The central government is likely to raise the guarantee limit for education loans by 33% to Rs. 10 lakh from the existing Rs. 7.5 lakh.

CGFSEL- Central government's Credit Guarantee Fund Scheme for Education Loans guarantees education loans. According to the scheme, a student can have an education loan without any third-party guarantee and collateral security up to the highest loan amount of Rs. 7.5 lakh.

Ministry of Finance- the Department of Financial Services will be consulting with the Education Ministry to increase the maximum guarantee limitation to Rs. 10 lakh. The fixed-guarantee limit could be increased to Rs. 10 lakh or even heightened.

In August, the Department of Financial Services carried out a meeting with all the 12 government-owned banks to discuss disbursal targets of education loans.

During the meeting, a bank official asked the department to bring uniformity in the guarantee limitation on educational loans. The bank official emphasized that while the central government's CGFSEL scheme offers a guarantee for education loans up to Rs. 7.5 lakh, some state governments had fixed up to Rs. 10 lakh as the guarantee limit.

CGFSEL- Central government's Credit Guarantee Fund Scheme profits students who come from the Economically Weaker Section (EWS).

The annual gross family income of the student who wants to take an education loan should not be over Rs. 4.50 lakh. The interest rate set by the lender for education loans under the CGFSEL scheme can only be up to 2% per annum over the base rate.

In addition, students from the Economically Weaker Section (EWS) can also claim full interest subsidy for these loans during the moratorium period, which is the whole course period plus one year. The subsidy is offered for the maximum loan amount of 7.5 lakh.

News Source: NDTV