Thursday, June 30, 2011

Education Loan Interest Waiver

With the cost of education rising every year, students are increasingly looking towards financial institutions for education loans to support their higher education studies. And once a candidate has availed of an education loan, the banker would have told him/her that they would have to either pay the interest during the moratorium period or that the interest would accumulate leading to a higher principal amount when they start paying the EMIs.

What a lot of people still are not aware of, is that the government of India has brought out a scheme where there will be full interest subsidy on educational loans to certain eligible applicants during the moratorium period, which usually extends throughout the course of study and a short grace period allowing the student to get gainful employment. The scheme is effective from the year 2009-10. So if you have paid the interest on the period, it will be returned to your bank account.

The eligibility to avail of this subsidy is that the family income of the candidate should be below 4.5 lakhs/annum. The interest subsidy is only for a loan amount of a maximum of Rs 10 lakhs.

There will be a full interest subsidy provided during the period of moratorium on loans for students. Here the moratorium means the time till the students completing the course and 6 months after completing the course. The proof of income is to be certified by authorities to be designated by the State governments.

Eligible students can approach the respective bank branch from where they have availed the loan and complete the formalities so that the individual accounts could be credited with the interest due on the loan from the academic year 2009-10 onwards.

The interest subsidy under the Scheme shall be available to the eligible students only once, either for the first undergraduate degree course or the post graduate degrees/diplomas. Interest subsidy shall, however, be admissible for combined undergraduate and post graduate courses.
Interest subsidy under this scheme shall not be available for those students who either discontinue the course midstream, due to any reason except on medical grounds, or for those who are expelled from the Institutions.


  1. you are right... you can also find latest Education Loans news online.

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  3. nice one chaita... didnt know that... would ask my dad regarding it today... but family income means the income of parents only or does it include the income of siblings as well.... ??

  4. Thanks Rohit! Family income is just your parents' income. Your siblings' income is not considered. Talk to your bank manager for a refund ASAP! Remember the refund would be for a loan amount of maximum Rs 10 lakhs

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