Interest subsidy schemes are provided by the government to give a concession on interest rates on education loans to students. They help students in financing their higher studies by paying less interest on education loans. If you are a student planning to take an education loan then you must check whether you are eligible for any interest subsidy scheme or not as this can help you save a lot of money.
Many students from low-income families benefit from such schemes. There are different government schemes that provide interest subsidies like the Dr. Ambedkar Scheme of Interest Subsidy and Himachal Pradesh Mukhyamantri Gyandeep Yojana. Let’s understand the meaning of interest subsidy schemes and look at various such schemes in detail!
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Meaning of Interest Subsidy Schemes
There are different education loan terminologies that students applying for education loans should know. One such important term is ‘interest subsidy scheme’. An interest subsidy scheme is a measure to provide financial assistance to students from low-income families by providing a concession on the interest rate. Students can opt for education loans with an available subsidy on interest depending upon their eligibility. For example, one of the major schemes provided by the government is the Dr. Ambedkar Scheme of Interest Subsidy where students belonging to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs) can avail an interest concession during the moratorium period.
Features of Interest Subsidy Schemes
Interest subsidy schemes are a great way to reduce the cost of loans. Interest subsidy schemes help students get a concession on interest rates and prove to be beneficial for students especially those belonging to economically weaker sections of society. Let’s understand the major features of interest subsidy schemes in detail.
Interest Concession
As already mentioned, students benefit from the reduction of interest rates by availing of such schemes. For example, if the normal interest on taking an education loan of INR 12 Lakhs is 13.5%, then for eligible students taking an interest subsidy scheme, the interest rate might be as low as 4%, subject to terms and conditions.
Role of Nodal Bank
The responsibility of implementing the scheme is given to nodal banks. Under any interest subsidy scheme, the respective ministry signs a Memorandum of Understanding (MoU) with scheduled banks. The banks then implement the scheme after consulting the ministry and checking the eligibility. For instance, under HP Mukhyamantri Gyandeep Yojana, bonafide Himachali students can approach any scheduled bank and take an education loan as per the guidelines of this scheme. In this case, the respective bank acts as a nodal bank for implementing the scheme.
Maximum Eligible Loan Amount
Some interest subsidy schemes have a maximum limit of education loans above which a student can not claim an interest subsidy. For example, Dr. Ambedkar Scheme of Interest Subsidy allows students to claim subsidies on interest rate when the loan amount is equal to or less than INR 20 Lakhs.
Also Read: Check out this blog Bihar State Cooperative Bank Education Loan
Government Interest Subsidy Schemes in India
There are many government interest subsidy schemes in India that provide a reduced rate of interest to students. The government launches such schemes from time to time to provide financial help to students who come from economically weaker sections of society. Let’s look at some major government schemes in detail.
Dr. Ambedkar Scheme of Interest Subsidy on Education Loans
Dr Ambedkar Central Sector Scheme of Interest Subsidy on Education Loans is an initiative by the Ministry of Social Justice and Empowerment of the Government of India. The scheme provides interest subsidies on education loans to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs). OBCs and EBCs students pursuing courses at the Master, M.Phil. or Ph.D. level are eligible to apply for this scheme.
Under this scheme, the interest payable by students during the moratorium period is borne by the government. However, after the moratorium period is over, the interest on the outstanding loan amount has to be paid by the student.
Himachal Pradesh Mukhyamantri Gyandeep Yojana
HP Mukhyamantri Gyandeep Yojana is a scheme of the Government of Himachal Pradesh and aims to provide interest subsidy on education loans to students who are residents of Himachal Pradesh and want to pursue higher education in India or abroad. The government provides interest subsidy on education loans up to INR 10 Lakhs. Interest subsidies to the extent of 4% p.a. education loans are allowed under this scheme and students are also provided with a Vidyarthi Credit Card.
Gujarat Government Interest Subsidy Scheme on Education Loans
Under its Interest Subsidy Scheme on Education Loan, the Government of Gujarat offers a 100% interest subsidy to economically weaker students from Gujarat who want to pursue higher education from abroad. The 100% interest subsidy is available only till the moratorium period (the duration of the course and one year more) after which the interest has to be borne by the students. To avail this scheme, the student has to be a native of Gujarat and must have passed the 12th class examination with more than 60% marks.
Also Read: International students must possess a basic financial prowess. Read our article on the Importance of Financial Literacy to know more.
FAQs on Interest Subsidy Schemes on Education Loans
The main benefit of taking an interest subsidy scheme is to get a concession on interest rates. When you opt for such schemes your interest rate is reduced considerably and this helps to save on education loans.
Dr Ambedkar Central Sector Scheme of Interest Subsidy on Education Loans is one such scheme that provides interest subsidies on education loans to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs).
Students who are residents of Himachal Pradesh and have completed their class 12th are eligible to apply for the HP Mukhyamantri Gyandeep Yojana.
Yes, under this scheme the government provides interest subsidy only up to a maximum loan amount of INR 10 Lakhs.
There are different eligibility criteria to apply for different interest subsidy schemes. For example, some schemes are restricted to natives of that particular state whereas others are central sector schemes for which anybody can apply. Also, some schemes are only available for OBCs and EBCs. Hence, you must check the eligibility criteria before applying.
This blog was all about interest subsidy schemes. To know more about such schemes, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
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