Education Loan Subsidy Schemes: Eligibility, Benefits, and Claims

The Government of India provides interest subsidies or subventions on eligible education loans through various schemes. The government pays an education loan interest rate subsidy during the moratorium period. There are two main central schemes for eligible students. They are:

1. PM-USP CSIS (Pradhan Mantri Uchchatar Shiksha Protsahan - Central Sector Interest Subsidy scheme): for students with family income up to ₹4.5 lakh.

2. 3% Interest subvention under PM-Vidyalaxmi: for income between  ₹4.5 lakh and  ₹8 lakh.

Apart from the two schemes, there are other education loan subsidy schemes like the Dr Ambedkar Central Sector Scheme (paused for new applications) and the Padho Pardesh Scheme. These are accessible to the socio-economically backward sections to empower them to pursue higher studies abroad. If you are planning to fund your higher education through a loan, a government subsidy could help reduce your interest burden and make repayment manageable.

However, eligibility depends on factors such as your family income, course, institution, loan amount, and lender.

Students can refer to the step-by-step guide to learn the complete education loan process.

We have compiled complete information on the relevant government schemes and how to meet their conditions, including requirements related to the institution and the lender, in the following article.

*The prices mentioned are indicative and subject to change. Total cost also depends on individual preferences and choice.

Note: It is advised that you always verify the latest eligibility and application requirements on the PM-Vidyalaxmi portal or with your lending bank before applying. 

An education loan interest subsidy is a government benefit that covers some or all of the eligible interest on an education loan during a specified period.

Normally, when a student takes a disbursement, the interest starts accruing. However, under a subsidy scheme, the government pays some or all of the applicable interest during the moratorium period. These schemes are designed to support eligible students from lower- or middle-income families.

Note: The government education loan subsidy scheme discussed applies to the interest component. Neither the principal borrowed nor the education loan gets subvention or subsidy benefits.

Understanding the terms is vital for students to identify which scheme they are eligible for and make the most of its benefits.

Therefore, under CSIS, eligible students receive a full interest subsidy during the specified moratorium period, while PM-Vidyalaxmi provides a 3% interest subvention subject to its eligibility conditions.

The PM-Vidyalaxmi scheme has separate credit guarantee and interest subvention components, which can sometimes be confusing. To make things easier, here's a simplified comparison of the two:

Note: The prices mentioned are indicative and subject to change. Total cost also depends on individual preferences and choices.

*QHEI (Quality Higher Education Institutions) refers to a list of around 1032 eligible institutions identified by the government. To receive benefits under PM-Vidyalaxmi, a student must be admitted to an institution mentioned on the curated list.

Hence, you can benefit from the credit guarantee (no collateral) without qualifying for any interest subvention if your family income exceeds ₹8 lakh.

We’ve understood the key difference between the interest subsidies and their sub-schemes. But how does each scheme actually work? Let's break down the details of each government scheme and see what interest subsidy benefits you may be eligible for.

WeMakeScholars can help you compare lending banks and educational loan options that may offer PM-Vidyalaxmi benefits.

Different government schemes have different income, course, institution, loan, and study-destination requirements.

The major schemes relevant to students include the following:

1. PM-USP Central Sector Interest Subsidy Scheme (CSIS)

The CSIS scheme, implemented by the Department of Higher Education, Ministry of Education, provides a 100% interest subsidy during the moratorium period for education loans taken from scheduled banks under the Model Education Loan Scheme of the Indian Banks Association.

The scheme aims to support students belonging to economically weaker sections, with an annual parental income of up to INR 4.5 lakh, who want to pursue higher education in professional or technical courses from NAAC-accredited institutions or professional/technical programs accredited by NBA or institutions of national importance. 

Eligibility:

Students generally need to meet conditions such as:

• The applicant should be an Indian national.

• They should have secured admission in a technical or professional course in India.

• The applicant should avail the education loan from a scheduled bank under the Indian Banks’ Association (IBA) Model Education Loan Scheme.

• The applicant's total annual family income from all sources should not exceed ₹4.5 lakh.

• Meet the applicable loan and scheme conditions listed on the official portal.

Interest Subsidy:

• Full interest subsidy during the moratorium period (course period plus one year) for education loans taken without any collateral security and third-party guarantee, for pursuing technical/professional courses in India from scheduled banks.

• The eligible loan amount for the subsidy is capped at ₹10 lakh. If the sanctioned loan is higher, then the subsidy applies only to the eligible portion under the scheme.

Documents Required:

• Income certificate of the student's parents/guardians

• Admission letter from the institution

• Loan sanction letter from the bank

• KYC documents

How to claim:

Canara Bank is the nodal bank for CSIS subsidy claims, and it runs the PM-Vidyalaxmi portal, as there is no separate portal to claim the CSIS subsidy. This is the portal where all the other banks submit their students' subsidy claims. 

Students get their loan from their chosen bank, which then submits the subsidy claim to Canara Bank, which will process and approve it on the government's behalf. The subsidy is credited straight into the student's loan account through the PM-Vidyalaxmi Digital Rupee app.

2. PM-Vidyalaxmi 3% Interest Subvention

This scheme provides 3% interest subvention during the moratorium period on a qualifying education loan. This scheme is to support eligible students from middle-income families in pursuing their aspirations for higher education.

Who is eligible for the PM-Vidyalaxmi interest subsidy scheme?

• Annual family income between ₹4.5 lakh and ₹8 lakh.

• The institution should be listed in the Quality Higher Education Institution (QHEI).

• Selection to the institution is merit-based and is subject to the scheme conditions. 

• The loan amount eligible for the benefit is capped at ₹10 lakh.

Loans up to ₹7.5 lakh may also receive the scheme's collateral-free and guarantor-free credit guarantee benefit, subject to eligibility.

Fresh applications under this scheme have been paused for now. Hence, students should confirm current application availability directly from the Ministry of Social Justice and Empowerment or the lending bank before applying.

3. Dr Ambedkar Central Sector Scheme

This scheme provides 100% interest subsidy support for eligible OBC and EBC students pursuing higher studies abroad.

The courses eligible for this scheme are:

• Master's programs

• PG diplomas

• M.Phil programs

• Ph.D programs

Education Loan Interest Subsidy Eligibility under Dr Ambedkar Central Sector Scheme: 

• The scheme is open to students belonging to Other Backward Classes (OBCs) and Economically Backward Classes (EBCs).

• Students must be pursuing courses leading to Master's (including PG Diploma), M.Phil, and Ph.D. levels.

• Priority is given to students who have completed their qualifying education in a government university/institution before taking admission.

• The total income of the applicant (from all sources) should not exceed ₹8 lakh per annum for OBC and ₹2.5 lakh for EBC.

Interest Subsidy:

• The interest payable by the students availing the education loans of the Indian Banks Association (IBA) for the period of moratorium (i.e., course period, plus one year or six months after getting a job, whichever is earlier) as prescribed under the Education Loan Scheme of the IBA shall be borne by the Government of India.

• The loan amount eligible for the benefit is capped at ₹20 lakh.

Application Process:

• Students can apply for this scheme through their chosen lender after availing the study loan.

• Submit all the relevant documents to the lender stating that you’re eligible for the interest subsidy scheme.

Documents Required:

• Income certificate issued by the competent authority in the State/UT Government.

• Proof of admission to the course.

• Copy of the letter confirming the sanction of loan by the Bank.

• Copy of Passport.

• Interest subsidy claim.

Fresh applications under this scheme have been paused for now. Hence, students should confirm current application availability directly from the Ministry of Social Justice and Empowerment or the lending bank before applying.

4. Padho Pardesh Scheme

The Padho Pardesh Scheme, introduced by the Government of India, provides an interest subsidy on education loans for students from minority communities who want to study abroad for higher studies.

Eligibility:

• This govt subsidy for education loan scheme is open to students belonging to minority communities, as notified by the Government of India.

• The annual income of the applicant must be below ₹6 Lakh.

• The applicant should have secured admission in an educational institute overseas for a Master's, M.Phil., or Ph.D. program.

• The 'meritorious' criteria in the scheme refers to the student's academic performance, extra-curricular activities, and other achievements that demonstrate their exceptional potential for success in their chosen field of study.

Interest Subsidy:

• The interest subsidy is provided for the moratorium period of the education loans under the Scheme of Interest Subsidy on Educational Loans for Overseas Studies.

• The rate of interest subsidy may be amended from time to time.

• As per the Model Scheme of IBA, the interest subsidy is provided for the loan amount disbursed up to ₹20 Lakh.

• If the course pursued by the minority student is partly in India and partly abroad, they may still be eligible for the interest subsidy.

Application Process:

• Students can apply for the Padho Pardesh scheme through their chosen lender after availing the study loan.

• Submit all the relevant documents to the lender stating that you’re eligible for the interest subsidy scheme.

Documents Required:

• Income certificate issued by the competent authority in the state/union territory.

• Admission letter from the educational institute abroad.

• Passport and photograph.

• KYC documents.

 5. State Government Education Loan Subsidy Schemes

Apart from the mentioned central schemes, some state governments also offer their own education loan subsidy schemes or student credit schemes.

For example:

• West Bengal Student Credit Card Scheme: This scheme provides educational financial assistance with a subsidy for eligible students who are residents of West Bengal.

• Guruji Student Credit Card Scheme: Provides education loans to eligible students from Jharkhand at a subsidised interest rate.

The loan amount, interest benefit, income criteria, and eligible courses differ between states. Therefore, check with your state's education or minority welfare department, or your bank's state-scheme page, for current terms.

Let us compare and see the differences in income and loan cap, and eligibility of various schemes.

*The prices mentioned are indicative and subject to change. Total cost also depends on individual preferences and choices.

If you're planning to study abroad, you may be eligible for only certain schemes. Use the table above as a quick checklist to see which central subsidy scheme for education loan fits your study destination and plans.

Students aspiring to study abroad can check their education loan eligibility with WeMakeScholars and get personalised loan assistance, along with guidance on the interest subsidy schemes they may be eligible for.

However, a few private banks (15), Regional rural banks (17), and co-operative banks (3) also participate in the CSIS and PM-Vidyalaxmi schemes. The banks handling the largest share of applications include:

The interest that builds up during the moratorium period can be significant, depending on the loan amount disbursed and the lender's benchmark rate. Understanding the benefits of each subsidy scheme can help students choose the one that best fits their profile and study loan.

For realistic numbers, let us take an illustrative example:

A student takes a ₹10 lakh education loan at 9% interest (simple interest) with a four-year moratorium.

*The prices mentioned are indicative and subject to change. Total cost also depends on individual preferences and choices.

Hence, government subsidy for education loan interest can be a valuable support for students facing financial constraints. It can help ease the burden of loan interest until students complete their higher studies, start their careers, and become financially independent.

If you have already applied for an education loan subsidy and want to know its status, start by checking the PM-Vidyalaxmi portal and your lending bank.

You can generally:

1. Log in to the PM-Vidyalaxmi portal.

2. Check the status of your education loan application or subsidy claim.

3. Contact your bank if the claim has not been updated.

4. Ask the bank whether the subsidy claim was correctly submitted.

If there is a delay, it is suggested to contact the education loan department of your bank and ask for the current status to accelerate the subsidy claim.

After the loan sanction, the lending banks upload the candidates’ details into the nodal banks' software every quarter. This list of students goes to the selection committee.

The selection committee considers the following factors:

• The merit of the candidate.

• Annual income from all sources (siblings, spouses, parents, guardians).

• Under the Dr Ambedkar education loan interest subsidy scheme, priority will be given to students who have finished their qualifying education from government universities/institution prior to being enrolled in an overseas education program.

On the directions of the governing body, all the member banks will open the subsidy portal. The application portal for these schemes will be opened only once in a financial year by nodal banks. They may reopen it again if they do not receive a sufficient number of applications that satisfy the yearly quota.

Planning for higher studies includes planning a significant budget. This is exactly where students consider an education loan for financial assistance, which gives them breathing room before achieving their career goals. Government education loan subsidy schemes can make this education loan more affordable. The benefits range from a full interest subsidy under CSIS to a 3% interest subvention under PM-Vidyalaxmi, depending on the student's eligibility. Padho Pardesh and the Dr.Ambedkar scheme assist students for higher studies abroad to ease the financial burden.

However, eligibility depends on factors such as family income, institution eligibility, and the type of lender. Hence, check these details before finalising your education loan; this will help you make the most of the subsidy benefits available to you and reduce your overall repayment burden.