Subsidy claim on education loans rises 60% in 1st yr despite fall in beneficiaries

Written by Kirtika Suneja | New Delhi | Updated: Dec 17 2011, 07:07am hrs
The net subsidy claim on education loans for students belonging to the economically weaker sections increased 60% in the first year of its launch to R394.9 crore in 2010-11 from R246.7 crore in 2009-10.

The massive increase in the claims is significant in the light of the fact that the number of students who benefitted from the scheme actually declined by 8%.

The number of students who sought loans in 2009 stood at 5.5 lakh while in 2010, the number fell to 5.09 lakh.

The scheme was launched in 2009-10 and aimed to provide full-interest subsidy during the period of moratorium which includes one year of course period followed by six months of getting employment on educational loans for students belonging to economically weaker sections (with parental family income from all sources of less than R4.5 lakh annually) under the Educational Loan Scheme of the Indian Banks Association (IBA).

The loans are for pursuing studies in professional and technical streams from recognised institutions in India, subject to a loan ceiling of R10 lakh.

Interestingly, large states like Andhra Pradesh, Uttar Pradesh, Karnataka, Madhya Pradesh and Maharashtra saw a fall in the number of beneficiaries but an increase in the subsidy claims.

The scheme has recently taken off and the claims include both delayed claims of second year students and also the interest component of the students who took admission in first year, said an official from the ministry of human resource development (MHRD).

While Maharashtra saw a 32% fall in the number of students, the net subsidy claim in the state increased 10% whereas in Orissa, the number of beneficiaries declined 14%, the subsidy claims rose sharply by 95%.

In Uttar Pradesh, the number of students who claimed the subsidy fell 45% while the subsidy claims marginally declined by 1.2%.

The Centre bears the interest on the study loans during the students course period and a year after its completion or six months from the date of joining a job, whichever is earlier.

After the completion of the moratorium period, the scheme beneficiary has to return the principal amount along with the interest that would accrue over the period in which he or she pays back the loan.

Many states offer subsidised education due to which the claims rise. This also adds to the subsidy burden, explained chairman of All India Council for Technical Education (AICTE) SS Mantha.

However, this scenario does not hold true for all states. Some states showed a different picture. For instance, Tamil Nadu where the number of students who availed the subsidy increased from 2.1 lakh to 2.45 lakh and the net subsidy claim almost doubled from R85 crore to R160 crore in 2010.