The Indian central government has committed ₹1,050 crore in the current financial year to bolster access to education loans for students nationwide. Finance Minister Nirmala Sitharaman announced this significant allocation in the Rajya Sabha, detailing the support for three crucial schemes designed to ease the financial burden of higher education.
Boosting Student Access to Higher Education
The funding specifically targets the Pradhan Mantri Vidyalaxmi Scheme, the Central Sector Interest Subsidy Scheme under PM-USP, and the Credit Guarantee Fund Scheme for Education Loans under PM-USP. These initiatives aim to provide students with collateral-free financing and interest subsidies, making education more accessible across different income levels.
The Model Education Loan Scheme
All scheduled commercial banks in India adhere to the Model Education Loan Scheme, an framework established by the Indian Banks' Association. Under this model, students can secure loans up to ₹7.5 lakh without needing collateral or a third-party guarantee, benefiting from government subsidy and guarantee programs. For loans up to ₹4 lakh, no margin requirement is imposed. Borrowers receive a repayment holiday covering the entire course duration plus an additional year, with a generous repayment window extending up to 15 years.
Pradhan Mantri Vidyalaxmi Scheme (PMVLS)
Launched in November 2024, the PM Vidyalaxmi Scheme focuses on students admitted to top-tier higher education institutions. It offers collateral-free and guarantor-free loans, coupled with a 3% interest relief for families with an annual income up to ₹8 lakh. This benefit applies to loans up to ₹10 lakh during the moratorium period. The scheme aims to support up to one lakh students annually, provided they are not simultaneously receiving other scholarships or interest subsidies. Banks extending loans up to ₹7.5 lakh under PMVLS receive a 75% government-backed credit guarantee. The total budgetary commitment for interest relief under this scheme is ₹3,600 crore between FY 2024-25 and FY 2030-31.
Central Sector Interest Subsidy Scheme (CSIS)
In operation since 2009, the Central Sector Interest Subsidy Scheme caters to students from lower-income families, specifically those with a combined annual household income of up to ₹4.5 lakh. This scheme covers the full interest on education loans up to ₹10 lakh during the moratorium period. Eligibility extends to students enrolled in approved professional and technical programs at NAAC-accredited institutions, NBA-accredited courses, Institutions of National Importance, and Centrally Funded Technical Institutions.
Credit Guarantee Fund Scheme for Education Loans (CGFSEL)
Established in 2015, this scheme addresses a significant hurdle for many students who cannot arrange collateral or guarantors. The government, through the National Credit Guarantee Trustee Company, provides a 75% credit guarantee on loans up to ₹7.5 lakh. Crucially, this scheme has no income ceiling, making its benefits accessible to all students regardless of their family's earnings.
Loan Disbursement Trends
In FY 2024-25, scheduled commercial banks disbursed a total of ₹40,253 crore in education loans. Provisional figures for FY 2025-26 indicate disbursements of ₹38,934 crore. The State Bank of India led in loan disbursals in FY 2025-26, accounting for ₹13,370 crore.