Education loan access declining; parliamentary panel notes gaps for rural, low-income students

NEW DELHI: The accessibility of educational loans has declined over time, even as the cost of higher education has gone steeply up, a Parliamentary Panel has noted, while recommending the government not to curtail or reject loan applications. The findings were tabled in the Rajya Sabha by the Standing Committee on Education, Women, Children, Youth and Sports, headed by Congress MP Digvijaya Singh.

The committee noted that the majority of students from disadvantaged, rural backgrounds, and remote areas were "perhaps" not aware of the schemes being run by the government for education loans , despite the Department of Higher Education's several initiatives for publicity of the PM Vidyalaxmi scheme. The report painted a worrying picture of a system that, instead of closing the opportunity gap, continues to exclude large sections of aspirants.

"The states of Tamil Nadu, Kerala and Maharashtra account for the bulk of education loan borrowers. This skewed distribution of loan disbursal shows that there are gaps in implementation of the education loan schemes and there is a dire need to make efforts to raise awareness across States," it said. The panel noted that students in northern and rural regions remain largely cut off, despite being among the most in need.

Higher Education Cost: Active loan numbers falling

"Even though schemes promise collateral-free, low-interest access, in practice, banks still rely heavily on formalities. Loan applications are accepted only on proper documentation and the presence of a co-applicant or guarantor. Due diligence is carried out before loan sanction," it said. The committee noted that between 2014 and 2025, the number of active student loans fell from 23.36 lakh to 20.63 lakh.

"However, the total credit amount has increased steeply from Rs 52,327 crore in 2014 to Rs 1,37,474 crore in 2025, suggesting much higher borrowing per student due to rise in cost of higher education during recent years," it said. The committee recommended that the Higher Education and Financial Services departments ensure educational loans to the maximum number of students, and prioritise all Below Poverty Line (BPL) families.

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PM Vidyalaxmi scheme disbursal

The panel revealed that under the PM Vidyalaxmi scheme , the total number of education loan applications received between February 25 and August 31 this year was 55,887, and the amount sanctioned was Rs 4,427 crore. However, it said, the number of education loans sanctioned for the period was 30,442, the number of loans disbursed was 21,967, and the total money disbursed was only Rs 688.27 crore.

The figure is around merely 15 per cent of the sanctioned amount of Rs 4,427 crore under the PM Vidyalaxmi scheme, it said. The committee called for sweeping reforms in the form of simplified paperwork, enforcement of no-collateral rules for eligible students, interest subsidies beyond the course duration, and special awareness drives in underserved regions. Without these changes, it warned, education loans may "fail to ensure equitable access to higher education and may instead end up perpetuating inequity rather than eliminating it."