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Poor students handed loan relief

Schoolchildren in Moradabad hold a placard thanking finance minister P Chidambaram for increasing the allocation for the National Skill Development Fund in the interim budget on Monday. (PTI)

New Delhi, Feb. 17: The UPA II government today brought cheer to nine lakh economically weaker students by proposing an interest moratorium on their education loans.

So far, only those who had taken their education loans after April 1, 2009, enjoyed the interest waiver granted by a central scheme — if their parents earned less than Rs 4.5 lakh a year, that is.

In his interim budget speech today, P. Chidambaram proposed the interest moratorium on education loans taken in March 2009 or earlier by students who satisfied the parental income cut-off.

“I have noticed a sense of discrimination among students who had borrowed before 31-3-2009, struggled to pay interest during the period of study and continued to service the loan afterwards,” Chidambaram said.

“I think they deserve some relief. I, therefore, propose a moratorium period for all education loans taken up to 31-3-2009 and outstanding on 31-12-2013,” the finance minister said.

However, these borrowers will have to pay the interest for the period after January 2014 — unlike those who took their loans after April 1, 2009.

Chidambaram estimated that nine lakh students would benefit from his proposal, and allocated Rs 2,600 crore towards paying their outstanding interest.

The Centre had introduced the Central Scheme of Interest Subsidy on Education Loan in 2009-10. It allows interest-free bank loans for higher studies to be given to students who meets the economic criterion.

The loans are given for a period that lasts one year after the student passes the designated course or six months after the borrower joins a job, whichever is earlier. The scheme, which does not look at the students’ social background, has so far benefited about 18 lakh poor students.

Sources in the Union human resource development ministry said the scheme was drawing more and more students.

The sum sanctioned to pay the interest for poor student borrowers was Rs 203.28 crore in 2010-11, rose to Rs 697 crore in 2011-12 and then to Rs 1,000 crore in 2012-13.

Experts said that students from the southern states formed the bulk of the scheme’s beneficiaries and that efforts should be made to bring more students from the other regions under its ambit.

“It appears that students from states such as Tamil Nadu, Kerala, Karnataka and Andhra Pradesh get the maximum share. It needs attention,” said Sukhadeo Thorat, chairperson of the Indian Council of Social Science and Research.

Ministry data show that nearly six lakh of the eight lakh-odd students who enjoyed the scheme’s benefits in 2011-12 came from the four southern states. The number of beneficiaries from Bengal was 9,613 in 2009-10, increased to 12,671 in 2010-11, and slipped to 11,616 in 2011-12.

A senior ministry official said that IIM Bangalore had been asked to suggest ways of achieving a more equal regional distribution of the beneficiaries. The B-school’s report is expected by June.

The budget allocation for elementary and higher education for the next fiscal is Rs 67,398 crore, up from about Rs 62,000 last year.