Study loans at low rates of interest?

Updated on: Tuesday, September 14, 2010

Every student in the country wanting to pursue higher education can get education loan at low rate of interest if the proposal to establish a National Education Finance Corporation becomes a reality.

This proposal of the Ministry of Human Resource Development has two components — one, to offer loans to students at concessional rate of interest for pursuing higher education, and two, to attract investment from the private sector in higher education by offering incentives.

The plan is to offer education loan at four per cent rate of interest. It is also being contemplated to give guarantee from the Central Government for the education loans to be given for students who get admission to professional courses.

While the first part of the scheme has already evoked a good response from academicians, educational institutions and students, there are some apprehensions about the second aspect of it.

The HRD Ministry wants to attract private investment by offering soft loans through the priority sector lending rate, which is available to some other sectors.

When various industries are given loans at priority sector lending rate and are offered longer repayment period, why not extend the facility for building educational infrastructure and expansion of educational institutions, is the basis on which the Ministry is pushing forward this proposal.

M.S. Thimmappa, former Vice-Chancellor of Bangalore University, appreciated the move, pointing out that it will allow meritorious students hailing from poor families to join top educational institutions, which have a reputation for campus placement.

However, some of the present Vice-Chancellors have felt that even though the scheme is good, they fear that guarantee of loan might encourage private educational institutions to increase the fee exorbitantly.

Citing how some hospitals began overcharging patients due to the availability of health insurance scheme, they said that some mechanism is essential to check the fee charged by private institutions.

Negative effect

Meanwhile, J.S. Patil, Vice-Chancellor of Karnataka State Law University, felt that the creation of a corporation might result in the government withdrawing from its responsibility of higher education in the long run when the private sector gains control over the education system.

This has been witnessed in many fields where the government is following what the corporates are saying.

He says that the government should come out with more scholarships to the poor and meritorious students instead of pushing towards education loan, which may become a burden on them if they do not get an appropriate job.

A representative of the Karnataka Private Medical and Dental Colleges' Association said that the proposal to offer guarantee for those securing a seat in professional courses will help many poor, meritorious students to pursue medical, dental and engineering courses.

“The banks will not hesitate to give loans to them as the government will provide guarantee for such loans,” a member of the Association.

While supporting the proposal to offer loans at priority lending rate with longer repayment option to private educational institutions, a member of the Bangalore University Private Colleges' Association said that such an initiative will encourage institutions committed to providing quality education to expand their activities with minimum increase in fee and without charging any fee under the name of college development.

Study loans at low rates of interest?

More Education news