Before we dive into the details of subsidy loans and crisis related to the same, let’s first understand what it means. A subsidy loan is a type of load that does not require interest payment from only the borrower but it allows a third party to pay. Student loans are a subcategory of many types of subsidiary loans that either a private body, charitable organization or government can provide. Many might think that taking a personal loan will be convenient rather than an education loan but on the contrary interest rates for education loans, are way lower than personal loans. Most of the banks in India provide education loan for students who want to pursue higher education in India as well as in foreign countries.
The government of India has made it easy for students by setting some guidelines like anybody who desires for education can apply for a loan that too for any desired course, lower interest rates for female candidates etc. A student is eligible for a loan of 2 to 22 lakhs as per their requirement. So after the loan gets approved the student need to repay it 6 months to 1 year of completion of the course though it can extend up to 5 years. State Bank of India, Canara Bank, Axis Bank, ICICI Bank etc are some of the many banks that avail this facility easily to students.
A student applying for education loan also need support from college in getting necessary documents and bonafide certificate to avail the loan. Colleges like S.R.M Institute of Technology, NSHM Durgapur which is one is the top engineering colleges in Chennai, Anna University Chennai etc helps students a lot in this process.
The relevance of this type of loans in our country will make more sense if we check the number of people who are below poverty line. Surprisingly in a fast-developing country like India around 276 million people are below poverty line. With movements like Make in India campaign, it is true that it opens new doors of employment opportunity to people at the same time demands a need for education. Students who aspire to do courses like Engineering, MBA etc even after cracking the entrance exams are not able to afford the tuition fees and seek for subsidized loans from banks. On the education loan that is allotted to them they get subsidies based on the criterias like SC/ST, women, single child etc but the sad part is that in spite of many students being eligible for subsidies some banks force them to pay interest.
There are tons of colleges in south India that promise 100%placement and then leave the students cheated. In spite of doing courses and in spite of getting themselves into the debt crisis, not getting a job makes them depressed. This is a major cause of student suicides in India.
The unemployment rates have shot up in the last five years despite all the efforts. In this scenario, the students are not able to pay the loans which drag them into the debt crisis. According to 2017, the interest rates for a subsidized loan is 4.46%. Recently it has been reported that SBI has failed to remit more than INR 534 Crore which was received from the centre as interest subsidy to eligible students. Incidents like this make the already bad situation worst. This forces the poor students to repay 40 % more on their loan. On one side the government gives all sort of facilities to students and on the other side, things are falling apart. As a developing country, we need to pay attention to all these factors for better growth because our future lies in the hands of students.