Wooing youth, the Finance Minister has announced a moratorium period for education loans taken up to March 31, 2009 and outstanding on December 31, 2013.

The student borrower will, however, have to pay interest for the period after January 1, 2014.

P Chidambaram said this will give relief to over nine lakh students and cost the Government about ₹2,600 crore in 2013-14. The relief for each student comes to about ₹29,000. The expense for the Government on this count will be in the nature of “interest subsidy”.

But not all students are impressed. Shreya Bhattacharya, an M.Phil student at IGIDR, Mumbai, said: “This looks more like an election sop to attract the young voter. It may be a good initiative but I am unsure about how students who really need this would be targeted. Plus, the mechanism for targeting should have been outlined, too.”

Rohini Rammohan, 24, said: “I don’t think it’s fair to take the tax payer’s money to extend rebate to these education loan borrowers. This announcement is not going to affect all borrowers equally. Moreover, this amount of ₹2,600 crore could have been used to increase spending on rural education.”

Bankers are quick to clarify that this facility will come to the aid of those who had borrowed before 2009 and are even now finding it difficult to service the loan. “This does not mean that all those who borrowed before 2009 and have repaid will be eligible to get a refund as the contract between the borrower and the bank in such cases is no longer in existence,” said a senior public sector bank official.

Chidambaram has in the third batch of supplementary demand for grants tabled in the Lok Sabha provided ₹2,600 crore towards this relief.

The amount will be transferred to Canara Bank, the nodal bank managing the interest subsidy scheme on educational loans.  The details of the scheme will be announced shortly, Chidambaram said.

H Chaturvedi, Director of BIMTECH, said: “Moratorium on interest outstanding on education loan is certainly a big relief for students who have to face difficulties due to poor job availability and low salaries as an outcome of economic slowdown post-2008.”

(With inputs from Siddhartha P. Saikia)

(This article was published on February 17, 2014)
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