With the cost of higher education climbing steadily, there is mounting pressure on banks and policymakers to reduce interest rates on education loans in India. Students, parents, and education experts argue that lower rates are essential to expand access to quality education and reduce the long-term financial burden on graduates.
Current Scenario
Education loans from banks and NBFCs typically carry interest rates ranging between 8% and 14%, depending on the course, collateral, and borrower profile. While government schemes like the Credit Guarantee Fund for Education Loans and interest subsidies for economically weaker sections exist, the majority of borrowers still face high EMIs after graduation.
Key Drivers of the Demand for Lower Rates
Rising Tuition Fees: Professional and technical courses, especially abroad, have become significantly more expensive.
Student Debt Stress: Young graduates often enter the workforce with heavy debt, limiting their career choices and disposable income.
Need for Skilled Workforce: Lower loan costs can boost enrolments in higher and technical education, supporting India’s demographic dividend.
Stakeholders Advocating Change
Student Groups & NGOs: Highlighting financial hardship and potential dropouts due to unaffordable credit.
Academics & Economists: Arguing that education loans should be treated as human-capital investment with concessional rates.
State Governments: Some, like Bihar, have already introduced interest-free student credit card schemes.
Policy Options Under Discussion
Government-backed interest subsidies for all categories
Lowering base rates on priority-sector education loans
Income-linked repayment plans for graduates
Conclusion
As India pushes to increase its Gross Enrolment Ratio and build a skilled workforce, making education loans affordable is becoming a policy priority. Reducing interest rates could be a powerful step toward equitable, accessible higher education.
FAQ
Q1. Why are people demanding lower interest rates on education loans?
Because high rates make higher education unaffordable and saddle graduates with heavy debt burdens.
Q2. What is the current interest rate on education loans in India?
Typically 8–14% depending on the course, collateral, and lender.
Q3. Are there any schemes for subsidised education loans?
Yes. The central government offers interest subsidies for economically weaker sections, and some states (like Bihar) provide interest-free student credit cards.
Q4. How would lower interest rates benefit students?
They would reduce EMIs, prevent dropouts, and allow graduates to choose careers based on interest rather than debt pressure.
Q5. Has any state already moved to interest-free education loans?
Yes. Bihar has announced that all Student Credit Card education loans will now be fully interest-free.
Published on : 17th September
Published by : SMITA
www.vizzve.com || www.vizzveservices.com
Follow us on social media: Facebook || Linkedin || Instagram
🛡 Powered by Vizzve Financial
RBI-Registered Loan Partner | 10 Lakh+ Customers | ₹600 Cr+ Disbursed
https://play.google.com/store/apps/details?id=com.vizzve_micro_seva&pcampaignid=web_share