The Cabinet on Thursday cleared a proposal on providing full interest subsidy on education loans from scheduled banks to economically backward students.
“Any student whose parents’ income is below Rs 4.5 lakh a year is entitled to the subsidy, provided he is doing a professional course from a recognised institute,” Union Human Resources Development Minister Kapil Sibal said.
So, poor students applying for a loan to pursue approved courses in technical and professional streams, from recognised institutes in India will not have to pay any interest for the course period, plus one year or six months after getting a job, whichever duration is shorter.
Under the scheme, interest payable by students availing of the loan for this period will be borne by the Government. The schemes will apply from the current academic year 2009-10.
Students can avail of the interest subsidy scheme once -- either for the first undergraduate degree course or the postgraduate degrees/diplomas. Students doing a combined undergraduate and postgraduate course will also be eligible.
However, students cannot avail of the scheme if they drop out or discontinue studies or are asked to leave due to misconduct. Only medical reasons for discontinuing studies will be entertained.
The Indian Banks’ Association (IBA) has formulated a comprehensive model educational loan scheme for adoption by all banks.