To aid and empower education amongst all income groups in the country, interest subsidy schemes on education loans have emerged to become an integral and popular choice for many aspiring students. Education loan interest subsidy schemes help reduce the interest component of the loan to make the cost of education more reasonable. Given its functionality, these subsidies extend to select demographics, such as economically disadvantaged students and students from minority communities.
These subsidised education loans further incentivise vocational and professional courses that help upskill the student population and prepare them for the workforce. Different schemes target different types of courses and fields, but the goal is to ensure that the access to quality education is not snubbed by the lack of adequate funding.
If you are considering availing of an education loan linked with an interest subsidy, here is what you stand to gain from it:
- Interest Concession: These schemes focus on making the cost of borrowing more economical and hence, offer substantial interest subsidies to borrowers. To state it clearly, these loans are not interest-free but are extended at nominal interest rates, and borrowers may enjoy a respite from the interest component through the prescribed moratorium period. Beneficiaries can start the process of loan repayment well after their course ends or after securing a job. The duration of the moratorium may differ based on the subsidy selected.
- Additional Costs Covered: Education loans with an interest subsidy cover not just the tuition fee but also the additional costs of seeking an education. They include but are not restricted to accommodation and boarding expenses, travel and commute expenses, material, and equipment costs (wherever necessary) and other expenses.
- Collateral Free Loan: Some interest subsidy education loans come without a collateral pre-requisite, making it easier for needy students to avail of the loan. It is not a standard rule and is a feature unique to only some schemes.
- Tax Rebates: Students may also be allowed to claim a certain percentage of the interest they repay under Section 80E of the Income Tax Act (1961) for a rebate. Even co-applicants may be permitted to declare the amount as a deductible while filing their returns.
Apart from these, an interest rate subsidy helps you not break into your savings or liquidate your assets to fund your dream of getting the education you want.
1. Central Scheme of Interest Subsidy (CSIS)
This scheme helps economically weaker students pursue professional and technical courses. The CSIS subsidy scheme is available to those whose annual parental income does not surpass Rs.4.5 Lakh. The CSIS education loan subsidy offers an interest holiday through the moratorium period. You will be allowed to avail of the benefit only once – either at the UG or PG level.
2. Dr. Ambedkar Central Sector Scheme of Interest Subsidy
Sponsored by the Ministry of Social Justice and Empowerment, this scheme is directed toward students from Economically Backward Classes (EBC) and Other Backward Classes (OBC). Students can study domestic courses or travel overseas for a program with the help of this loan at a Masters, PhD or M.Phil. level and can enjoy an interest moratorium through the duration of their course.
3. Padho Pardesh Central Scheme of Interest Subsidy for Minority Communities
The Padho Pardesh Central Scheme of Interest Subsidy helps disadvantaged students of notified minority communities secure education loans with subsidised interest rates for foreign educational courses. To qualify for the scheme, the applicant’s annual income cannot exceed Rs.6 Lakh per annum.
Education loans with interest rate subsidies are beneficial for those whose academic aspirations face economic challenges. However, these subsidies are linked to stringent eligibility criteria because the demand for them is high. Should you miss the mark, you can still fulfil your educational ambitions using the Bajaj Housing Finance Loan Against Property – a restriction-free loan that can be used to meet the expenses of quality education.
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