Education Loans to students will help expand facilities & improve quality of institutions

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Education Loan Interest
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Delhi govts Education Loans to students will
help expand facilities improve quality of
institutions The launch of the Education Loan
Guarantee Scheme by the Delhi government to
enable students of all universities, colleges,
technical institutes, skill centres, polytechnics
and ITIs in the national capital to get an
Education Loan Interest is a game changer that
other states should adopt. Students preparing for
courses like CA, ICWA or CFA and even those doing
skill development courses specified by the Delhi
government can also avail of the Education Loan
Interest.
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For the first time in the country a state
government will provide a guarantee for all
student loans up to Rs 10 lakh irrespective of
the social or economic background. The scheme
will also ensure that the students do not have to
provide any collateral or margin money to the
banks. The only condition is that the student
should have done their education in Delhi and are
studying in institutions whose fees are regulated
by the government. To meet the costs of the
scheme the state government has set up a Higher
Education and Skill Development Credit Guarantee
Fund (HESDCGF) for providing guarantees to the
banks against any default on these Education Loan
Interests. It will have an initial corpus of Rs
30 crore and will also collect an annual
guarantee fee of 0.5 of the outstanding amount
of the loan from the banks each year.
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In case of default by the students the HESDCGF
will initially settle 75 of the claims of the
bank after the initiation of the recovery
proceedings and the remaining 25 will be settled
after ascertaining the final loss of the bank at
the end of the recovery process. The threat of
defaults are to be minimized by making the
parents or the legal guardians joint borrowers
of the Education Loan Interest along with the
student. A default will also negatively impact
the credit rating of the student and
parents. The Education Loan Interest would be
available not only to students of government
owned institutions but also to the private or
self-financing institutions which have been a
minimum grade of A, A or B from either the
National Assessment and Accreditation Council
(NAAC), National Board of Accreditation (NBA) or
the State Fee Regulatory Committee (SFRC).
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Banks will be allowed to charge a maximum simple
interest rate of Base rate plus 2. Application
for loans is to be made simpler by receiving them
in online and ensuring sanction for eligible
loans in 15 days. Rejection of individual loans
is to be intimated the higher education
department of the Delhi government. The
repayment holiday of the Education Loan Interest
will extend up to one year after the completion
of the course and will have to be paid in fixed
equal monthly installments over a period of 15
years. Banks are to also allow for telescoping of
repayments with the size of installments going up
in the later years. Students availing of
educations loans are also to given life insurance
cover.
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This Education Loan Interest facility worked out
by the Delhi government will be a game changer in
the annals of higher education and could help
boost both the quantity and quality of the higher
education infrastructure. This is because the
liberal education loans will increase manifold
the number of students taking up higher
education. The competition among educational
institutions to attract more students and the
government stipulations for securing
accreditation by educational institutions
providing admission to students availing
Education Loan Interests will ensure improvements
in quality of education. The educational
intuitions would also be forced to improve the
course content in tune with market needs to
ensure employability of the students.
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By liberally expanding the Education Loan
Interest scheme the Delhi government has wisely
chosen to follow the approach most popular with
the governments in advanced economies. This would
help expand Education Loan Interests as an
important market to the banks like in the US
where the outstanding Education Loan Interests of
more than 1.3 trillion makes it the largest
form of household debt next only to
mortgages. The liberal Education Loan Interest
of the Delhi government, the risks of which are
borne by the government, is in line with the
practices in advanced countries like Australia,
Canada, Denmark, England, France, Germany, Japan,
Sweden and United States where the funds are
provided by the government to improve student
access to higher education. The shifting the
burden of losses from the banks to the government
is a landmark move which will give a big boost to
higher education and help roll out important
national programs like the Make in India
initiative and also build a new knowledge economy
in tune with the needs of changing
times. Sourcehttps//goo.gl/bGgYSf
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