New central scheme to facilitate guarantee-free loans for higher education

The union cabinet has approved a new scheme under which the Department of Higher Education will facilitate education loans to over 2.2 million students across top 860 higher educational institutions in India.

The mission mode `PM-Vidyalaxmi’ scheme is intended to provide financial support to deserving students to ensure that financial constraints do not prevent any student from pursuing quality higher education within the country.

An offshoot of the National Education Policy, 2020, PM Vidyalaxmi will ensure collateral free, guarantor free loan from banks and financial institutions to cover full amount of tuition fees and other expenses related to the course.

The scheme also aims at curbing the number of young students flocking to universities abroad for pursuing higher education, because of a lack of financial support for pursuing higher studies in the country. 

The PM-Vidyalaxmi scheme provides for collateral- and guarantor-free loans of up to Rs7.5 lakh, made available through simple, transparent, student-friendly and inter-operable digital application process.

Under the scheme, students with family income of up to Rs4.5 lakh will be eligible for interest-free loans.

For loans up to Rs7.5 lakh, Government of India will provide 75 per cent credit guarantee so as to support banks participating in the scheme.

The scheme provides for 3 per cent interest subvention on loans up to Rs10 lakh for students with annual family income of up to Rs8 lakh.

With an outlay of Rs3,600 crore for the fiscal years from 2024-25 to 2030-31, the interest subvention scheme is expected to benefit 7 lakh students.

Payments to banks against interest subvention will be made through E-voucher and Central Bank Digital Currency (CBDC) wallets.

The scheme will be applicable to students admitted to top 100 HEIs in the country as per the NIRF rankings both government and private – as also state government HEIs ranked in 101-200 in NIRF and all central government governed institutions. 

The list will undergo annual revision as per the latest NIRF rankings, and will start with 860 quality HEIs and over 2.2 million students as potential beneficiaries.

PM Vidyalaxmi expects to expand its reach and scope over the years so as to maximise access to quality higher education for the youth.