New Delhi, Oct. 14: A government promise to help students repay college loans has fallen prey to fresh differences between the human resource development ministry and the Prime Minister’s Office and may be put off indefinitely.

The PMO and the HRD ministry have come up with their own plans for a student loan scheme in higher education, promised by finance minister P. Chidambaram in this year’s budget, senior government officials have told The Telegraph.

Neither is willing to accept the other’s proposals, and the HRD ministry’s “hint” that both proposals be executed has not gone down well with the Planning Commission that has allocated funds for the scheme, sources said.

“Unless someone blinks — and that is unlikely — the future of the loan scheme looks uncertain,” an official said.

Differences had earlier crept up between the ministry and the PMO over the OBC reservation bill and on allowing private universities entry into India.

Students seeking education loans from commercial banks are forced to pay high interest rates — currently it is 13.5 per cent — which many students cannot afford.

The budget promise is in keeping with the common minimum programme, which said nobody would be denied “professional education because he or she is poor”.

The PMO, the official said, is intent on setting up a “refinancing corporation” for higher education, which will help students repay their loans at a lower interest rate over a longer period of time.

“If a student has taken a loan of Rs 1,000 for five years at 13.5 per cent, for instance, the refinancing corporation will pay that loan and interest. The student will have to pay that amount to the corporation over 10 years at half the interest rate. The annual burden is thus reduced,” an official associated with the proposal explained.

The total amount that a student pays — the loan plus interest — will, however, remain the same.

The HRD ministry, on the other hand, is adamant that the loan scheme should reduce the amount a student has to pay.

The ministry has proposed a scheme under which commercial banks will have to give higher education loans at almost the same interest rate as offered by government banks.

“Commercial banks will be allowed to keep an interest rate which is, at the most, 0.5 per cent more than government banks,” an official said.

The loss incurred by commercial banks will be compensated by the government through a corpus, officials said.

“The plan will ensure that needy students who seek loans will actually pay lower interest rates than the ones imposed by commercial banks currently. They will thus be saving money,” a source said.