The Central Government recently approved the PM Vidyalaxmi education loan scheme. The scheme aims to provide easy loans and financial support to meritorious students pursuing higher studies. In this post, let us find out more about the scheme.
What Is PM-Vidyalaxmi Scheme?
Note that the Central Government will not offer education loans under this scheme. The banks will offer these student loans. The Central Government is just an enabler. Through interest subvention and credit guarantee, the Government aims to make it easy for the students to access education loans and make banks comfortable in offering such loans.
Here are the prominent features of this scheme:
- Collateral-free and guarantor free education loans in the top 860 top-ranked higher education institutes.
- Simple, transparent, and completely digital application process.
- Interest subsidy on loans to students with family income less than Rs 8 lacs per annum. Makes loans cheap.
- Cost of credit guarantee on loan amounts up to Rs 7.5 lacs to be absorbed by the Government of India. This allows loans to be collateral and guarantor free.
- Over and above other education loan initiatives by the Government of India.
As I understand, there is no cap on the loan amount. However, the benefits (collateral-free, guarantor fee, interest subsidy etc.) of the scheme shall apply only up to a threshold loan amount. For instance, since the credit guarantee applies only for loan amounts up to Rs 7.5 lacs, the bank may not be willing to offer an education loan of Rs 25 lacs without collateral and guarantor.
As per the press release, the scheme is targeted at meritorious students seeking admission to quality institutes of higher education. Both Government and private colleges and universities are eligible.
How do you ensure that this scheme works only for meritorious students? By making only the top ranked colleges eligible for loans under this scheme and assuming that only good students will be able to secure admissions in such colleges.
Which Colleges and Universities Are Eligible under PM Vidyalakshmi Scheme?
The scheme is applicable to only top-quality higher education institutions in the country.
- All institutions of higher education governed by the Central Government
- All institutions of higher education (Government or Private) that are ranked in the top 100 in NIRF in overall, category-specific, and domain specific rankings.
- All institutions governed by respective state governments that are ranked in 101-200 in NIRF.
NIRF stands for National Institutional Ranking Framework. This framework specifies the methodology to rank institutions across the country. The ranking parameters cover
- Teaching, learning and resources
- Research and Professional Services
- Graduation outcomes
- Outreach and Inclusivity
- Perception
The list of eligible institutions shall be updated every year using the latest NIRF ranking.
Any Interest Subsidy under PM-Vidyalakshmi Scheme?
If the family income of the student is less than Rs 8 lacs, the Government will provide an interest subvention of 3% on the loans up to Rs 10 lacs. As I understand, your loan amount may be higher, but the interest-subvention shall be provided only on Rs 10 lacs. Further details on the interest subvention are awaited.
For more on interest subsidy works in general (not specific to this scheme), refer to this post.
Note that this interest subvention is applicable only if the student is not eligible for benefits under any government scholarship or interest subvention scheme such as CSIS. This will reduce the cost of the loan to the borrower.
Even if you are eligible for interest subvention, there is no guarantee that you will get it. The interest subvention shall be available to only 1 lac students every year and the preference shall be given to students from government institutions who have opted for professional/technical courses.
Payment of interest subvention shall be made through e-voucher and Central Bank Digital Currency (CBDC) wallets.
In addition, the loans under PM-Vidyalakshmi scheme up to Rs 7.5 lacs shall be provided with a credit guarantee of 75% of the outstanding amount. As I understand, the Government will bear the cost of this credit guarantee. This will give comfort to the banks in offering such loans to the students. This may reduce the cost of the education loan.
How to Apply for PM-Vidyalakshmi Education Loan?
The application process shall be entirely digital, and you will be able to apply for education loans with multiple banks from a single interface.
The Department of Higher education will launch a unified portal PM-Vidyalakshmi from where the students can apply for both the education loan and the interest subvention. There is already a Vidyalakshmi education loan portal. As I understand, the current Vidyalakshmi portal will be rechristened as PM-Vidyalakshmi portal.
You can expect forms/procedure to be available on the bank website and bank branches as well.
PM-Vidyalaxmi Supplements Other Education Loan Schemes
PM-Vidyalaxmi education loan scheme will supplement the Central Sector Interest Subsidy (CSIS) and Credit Guarantee Fund Scheme for Education Loans (CGFSEL), the existing schemes under Pradhan Mantri Uchchatar Shiksha Protsahan Yojana (PM-USP).
As I see, the scope of coverage under CSIS and PM-Vidyalakshmi schemes is the same. Both aim to provide easy and cheap education loans to students. The difference is in the eligibility of colleges, eligibility for interest subsidy, and the quantum of interest subsidy.
CSIS provides interest subsidy only to those with annual family income of up to Rs 4.5 lacs. With PM-Vidyalakshmi, this goes up to Rs 8 lacs of annual family income.
CSIS provides full interest subvention. PM-Vidyalakshmi provides interest subvention of 3%. This is logical too since CSIS provides relief to students with much lower family income. Under both the schemes, the loan cap for subsidy is Rs 10 lacs.
PM-Vidyalakshmi helps with studying only in top ranked colleges and universities. With CSIS, the criteria is more liberal.