In a big relief to 9 lakh families ahead of elections, the government on Monday said it will waive interest component of education loan taken before March, 2009, a decision that will cost the exchequer Rs 2,600 crore.
“Since interest concession is being given to borrowers (who have availed of loans) after April 1, 2009, what we are saying is if there is any outstanding interest on the loan you took as on December 31, 2013, I am willing to take over interest burden,” Finance Minister P Chidambaram said in his post budget interaction with media.
“We think, our calculation show Rs 2,600 crore is outstanding interest as on December 31, 2013. We are wiping out that burden from shoulders of families, we are taking over the burden. This is huge relief to 9 lakh families,” he said.
He, however, clarified that there is no change with regard to principal amount and interest rate as the contract remains the same.
At the end of December 2013, public sector banks had 25,70,254 student loan accounts and the amount outstanding was Rs 57,700 crore.
Earlier in the day in his Interim Budget proposals, Chidambaram said under the Central Scheme for Interest Subsidy (CSIS) with respect to education loans disbursed after April 1 2009, Government took over the burden of interest for the duration of the period of study and a little beyond. CSIS was announced in 2009-10.
“However, I have noticed a sense of discrimination among students who had borrowed before March 31, 2009, struggled to pay interest during the period of study, and continued to service the loans after wards. I think they deserve some relief,” he said.
“I, therefore, propose a moratorium period for all education loans taken up to March 31, 2009 and outstanding on December 31 2013,” he said.
Borrowers need to pay interest for the period after April 1, 2014.