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Limit on education loan without collateral to rise, government

Limit on education loan without collateral to rise, government

Apnaloan.com Research Bureau

27 Feb 2008

The upcoming budget is expected to have some good news for the education loan sector. It is expected that the government will raise the limit on education loans without collaterals from Rs 4 lakh to Rs 5.5 lakh.

Finance minister P Chidambaram has been urged by the industry to provide liberal funds for study loans as there is a crunch of skilled manpower in the manufacturing and services sectors.

Banks provide educational loans of up to Rs 4 lakh without collateral security and up to Rs 7.5 lakh with security.

The Human Resources Development (HRD) Ministry may offer loan subsidies to students from the economically weak sections of society. The finance minister is expected to make similar announcements in the upcoming budget.

Even students with family incomes of less than Rs. 2.5 lakh annually will be able to avail a loan, whether belonging to the general or the reserved categories.

Most education loans are available at an interest rate of 12 per cent for loans up to Rs 4 lakh.

According to the HRD Ministry's proposal, students may be able to avail of loans at around 4 per cent, irrespective of the market rate. The difference will be subsidized from the Ministry's budget. The subsidy is estimated to cost around Rs 3,250 crore over the 11th Five Year Plan. The outlay for the education sector is 5.1 per cent for 2007-08 compared to 4.1 per cent of total expenditure for the previous year.