Low interest on education loans up to ₹10L for courses within India

Budget proposes lower interest rates for education loans up to ₹10 lakh, with e-vouchers for 1 lakh students annually. Education allocation at 2.6% of total budget.

Students pursuing higher education within the country will get financial support from the central government in the form of lower interest rates for loans up to ₹10 lakh, the budget proposed on Tuesday.

Out of ₹1.48 lakh crore, ₹1.2 lakh crore will be spent on education, representing 2.6% of total budgetary expenditure, which compares with 1.9% for health and 11.3% for transport (highest allocation). (HT Photo)

“E-vouchers for this purpose will be given directly to one lakh students every year for annual interest subvention of 3% of the loan amount,” finance minister Nimala Sitharaman said in her speech in Parliament. To be eligible for this, the student cannot receive any other benefit under a government scheme or policy. High street banks typically provide education loans at around 11%-12%.

The budget for 2024-25 allocated ₹1.48 lakh crore for education, employment and skilling. Out of this, ₹1.2 lakh crore will be spent on education, representing 2.6% of total budgetary expenditure, which compares with 1.9% for health and 11.3% for transport (highest allocation).

The allocation also represented a roughly 7% decrease compared to the revised estimate for 2023-24, but remained the same as announced in the interim budget in February. Of the total outlay, the government has set aside ₹73,008.10 crore for schools, a marginal 0.73% increase from the revised estimate for 2023-24, while higher education was earmarked ₹47,619.77 crore, down by a sharp ₹9,600 crore, a reduction of 16.8%.

The funding for the University Grants Commission was slashed significantly by 60.9%, down to ₹2,500 crore for 2024-25 from the revised estimate of ₹6,409 crore in the preceding financial year. This, though was because some central universities funded through UGC last year will receive direct funding this year. Thus, grants for central universities shot up to ₹15,472 crore from the revised estimate of ₹12,000 crore last fiscal year.

The budget also proposed reduced support to the premier Indian Institutes of Technology to ₹10,324 crore, a fall of ₹59.7 crore compared to the revised estimate, but increased to ₹10,384.21 crore for the National Institutes of Technology and Indian Institute of Engineering Science and Technology, a rise of ₹160 crore.

Budgetary allocations for the Indian Institutes of Management continued to shrink for the second financial year in a row. The allocation declined to ₹212.21 crore for 2024-25, whereas they were ₹608.23 crore and ₹300 crore in two preceding fiscal years for the premier business schools.

The allocation for R&D has increased to ₹355 crore from ₹193.3 crore shown in the revised estimate of 2023-24. The government will operationalize the Anusandhan National Research Fund for basic research and prototype development, Sitharaman said. “Further, we will set up a mechanism for spurring private sector-driven research and innovation at commercial scale with a financing pool of ₹1 lakh crore in line with the announcement in the interim budget,” she added.

In school education, the midday meal scheme, now renamed as PM Poshan, saw an increase in allocation to ₹12,467.39 crore for 2024-25 from ₹10,000 crore in 2023-24. The outlay for Samagra Shiksha Abhiyan, a government scheme for universal education, increased to ₹37,499 crore from ₹32,999 crore earlier.

The budget also set aside ₹6,050 crore for the Pradhan Mantri Schools For Rising India (PM-SHRI) scheme, under which over 14,500 schools across the country will be upgraded . This amount has increased from last year’s revised estimate of ₹2,800 crore.

The allocation for education in the budget was people-oriented, growth-inducing, inclusive and progressive, education minister Dharmendra Pradhan said. “Prioritizing education, skilling, employment generation, research and innovation like never before, #BudgetForViksitBharat paves the way for strengthening Bharat’s credentials as the talent basket, skill hub and solution provider for the world,” Pradhan posted on X.

Education loans at lower interest rates were welcomed by educators. “The provision of financial support for loans up to ₹10 lakh through e-vouchers for students aiming for higher education in domestic institutions is a significant step towards making higher education more accessible for all,” said Mahadeo Jaiswal, director at IIM Sambalpur. “This initiative will empower many aspiring students to pursue their academic goals without the burden of financial constraints and increase job opportunities.”

“The introduction of e-vouchers for higher education loans is a transformative step towards ensuring equal access to quality education,” said Alison Barrett, India director at the British Council.