Hi all
As you all know Education Loan Task Force (ELTF) is an initiative of India Vision, Action 2020 groups and ezine PreSense. ELTF creates awareness about education loan and also provides guidance and clarifications on the guidelines. ELTF has also taken up issues relating to education loan through supporting MPs in Parliament.
As per the Central Scheme for Interest Subsidy (CSIS), all the education loans granted to economically weaker section students (annual parental income not to exceed Rs.4.5 lakh) under IBA scheme for pursuing professional and technical courses are eligible for 100% interest subsidy from 1.4.2009 during moratorium period. The moratorium period is the period of study plus one year or six months after completion of study whoever is earlier. For engineering student, moratorium period is 5 years (4 years + 1 year), if he is not employed for one year.
Now the Hon'ble Finance Minister during the last Lok Sabha session announced the scheme extending the interest subsidy for the loans granted prior to 1.4.2009 also.
Though Hon'ble FM has been talking about the education loan and interest subsidy in all the platforms, in reality, all the eligible students are misled or cheated by the banks. Though the banks are required to guide the students, many banks have not properly guided the students to complete the formalities.
In all other cases, only a small portion of subsidy (say 10 to 20%) only are credited to the loan account. Though the students need not pay even a single rupee by way of interest during moratorium period, they are forced to pay the interest in violation of the Government guidelines. The interest subsidy scheme is managed badly by all the banks. Not even a single eligible students gets the 100% interest subsidy.
Though ELTF has taken up with Lok Sabha and also directly with Hon'ble Prime Minister on the mess up and improper implementation of the scheme, nothing has happened to correct the system. Students are continued to be misled and cheated by the Banks. For no fault of the students, the loans are classified by the banks as 'Non Performing Assets (NPA) and the students are caught in the debt trap. Such situation arises because, the banks do not follow the RBI/IBA guidelines properly. ELTF has also demanded a CAG/RBI audit of the interest subsidy scheme.
We have taken up with Government of India, Reserve Bank of India, Indian Banks Association and the Bank Managements several times through supporting MPs. They are highly insensitive to this issue, ELTF is getting numerous mails about the denial of legitimate interest subsidy to the eligible students. Senior bank officials from different banks also admit about the 'mess up' of this scheme for various reasons.
In view of this, ELTF decided to take up with all political parties who are contesting Lok Sabha Elections, so that they can include this issue in their election manifesto.
ELTF has made the following two suggestions to the political parties.
1. Instead of interest subsidy, 'interest free loan' can be given during the moratorium period. This will avoid mis-management of the scheme. Poor students will get the full benefit. Banks can claim the interest portion from the Government. Harassment of students by banks will be stopped immediately. This will avoid classifying
standard loan accounts as NPAs, due to the fault of the bank officials.
2. Presently, many banks charge more than 14% or 15% interest (compounded) for education loans. Car loans are given at low interest. The students are trapped in the debt and their credit rating comes down. In the long run, it is against the interest of the nation. The Government can set up an 'Education loan refinance bank' like IDBI, SIDBI and NABARD. This new bank can acquire international funding at low rate and refinance the education loans granted by the banks. Thus, after completion of education, the students can be charged at 6 to 8%. This will reduce the burden of the poor students. Now the same refinance procedure is being followed for small and medium industries and agricultural loans.
In short:
Till the education is completed (moratorium period), the students can be provided with 'interest free loan' and after completion of education through the refinance bank, 'low interest' can be charged.
Now only around 25 lakh students across the nation have availed education loan to the extent of 55,000 crores. This is an outstanding figure. This is very small when compared to the human resources and opportunity available. More focus should be given for education loan. The number of beneficiaries and the loan amounts should be enhanced.
I request all the members to take up with the political leaders at your level and also with the candidates to create a public opinion on this vital issue. You may request the political leaders to take up with their senior leaders.
If any political leader or media person needs more details, they can contact us at info@eltf.in.
K. Srinivasan
Convenor
Education loan Task Force (ELTF)
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