Education Loan: PM Vidyalaxmi approvals at 54%; panel says ditch income, choose ration card for eligibility

A parliamentary panel has expressed serious concern over the declining accessibility of education loans, including PM Vidyalaxmi Scheme and Pradhan Mantri Uchchatar Shiksha Protsahan Central Sector Interest Subsidy (PM-USP CSIS), despite escalating higher education costs and called for major reforms. Terming the income-based criterion “arbitrary”, the committee suggested parents’ ration card-based eligibility to apply for student loans and income-based repayment models.

The concern from the panel follows figures shared by the government that states between 2014 and 2025, the number of active student loans fell from 23.36 lakh to 20.63 lakh in 2025. However, the total credit amount has increased steeply from Rs 52,327 crore to Rs 1,37,474 crore over the same period.

Taking note of the pendency in loan disbursal, the panel has also pointed out that “private banks, cooperative banks and rural regional banks are not friendly to students who are seeking loans under PM Vidyalaxmi scheme”.

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The parliamentary standing committee on education, women, children, youth and sports headed by Congress MP Digvijaya Singh presented the report in parliament on Tuesday.

The body reviewed the following education loans:

• PM Vidya Lakshmi Scheme
• Pradhan Mantri Uchchatar Shiksha Protsahan Central Sector Interest Subsidy (PM-USP CSIS)
• Pradhan Mantri Uchchatar Shiksha Protsahan Credit Guarantee Fund Scheme for Education Loans (PM-USP CGFSEL)
• Model Education Loan for pursuing higher education in India and abroad

Education Loans: 9.46% CAGR over 11 years

As per RBI in its meeting held with the committee in September, stated, “The overall quantum of credit outstanding under education loans has seen a notable upward trend over the last 11 financial years. The amount outstanding under education loans rose from Rs 52,327 crore in 2014 to Rs.1,37,474 crore in 2025, reflecting a Compound Annual Growth Rate (CAGR) of approximately 9.46% over the 11-year period.”

The RBI stated that in the last three years alone the data indicated a sustained and sharp rise in the education loan portfolio.

Expressing concern over the figures, the panel stated, “These figures suggest that the accessibility of educational loans is declining over time, even as educational costs have risen rapidly. The committee, therefore, recommends the Department of Higher Education and Department of Financial Services should take sincere efforts to ensure educational loans to maximum number of students of the country and all families Below Poverty Line (BPL) should be accorded priority in sanctioning of educational loans for higher education.”

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PM Vidyalaxmi: Just 54% of applications sanctioned

New central sector scheme PM Vidyalaxmi was launched on November 6, 2024, under which collateral-free and guarantor-free education loans are provided to students who get merit-based admission in higher education institutions.

For students with annual family income up to Rs 8 lakh, the PM Vidya Laxmi scheme provides 3% interest subsidy on loans up to Rs 10 lakh. Total outlay kept for interest subvention from 2024-25 to 2030-2031 is Rs 3,600 crore.The interest on the loans will become due one year from date of disbursement of loans.

The data submitted to the panel showed that the total number of applications for education loan received during February 25 to August 31, 2025, was 55,887 and the amount sanctioned was Rs 4,427 crore. However, the number of education loan applications sanctioned was 30,442, number of loans disbursed 21,967 and an amount of Rs 688.27 crore only have been disbursed.

“These figures reflect the fact that around 15% amount has been disbursed against the sanctioned amount of Rs 4,427 crore... We recommend that the Department of Financial Services ensure that sanctioned loans should not be curtailed or rejected. Further, the financial institutions and banks should take sincere efforts to maximise the number of applications sanctioned against the loan applications received,” the panel stated.

PM Vidyalaxmi: Pendency in banks, beneficiaries

As per the data submitted to the panel on PM Vidyalaxmi, the percentage of pending applications beyond 10 is 32% in private banks and 41% in cooperative banks and RRBs. It has also highlighted that several banks have not even sanctioned a single loan application under the scheme in the same period.

The committee has asked the department to issue strict guidelines for sanctioning, rejection and pendency of the loans.

“The committee further recommends that the Department of Higher Education, Department of Financial Services, RBI and NABARD should issue uniform policy/guidelines in consultation with Indian Bank Association (IBA) for public sector, private, Regional Rural Banks, NBFCs etc.

It also wants the authorities to issue a district-wise dashboard for monitoring of education loans ensuring transparency in its sanctioning and disbursement. “The dashboard should also include reasons for rejection and avenues for appeal, with targeted data for all States to address regional inequities,” the panel stated.

As per the scheme there is 3% subvention on loans up to Rs 10 lakh and also a limit to the number of beneficiaries, which is around one lakh with income ceiling of up to Rs 8 lakh.

“The committee recommends the department revise the limit of the number of beneficiaries in view of the vast population of the country and to ensure that no eligible student is left out of the education system,” the panel said.

Instead of advertising the scheme at IITs and IIMs the panel has recommended that the scheme should be advertised at Kendriya Vidyalayas (KVs), Jawahar Navodaya Vidyalayas (JNVs) and secondary schools.

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Education Loans: Change eligibility, credit score criteria

The Digvijaya Singh-led panel has stated that it is also important for the government to allow students to avail loan under the scheme beyond the 902 higher education institutions.

“Students from other institutions cannot avail this facility under the PM Vidyalaxmi scheme. The committee recommends that the PM Vidyalaxmi scheme should be extended to students from institutions other than 902 HEIs, in view of the fact that the majority of higher education institutions are not covered under it,” the panel stated.

On the income criteria for availing education loans, the panel stated: “The committee strongly believes that the income criteria can be arbitrary, difficult to implement, and pose hurdles for students in accessing credit. Rather than income based criteria to avail of the ministry’s education loan schemes of CSIS and PM Vidyalaxmi, the committee recommends that ration-card of the parents be considered as the primary criteria of eligibility for student loans”.

The view from the panel is not just for the Vidyalaxmi scheme but for all others.

Under the PM USP-CSIS scheme, full interest subvention is provided to students with annual family income up to Rs 4.5 lakh and who are pursuing technical/professional courses from approved National Assessment and 8 Accreditation Council (NAAC) accredited HEIs/National Board of Accreditation (NBA) accredited courses.

The panel hence states that priority should be given to the families holding the ration card and those getting free rations “...with at least 20% of loans reserved for this segment and with the government standing as the guarantor for these loans,” the panel stated.

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Student Loan Repayment: Moratorium period

As students are finding it difficult to find jobs, the panel feels that the moratorium period for the repayment of student loans should be extended to two years after course completion instead of the present duration of study period plus one year.

There is a repayment period of about 15 years post-moratorium for educational loans. But the panel states, “There are a large number of students who are left without any stable jobs, which would risk default of repayments. The committee, therefore, recommends that the ministry should consider on an urgent basis the introduction of income contingent repayment models to ensure that there is no increase in the number of Non Performing Assets (NPAs) in the banks.”

It also suggests that the RBI and the departments can develop alternate evaluation criteria such as parental occupation, income sources, or school certification to assess repayment capacity.

The committee also wants that the income limit for collateral security requirements for educational loans should be revised. Since 2010, banks have been advised not to demand collateral security for educational loans up to Rs 4 lakh.

“This limit is not relevant in view of high inflationary trends in higher educational costs, tuition fees, hostel expenses etc. The committee, therefore, recommends the RBI to review its limit and revise/align it with creamy layer criteria decided by the government from time to time to accommodate students from SC/ST/OBC/EWS and poorest section of the society to avail educational loan without collateral security,” the panel added.