The Union Finance Minister Shri P. Chidambaram has announced a Moratorium period for all education loans taken-up to 31.3.2009 and outstanding on 31.12.2013. Government will take over the liability for outstanding interest as on 31.12.2013, but the borrower would have to pay interest for the period after 1.1.2014. Nearly 9 lakh students borrowers will benefit to the tune of approximately Rs. 2,600 crore.

Presenting the Interim Budget in the Lok Sabha today, the Union Finance Minister Shri Chidambaram said that a sum of Rs. 2,600 crore will be provided in the current financial year itself and this amount will be transferred to the Canara Bank. Mr. P. Chidambaram said that the Central scheme for interest subsidy was introduced in 2009-10 in respect of education loans disbursed after 1.4.2009. However, students who had borrowed before 31.3.2009 struggled to pay interest during the period of study and they deserved some relief.

Shri P. Chidambaram informed that ten years ago, only a few thousand students- mostly the well-connected- got education loans. 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.

Education loan moratorium provides government takeover of outstanding interest for eligible loans; borrowers pay interest thereafter under subsidy framework. A moratorium for education loans taken up to 31.3.2009 and outstanding on 31.12.2013 places liability for interest outstanding as on 31.12.2013 with the government, while borrowers must pay interest accruing after 1.1.2014. Funding is provided in the interim budget and will be transferred to a public sector bank to implement the relief, targeting borrowers who borrowed before the central interest subsidy scheme and addressing the substantial stock of student loan accounts and outstanding balances in public sector banks.