Govt likely to cut subsidy on education loans

The Human Resource Development (HRD) Ministry has mooted a more than 50 per cent cut in interest subsidy that the government pays on education loans availed by students from economically weaker sections under a Central government scheme.

The ministry mooted the drastic cut at a recent meeting with officials of the department of financial services, sources told Deccan Herald.


Funds crunch had prompted the proposal. “The department of financial services is examining the proposal. No final decision has been taken yet,’ the sources added.If the proposal is accepted, poor students will have to bear a major share of the interest burden on their education loan availed from scheduled banks. 

Until now, a student belonging to economically weaker sections was required to repay only the principal loan amount to the bank concerned and the interest accrued during the moratorium on repayment was fully paid by the government under the interest subsidy scheme launched by the previous United Progressive Alliance regime in 2009. The period of moratorium includes the duration of the academic programme a student has undertaken and up to one year or six months after getting a job, whichever is earlier.

While the ministry is pushing for a subsidy cut of more than 50 per cent to ease its financial burden, sources said a section of the officials of the department of financial services are not in favour of “any drastic cut” in interest subsidy in view of possible “political consequences”.