New Delhi: Extending the interest subsidy scheme on study loans, the government on Monday said it will pay the interest amount of all eligible education loans that were taken till 31 March 2009, but remained unpaid by 31 December.
The move will benefit 900,000 student borrowers and cost the governmentRs.2,600 crore in 2013-14, finance minister P. Chidambaram said while presenting the interim budget in Parliament. “I intend to provide the funds in the current financial year itself,” Chidambaram said.
By 31 December, state-run banks had 2.57 million student loan accounts and the amount outstanding was Rs.57,700 crore.
The extension of the subsidy scheme looks like a pre-poll sop to woo young voters, according to Pramath Sinha, founding dean of Hyderabad’s Indian School of Business. “The interest rate is too high and that needs to brought down to benefit millions than such announcements,” said Sinha.
K. Srinivasan, convenor of the Educational Loan Task Force, a private agency helping students on study loans, also called the move a vote-catcher. “The scheme is in a mess and I don’t know how they are going to implement this extension. Instead of interest subsidy, they should make it interest free loans for the eligible students,” said Srinivasan. He said education loan interest rate is more than home or car loans and the government must ask banks to lend to students below their base rate.
Chidambaram also budgeted a planned outlay of Rs. 67,398 crore for 2014-15 as against Rs.61,862 crore in the revised budget for the 2013-14 budget. A cash-strapped central government had cut education budget by little overRs.4,000 crore in November while revising its planned budget estimate. “This 8-9% increase in education spending is too less and government needs to allocate more funds understanding its importance for the economy,” Sinha said.
To be sure, these numbers may change during the full budget to be presented by the new government after the general elections due by May.
Of the total planned outlay, the school education share will be Rs.51,198 crore and higher education Rs.16,200 crore.
The centrally sponsored schemes have been restructured, the interim budget said, and “funds under these programmes will be released as central assistance to state plan, thus giving greater authority and responsibility.”