Study loans

Easier, cheaper & better

Papa, don’t cry. From next year onwards, college education is not going to cost a fortune. Yes! Study loans are poised to get easier and cheaper, with the central government planning to meet the interest cost of the loan till such time the borrower-student gets a job. This is great news for those who belong to the less affluent sections of society, specifically for families who come within the income range of Rs 2.5 lakh per year (approx. Rs 12,000 per month) who will be covered under the new scheme.

Right now, banks sanction educational loans come with a moratorium period limited up to the time the student starts earning, during which period the borrower is not required to pay interest on the loan. The interest is added to the principal and the amount becomes due for payment only upon the student getting a job.

With the government now taking over the interest burden, educational loans will become more affordable and attractive, both for the middle class and lower classes, and for banks. The interest subsidy will be available for eligible students pursuing professional courses (like medical, engineering, dental, architecture, etc) and technical courses at the undergraduate or post-graduate levels, recognized by the Medical Council of India, University Grants Commission or All India Council for Technical Education, among others.

However, the benefit of interest waiver will be available only for one loan. So if you have taken a loan for completing your graduation, don’t bank on it for your PG course.

Once the new scheme gets operational, banks and FIs are sure to be more liberal in extending educational loans. It will be a big welcome change from the present scenario, where many banks even find ways to wink at the rule book to ward off educational loan seekers. For instance, they demand collateral and security even when it is not required under the scheme. From 2K8, things are set to change for the better. Happy new year!