Education loan subsidy schemes provide financial assistance to help students repay their education loans more conveniently. These subsidies are available in various forms, including interest rate reductions, loan forgiveness, or rebates on education loan repayments. The education loan subsidy program offered by the Central Government provides significant benefits to a wide range of loan applicants to support their educational pursuits. Additionally, many banks offer their own interest rate subsidy schemes for education loans based on their internal criteria.
Education Loan Subsidy Schemes: Benefits and Features
- Concession on the interest rate charged by banks on education loans
- Rebate on interest paid towards repayment of education loan
- Collateral waiver for education loans below certain ranges
- Reimbursement of processing charges and additional expenses
- Waiver of education loan principal amount (conditional)
- Taxation benefits based on Section 80/E under the Income Tax Act
Education Loan Subsidy: Types and Categories
Education loan subsidies are not limited to interest rate and taxation benefits only, they also provide rebates on interest paid towards education loans and principal loan amount waivers. Students pursuing graduation, postgraduation and other levels of higher education can avail these subsidies based on their education loan eligibility criteria. But, before they apply for any such scheme, applicants must know complete details about education loan subsidy programs.
Types of Education Loan Subsidy Schemes
Interest Reimbursement
Government education loan subsidies often include interest reimbursement benefits. These schemes assist students by reimbursing the interest they pay as EMIs for their education loans. Education loan EMIs consist of two components: the interest and the principal amount. Under interest reimbursement subsidy schemes, the interest component paid on the education loan for a specified period is refunded, similar to a cashback benefit.
Interest Concession
Banks offering education loans to students typically provide interest rate subsidies. This type of subsidy offers a concession or discount on the interest rate charged on the loan amount. As a result, the effective interest rate on the education loan decreases immediately. These benefits are usually time-invariant, meaning they last throughout the entire loan repayment period.
Loan Principal Waiver
Under certain seasonal government schemes, students may benefit from loan waiver programs designed to support their education. These schemes offer a complete waiver of the pending education loan, provided students meet the specified conditions. Common conditions include community-based eligibility, income-based criteria, and a good record of previous loan repayments.
Education Loan Interesting Fact: Indian students can also take education loans from foreign banking institutions. Students pursuing international studies and applying for education loans with confirmed admission can seek loans from international banking institutions. Such loans are also eligible for loan forgiveness and loan refinance options.
Education Loan Subsidy Schemes Provided by Banking Institutions
Almost all banks in India which provide education loans offer some interest rate subsidy to the loan applicants. These schemes are generally dependent on gender, community and family income slabs. Here is a list of popular education loan subsidy schemes provided by PSU banks/private banks/NBFCs (Non-Banking Financial Institutions).
Education loan interest subsidy- Private & PSU Bank schemes
| Bank Name | Subsidy type and limits | Terms and conditions |
| State Bank of India (SBI) | 0.50% interest rate concession | Loan for female students |
| 0.50% interest rate concession | Students availing SBI Rinn Raksha (Education Loan insurance scheme) | |
| Axis Bank | 0.25% interest rate concession | Loan for female students |
| Canara Bank | 0.50% interest rate concession | Loan for female students |
| Bank of Baroda | 0.50% interest rate concession | Loan for female students |
| 100% processing charge subsidy | Skill loan scheme applicants | |
| Bank of India | 1.0% interest rate concession | For students not paying EMIs during the moratorium period/holiday period |
| 0.50% interest rate concession | Loan for female students | |
| 0.50 % interest rate concession | Applicants pursuing professional courses (engineering, medical, management) | |
| ICICI Bank | 0.50% interest rate concession | Loan for female students |
Did you know?
Education loans cover various unique expenses, such as student insurance, student tour expenses, thesis writing costs, and fees for entrance tests like the SAT, LSAT, GRE, TOEFL, IELTS, GMAT, and more. Be sure to check with your bank for a complete list of expenses covered by the education loan.
Education Loan Subsidy Schemes Provided by the Government of India
The Government of India provides education loan subsidy schemes to help students repay their education loans more conveniently. The government subsidy schemes are collectively bundled as Central Sector Interest Subsidy (CSIS) Schemes. There are subsidy schemes for students from all sections of society but most of them are based on certain income-based limits. Here is a list of all the education loan subsidy schemes provided by the Indian government.
| Subsidy Scheme Name | Subsidy Type and Limits | Terms and conditions |
| Central Sector Subsidy Scheme (CSIS)
Provided by the Ministry of Human Resource and Development |
Interest reimbursement |
|
| Dr. Ambedkar Central Scheme of Interest Subsidy on Education Loan for Overseas Studies for OBC & EBC
Provided by the Ministry of Social Justice and Empowerment |
Interest reimbursement |
|
Padho Pradesh Central Scheme of Interest Subsidy for MinoritiesProvided by Ministry of Minority Affairs |
Interest reimbursement |
|
Education loan myth-buster: Canara Bank is the nodal bank for all education loan subsidy schemes provided by the government (CSIS schemes). Many students presume that they have to apply for subsidies at Canara Bank branches. But this is ‘NOT TRUE’.
Students are required to apply for education loan subsidies at the bank from where they are availing the loan amount. The fact that Canara Bank is the nodal bank for these schemes has nothing to do with subsidy applications at the applicant level.
Education Loan Subsidy Schemes: How to Apply
The key point to remember about education loan subsidy schemes is that they are not automatically given to eligible candidates; students must apply for these benefits. The application process for subsidy schemes is straightforward and does not require multiple visits to the bank. Below is the procedure for applying for education loan interest subsidies.
Application Procedure for Education Loan Subsidy:
- Gather all the necessary documents required to apply for an education loan subsidy application
- CSIS: Income certificate and loan agreement
- ACSIS: Income certificate and caste certificate (issued by competent authority)
- Padho Pardesh Scheme: Income certificate and minority certificate (issued by competent authority)
- All bank-based subsidy schemes: Income certificate, ID proofs and proof of admission
- Visit the nearest branch of the bank and request an ‘Education Loan Subsidy Application Form’.
- Fill in the required details and submit your documents with the application
- Track your application regularly by seeking status updates from bank officials
- Provide additional documents as (if) requested by bank authorities
FAQs
What is an education loan subsidies?
An education loan subsidy is a financial benefit provided by the government to reduce the interest burden on student loans. Generally, this subsidy is offered to students from economically weaker sections (EWS).
Who is eligible for education loan subsidies?
Eligibility criteria for education loan subsidies vary depending on the specific scheme. However, generally, students from EWS families with a certain income limit are eligible to avail benefits under education loan subsidies.
How can I apply for an education loan subsidy?
You need to apply for an education loan from a participating bank and submit the required documents, including income certificates and admission proof to apply for an education loan subsidy. The bank will then process your application for the subsidy.
For how long is the interest subsidy provided?
The interest subsidy is provided during the moratorium period, which is the course duration plus one year.
What is the interest subsidy rate under CSIS?
The interest subsidy rate under CSIS varies annually. It’s advisable to check with the bank or the government’s official website for the latest information.