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Education Loan Disbursal is Going to Get a Bit Difficult. Know Why?

Updated On - July 4th 2019 By - pranjal.singhal

Education Loan Disbursal is Going to Get a Bit Difficult. Know Why?

Applying for education loan is very common because of the flexible schemes and interest subsidies offered by various banking institutions. However, due to the recent modifications in the education loan policies, acquiring an education loan is getting more difficult.

There are various key factors responsible for making your education loan disbursal a bit difficult. Know some of these changes which will be affecting you in the near future.

1 Preference for Accredited Universities and Job-oriented Courses

Union HRD ministry’s new guidelines have set new eligibility criteria for education loan disbursal. Now, the model educational loan scheme of the Indian Banks’ Association is confined to only those students, who are pursuing technical and professional courses from NBA and NAAC-accredited colleges.

Any professional or technical course beyond this requires approval from both the Nursing Council of India for Nursing Courses and Medical Council of India for Medical Courses.

Under the revised accreditation Framework of NAAC, India has 59 accreditated colleges and 997 universities. As per data, there are 1,056 accredited institutions in India.

2. Bank Demands

Many bank education loan policies like SBI Education Loan believe that students studying in top-notch colleges and universities have higher chances of job prospects. This, in turn, will help them repay the loan easily and quickly.

Many bank officials from recognized banks have stated that they always consider the employment prospect associated with the candidate’s opted course and the reputation of the university in which he/she is pursuing that course.

3. Discrepancy in Process

All the applications regarding education loans have to be routed through the Vidya Lakshmi portal. In the past four years, the banks have approved only 42,700 out of the 1.44 Lakh applications received through the portal.

While applying for an education loan, students have to pick three banks, each in their respective areas. The banks are required to intimate the status of the application to the student within 15 to 30 days. Many experts state that banks do not respond within the prescribed period mandated by the guidelines. There is not even a proper grievance redress mechanism for education loans.

4. Loan and Interest Policy

Under the Central Sector Interest Subsidy (CSIS) Scheme, 2009, an interest subsidy is given during the moratorium period, i.e. the course period plus one year, to students belonging to economically weaker sections. However, the annual parental income should be up to INR 4.5 Lakh from all sources and the student must be pursuing only recognized professional/technical courses.

The loan is given without any collateral and third-party guarantee for a maximum amount of INR 7.5 lakh. Above 7.5 lakh, some tangible collateral security may be required. The repayment of a loan generally begins 6 months after the completion of course.

Due to rising unemployment even in the recognized technical courses such as engineering, parents are hesitating to take up education loans these days. The banks are also declining the student’s request for availing education loan by stating several reasons. If the same situation persists, the education industry is going to be very much affected.