The Indian Government understands the importance of tertiary education and encourages students to pursue their higher education irrespective of their financial health. To achieve this objective, the Ministry of Human Resource Development (MHRD) launched a Scheme titled “Central Sector Interest Subsidy Scheme” (CSIS) in 2009. This is an education loan subsidy and its benefits are for those students who will not be able to pursue higher education without financial support. CSIS pivots around the objective that no student must be deprived of education because of lack of financial resources
The Indian Banking Association (IBA) provides a framework for education loan schemes that all banks can follow. The model scheme provides guidelines to the banks on determining the eligibility of student borrowers, educational courses to be covered, cost heads that can be financed under education loan, moratorium period, repayment and prepayment terms, margin requirements, limits for margin requirements and collateral free loans or loans based on third party guarantees.
The image below clearly indicates that India spends the least in education among the other BRICS nations (Brazil, Russia, India, China & South Africa).
Source: BRICS Joint Statistical Publication, 2017
If you are an Indian student who is searching for ways to cover their funds using education loans and want to maximise their student benefits, you’ve made a stop at the perfect article.
But, before we talk about an education loan subsidy and its benefits, let us first see what an education loan subsidy is.
What Is An Education Loan Subsidy?
Education loan subsidy is nothing but a mode of financial assistance that will help the student to repay their education loan with ease and without burden. Education loan subsidy by the Central Government such as CSIS, provides various benefits to all kinds of loan applicants to help in their education.
An education loan subsidy and its benefits are not limited to interest rates and tax benefits. They may also provide a rebate on interest paid towards education loan and principal loan amount waiver.
Here are the different types of Education loan subsidies,
Banks that offer an education loan to students may also provide interest rate subsidies. These loans are usually time-invariant and will allow you to get a low interest rate on your education loan. This variant of education loan subsidy provides a concession or discount on interest rate charged on the loan amount. One of the benefits of this education loan subsidy and low interest is that it will last for the complete duration of the education loan repayment.
Principal Loan Waiver
To help students with their education, there are some banks that provide a loan waiver to students, provided they meet some basic requirements. The general conditions to be eligible for this scheme are based on: income levels of the candidate, the community they may come from or based on previous records of loan repayments.
Government Education Loan Schemes such as the CSIS help the students by reimbursing the interest they pay as EMIs for their education loan. This scheme works like a cashback benefit by helping the student reimburse the interest they pay against the loan amount.
Education Loan Subsidy And Its Benefits
Central Sector Subsidy Scheme
As mentioned above, the CSIS is an initiative by the Government of India for equitable distribution of education irrespective of financial status. The Central Sector Interest Subsidy Scheme provides a full interest subsidy during the moratorium period on modern education loans without any collateral security and third-party guarantee, for pursuing technical/professional courses in India. Students whose annual gross parental/ family income is up to Rs.4.5 lakhs are eligible under the scheme. The existing Scheme has been modified with the approval of the Cabinet on March 28th, 2018.
Dr. Ambedkar Central Scheme for Overseas studies for OBC & EBC
Offered by the Ministry of Social Justice & Empowerment, this scheme is an interest subsidy and provides interest reimbursement. Only candidates who belong to the Other backward classes (OBCs) and EBCs are eligible to apply for this scheme. The education loan and its benefits are generous as it allows 100% reimbursement of interest paid. Only those students are eligible for this scheme whose family income does not exceed 3 lakhs per annum.
Padho Pardesh Central Scheme of Interest Subsidy for Minorities
If you wish to study abroad and are unable to decide which is the cheapest country to study abroad, the Padho Pardesh Central Scheme will make it easier for you to study in any country of your choice without questioning its affordability. This is an interest reimbursement scheme and offers students 100% reimbursement of the interest paid. This scheme is open for only minorities such as Jains, Parsis, Christians etc.
Application Procedure and Documents Required For Education Loan Subsidy
The necessary documents include:
- Income certificate
- Loan agreement
- Caste certificate
- Minority certificate
- ID Proof
- Proof of Admission
The application procedure includes the following steps:
- Visit the nearest branch of the bank which provides you the education loan
- Ask for an ‘Education Loan Subsidy Application Form’
- Fill in the required details and submit your documents with the application
- Track your application regularly by seeking the status update from bank officials
- Provide additional documents as (if) requested by bank authorities
What is an education subsidy?
Education loan subsidy schemes are types of financial aid that assist students in repaying their education loans with ease. These subsidies are available to student loan applicants in the form of interest rate subsidies, loan forgiveness, or rebates on education loan repayment.
Is there any subsidy on education loans?
Only education loans sanctioned without any collateral security or third-party guarantee are eligible under the CSIS scheme, and subsidies are available up to a maximum of Rs. 7.50 lakh regardless of the sanctioned amount.
Which bank is best for education loan interest subsidy?
The HRD Ministry of India has launched the SBI Central Scheme for Interest Subsidy on Education Loans (CSIS) to pay interest on student loans during the repayment vacation or moratorium period for students from the Economically Weaker Section of society pursuing professional and technical courses. The State Bank Of India is best for the education loan interest subsidy scheme.
Is subsidy on education loan taxable?
Interest paid on a student loan can be deducted under Section 80E of the Income Tax Act of 1961. The entire interest paid on the education loan is tax-deductible under Section 80E of the Internal Revenue Code.
Thanks for reading this blog on All You Need To Know About Education Loan Subsidy and its Benefits. If you are interested in learning more about funding options for your education, the following may be of interest:
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- Can You Pay Your Student Loan With A Credit Card?