Budget: Big relief for education loan borrowers

Finance Minister Chidambaram has announced a moratorium period for all education loans taken-up to 31.3.2009 and outstanding on 31.12.2013.

The government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014.

Nearly 9 lakh students borrowers will benefit to the tune of approximately Rs 2,600 crore (Rs 26 billion). 

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Presenting the Interim Budget in the Lok Sabha on Monday, the Union Finance Minister Chidambaram said that a sum of Rs 2,600 crore will be provided in the current financial year itself and this amount will be transferred to the Canara Bank.

Chidambaram said that the Central scheme for interest subsidy was introduced in 2009-10 in respect of education loans disbursed after 1.4.2009. 

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However, students who had borrowed before 31.3.2009 struggled to pay interest during the period of study and they deserved some relief. 

Chidambaram informed that ten years ago, only a few thousand students- mostly the well-connected- got education loans.

At the end of December 2013, Public Sector Banks had 25,70,254 student loan accounts and the amount outstanding was Rs 57,700 crore (Rs 577 billion).