If you are looking for that elusive education loan to fund higher studies but don?t have a collateral, help is on the way. The government is mulling a Higher Education Loan Guarantee Authority (HELGA), which will offer guarantee to students for loans.
Banks are not supposed to insist on a collateral for education loans of less than Rs 7 lakh. However, according to Planning Commission member B L Mungekar banks ask for collateral securities even for such loans. As a result many talented students from poor families are deprived of higher education. ?Keeping this in mind we have suggested establishing the authority, which would act as a guarantor to banks,? he said.
A guarantor would also keep the interest costs for such loans low, benefitting poor students aspiring to study in international and Indian universities. Sources said the government would soon take a decision to set up the authority.
According to the plan, the support from the proposed authority will basically be for students who need education loans of over Rs 7 lakh. The Planning Commission is working on the final details of structure and the scope of the authority as well as the modalities.
Commenting on the proposal, K Raghuraman, executive director, Punjab National Bank, said, ?Even today, banks do not require any collateral securities for education loans up to Rs 7 lakh. Therefore actual benefit would accrue to student seeking loan beyond Rs 7 lakh.?
Commercial banks are giving out educational loans to the tune of Rs 15,000 crore a year, which constitutes about 10% of their total retail loan portfolio.
Currently, the percentage of students in higher education courses in India is just about 10%. That percentage drops to 6% for SC/ST students.
Typically, an engineering course in any institution would cost upwards of Rs 180,000. Management programme would cost far more. A two-year management programme abroad costs over Rs 15 lakh.