Education Loan Subsidy: Complete Guide

Education Loan Subsidy schemes are modes of financial assistance which help students to repay their education loan with ease. Student loan applicants can avail these subsidies in the form of interest rate subsidies, loan forgiveness or rebate on education loan repayment. Education loan subsidy by the Central Government provides various benefits to all kinds of loan applicants to help in their education. There are numerous banks as well which provide interest rate subsidy schemes for education loans based on internal criteria. Here is the complete information about education loan interest subsidy schemes with details of eligibility and application process.

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Education Loan Subsidy Schemes: Benefits and Features

  • Concession on the interest rate charged by banks on education loans
  • Rebate on interest paid towards repayment of education loan
  • Collateral waiver for education loans below certain ranges
  • Reimbursement of processing charges and additional expenses
  • Waiver of education loan principal amount (conditional)
  • Taxation benefits based on Section 80/E under Income Tax Act

Education Loan Subsidy: Types and Categories

Education loan subsidies are not limited to interest rate and taxation benefits only, they also provide rebate on interest paid towards education loan and principal loan amount waiver. Students pursuing graduation, post-graduation and other levels of higher education can avail these subsidies based on the eligibility criteria for the education loan schemes. But, before they apply for any such scheme, applicants should know complete details about education loan subsidy programs.

Note: Students can now apply for customized education loans to adjust loan EMIs and repayment schedule. Applicants for education Loans to study abroad can benefit specially from these services by availing part-payment and pre-payment schemes. Check with education loan experts or read more about customized education loan from our article section.

Types of Education Loan Subsidy Schemes

Interest Reimbursement

Government Education Loan Subsidies generally feature interest reimbursement benefits only. Such schemes help the students by reimbursing the interest they pay as EMIs for their education loan. Education Loan EMIs comprise of interest rate component and loan principal amount component. Under interest reimbursement subsidy schemes, the interest component paid against the education loan for a certain period of time is refunded, just like a cashback benefit.

Interest Concession

Banks providing education loans to students generally provide such interest rate subsidies. This variant of education loan subsidy provides a concession or discount on interest rate charged on the loan amount. This means that the effective rate of interest on education loan will decrease immediately. These type of benefits are generally time-invariant, which means they last for the complete duration of education loan repayment.

Loan Principal Waiver

Under some seasonal government schemes, students are provided with the loan waiver schemes to help with their education. Such schemes provide a complete waiver of pending education loan provided the students adhere to the scheme conditions. General conditions of such schemes include community-based eligibility, income-based eligibility, record of previous loan repayments, etc.

Education Loan Interesting fact: Indian students can also take education loan from foreign banking institutions. Students pursuing international studies applying for education loan with confirmed admission can seek loans from international banking institutions. Such loans are also eligible for loan forgiveness and loan refinance options.

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Education Loan Subsidy Schemes Provided by Banking Institutions

Almost all banks in India which provide education loans offer some interest rate subsidy to the loan applicants. These schemes are generally dependent on gender, community and family income slabs. Here is a list of popular education loan subsidy schemes provided by PSU banks/private banks/NBFCs (Non-Banking Financial Institutions).

Education loan interest subsidy- Private & PSU Bank schemes

S. No. Bank Name Subsidy type and limits Terms and conditions
1. State Bank of India (SBI) 0.50% interest rate concession Loan for girl students
0.50% interest rate concession Students availing SBI Rinn Raksha (Education Loan insurance scheme)
2. Axis Bank 0.25% interest rate concession Loan for girl students
3. Canara Bank 0.50% interest rate concession Loan for girl students
4. Bank of Baroda 0.50% interest rate concession Loan for girl students
100% processing charge subsidy Skill loan scheme applicants
5. Bank of India 1.0% interest rate concession For students not paying EMIs during moratorium period/holiday period
0.50% interest rate concession Loan for girl students
0.50 % interest rate concession Applicants pursuing professional courses (engineering, medical, management)
6. ICICI Bank 0.50% interest rate concession Loan for girl students

Did you know:
Education loans cover numerous unique expenses like student insurance, student tour expenses, thesis writing expenses and expenses for entrance tests like SAT exams, LSATS, GRE, TOEFL, IELTS, GMAT, etc. Check with your bank the complete list of expenses covered by the education loan.

Education Loan Subsidy Schemes Provided by the Government of India

The Government of India provides education loan subsidy schemes to help students repay their education loan more conveniently. The government subsidy schemes are collectively bundled as Central Sector Interest Subsidy (CSIS) Schemes. There are subsidy schemes for students from all sections of society but most of them are based on certain income-based limits. Here is a list of all the education loan subsidy schemes provided by the Indian government.

S. No. Subsidy Scheme Name Subsidy Type and Limits Terms and conditions

Central Sector Subsidy Scheme (CSIS)

Provided by Ministry of Human Resource and Development

Interest reimbursement
  • Education loan applicants paying education loan EMIs while pursuing their course
  • 100% reimbursement of interest paid against education loan EMIs
  • Family income limit: ₹4,50,000 (4.5 lakhs) per annum

Dr. Ambedkar Central Scheme of Interest Subsidy on Education Loan for Overseas studies for OBC & EBC)

Provided by Ministry of Social Justice and Empowerment

Interest reimbursement
  • Education loan applicants (OBC & EBC only) paying education loan EMIs while pursuing their studies abroad
  • 100% reimbursement of interest paid against education loan EMIs
  • Family Income Limit
  • OBC (Other backward classes): ₹3,00,000 (3 lakhs) per annum
  • EBC (Economically backward classes): ₹1,00,000 (1 Lakh) per annum

Padho Pradesh Central Scheme of Interest Subsidy for Minorities

Provided by Ministry of Minority Affairs

Interest reimbursement
  • Education loan applicants (minorities like Jain, Parsi, etc.) paying education loan EMIs while pursuing their studies abroad
  • 100% reimbursement of interest paid against education loan EMIs
  • Family Income Limit: ₹6,00,000 (6 lakhs) per annum

Education Loan Subsidy Schemes: How to Apply

The important point to remember for education loan subsidy schemes is that they are not automatically activated for eligible candidates, students need to apply for these services. The application procedure for subsidy schemes is very simple and does not require any repeated visits to the bank. Here is the procedure to apply for education loan interest subsidies.

Education loan myth-buster: Canara Bank is the nodal bank for all education loan subsidy schemes provided by the government (CSIS schemes). Many students presume that they have to apply for subsidies at Canara Bank branches. But this is ‘NOT TRUE’.

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Students need to apply for education loan subsidy at the bank which provides them the education loan. The fact that Canara Bank is the nodal bank for these schemes has got nothing to do with subsidy applications at applicant level.

Application Procedure for Education Loan Subsidy

  • Collect the necessary documents required for education loan subsidy application
    • CSIS: Income certificate and loan agreement
    • ACSIS: Income certificate and caste certificate (issued by competent authority)
    • Padho Pardesh Scheme: Income certificate and minority certificate (issued by competent authority)
    • All bank-based subsidy schemes: Income certificate, ID proofs and proof of admission
  • Visit the nearest branch of the bank which provides you the education loan
  • Ask for an ‘Education Loan Subsidy Application Form’
  • Fill in the required details and submit your documents with the application
  • Track your application regularly by seeking the status update from bank officials
  • Provide additional documents as (if) requested by bank authorities

Did you know there are loan based scholarships as well which allow students to avail a scholarship for interest free loan and repay in an extended period of time? Such loans also allow students to avail loan forgiveness based on their academic performance. Find more such scholarship opportunities for Indian students and avail regular updates for them via sms and email at our website.

Education Loan Subsidy: Other Schemes

There are other forms of subsidies for education loans provided by state governments of India. These schemes are commonly periodic in nature, pilot programs or fixed duration programs. The benefits of such schemes may vary from interest reimbursement to principal amount waiver.

Kerala Education Loan Repayment Support Scheme

To help students of Kerala pay back their education loan, the state government of Kerala is providing them with a unique benefit of education loan repayment support. The students who struggle with their education loans EMIs and have missed some payment schedules can avail this service to continue their EMIs. This helps them avoid accumulation of interest while they continue their education.

The only certainty of securing an education loan subsidy is to find as much information as possible about the latest norms and have complete information about schemes. Students should not always rely on education loans to cover their educational expenses. There are scholarship and fellowship opportunities for Indian students all across the globe, which can be used to fund various academic and non-academic expenses. Most education loans can be adjusted with scholarships to cover margin payment and EMIs. With all the information about education loan subsidies, we hope that you would be able to manage your education loan in the best possible manner.


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