Education loan repayment scheme guidelines for the state of Kerala

A lot of students pursue higher education after they have completed their high school and many even do so after they have completed their graduation, but the continuously rising fees to pursue that education has made it even more difficult for parents to help their children study further. Today’s age is such where taken a bank loan is the only option for parents to help their study, but that also comes with a negative effect on the structure of the loan is such that the parents are held as the guarantors and the EMI of the loan starts when the child has completed his/her education. In, most cases there is a probation period of about 6 months to a year before the person begins to repay his/her loan. Most of the students are able to pay the loan but in certain circumstances, it turns out to be a problem when the child is unable to secure a job.

After recognizing the issue the government of Kerala made a decision to launch a scheme where the students where the students would have defaulted the repayment of the loan.

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Details on the scheme

This scheme is would throw a helping hand forward to the students in repaying their education loan and the scheme is applicable to the families whose annual income is less than INR. 6 lakhs. As per records, the state has a total education loan of INR. 10220 crore. Out of which INR. 1315 crore is a bad loan and this poses a significant challenge for the banks as well as the government, the government of Rajasthan has approved a budget of INR. 900 crore to clear such bad loans.

Implementation of the scheme

Under the scheme, the government will recognize such stressed assets and will try to make the repayment, as per information, the government will be looking for an education loan of less than INR. 4 lakhs and in such circumstances, as the government will negotiate with the banks to remove the interest and the penalty. As this is done, the government will pay 60% of the loan on a condition that the borrower would have to pay the rest of the 40% remaining. The scheme is also applicable for the loans above INR. 4 lakhs which have not been defaulted and in addition to this, if the loan of above 4 lakhs in an NPA, the government will pay up to 50% of the loan amount.

Eligibility of the scheme

  • The loan taken by the students should be an educational loan.(Note- Personal loans are not applicable for the scheme)
  • In addition to this, the families of the applicants should have a total annual income of less than INR. 6 lakhs
  • The borrower would have to agree for a repayment of 40 to 50 percent of the loan amount
  • The students should be a resident of Kerala.

Benefits of the scheme

  • The students and the families will get a new life as their loan will be paid and they will be able to make a fresh start
  • The tension on the banking system would reduce as the banks will be able to clear off their balance sheet
  • Once the bank has funds, the banks will be able to provide funds to more people in the forms of loans.

How to apply for the scheme?

The scheme has announced by the government recently and the application procedure of the scheme is still not clear. The government is expected to release a notification with regards to the scheme.

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