Wednesday, May 05, 2010

Education loans to get cheaper for professional courses

The government is working on a refinance scheme to offer education loans at interest rates as low as 4%, and plans to extend the repayment period for those who aspire to become doctors, engineers, fashion designers and IT professionals. The scheme envisages the setting up of a special purpose vehicle to refinance banks for giving education loans below prime lending rates. Currently, interest rates for education loan vary between 10% and 12%.

The Ministry of Human Resource Development (MHRD),which has drawn up the proposal, also wants to extend loan repayment period from 5-7 years to 6-12 years, according to government officials in the know. In the next one month, the entire concept will be crystallised, HRD minister Kapil Sibal told ET. Mr. Sibal said the ministry has already discussed the proposal with the Planning Commission on Tuesday. They have appreciated the idea and asked us to submit a formal note, he said. Confirming this, a Planning Commission official told ET that the panel was looking into the proposal to set up a new National Education Finance Corporation (NEFC) to refinance banks on this count. Based on the feedback, the ministry will prepare a formal note for the approval of the Cabinet.

NEFC is to be set up with an initial equity capital of Rs. 5,500 crore (Rs. 55 billion). The ministry has proposed to infuse Rs. 3,000 crore (Rs. 30 billion) in the company every year so that it reaches Rs. 35,500 crore (Rs. 355 billion)by 2020, the plan panel official said.

Source: The Economic Times, May 5, 2010

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