Model Education Loan Scheme Highlights

All Scheduled Commercial Banks provide Education Loan. to students. Indian Banks Association has formulated and circulated to all member banks a 'Model  Education Loan Scheme' for providing financial support to meritorious students for pursuing higher education in India and abroad. Salient features of the scheme  inter-alia include:

1. Loan up to Rs. 10 lakh for study in India and up to Rs. 20 lakh for study abroad.

2. Collateral free loans up to Rs. 7.5 lakh under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).

3. No Margin for a loan up to Rs. 7.50 lakh.

4. Repayment period of 15 years.

5. One year moratorium for repayment after completion of studies in all cases.

6. Moratorium taking into account spells of unemployment/ underemployment say two or three times during the life cycle of the loan.

7. The moratorium for the incubation period if the student wants to take up a start-up venture after graduation.

8. Simple interest for the loan is calculated from the date of disbursement of loan up to the end of moratorium period i.e., Course period plus one year and therefore the  Interest is never risen up to the principal amount. At the start of the repayment period, the interest accrued is clubbed with principal & EMI is calculated accordingly. The  Servicing of interest during the study period and the moratorium period until repayment commences is optional for students.

9. No such instance regarding the interest on the loan rises up to the principal amount within four years of completion of the study has been reported by banks.

10. For the students belonging to economically weaker sections, an interest subsidy scheme on educational loans is in place. Under the scheme full interest subsidy is 
Available during the period of moratorium on educational loans up to Rs. 7.50 lakh disbursed on or after 1st April, 2009.

11. Further, the Model Educational Loan Scheme of IBA provides for certain concessions on educational loans which interalia include,
(i) 1% interest concession if interest is serviced during the study period and subsequent moratorium period prior to the commencement of the repayment,
(ii) 0.5% concession in the interest rate to the girl students,
(iii) rebate in Income tax to the extent of interest paid on education loan. 

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