Credit Guarantee Fund Scheme for Education Loan

About the Scheme

The Credit Guarantee Fund Scheme for Education Loan (CGFSEL) is a scheme to provide collateral-free loans to students who wish to pursue higher studies for education inside or outside India. The scheme aims to make higher education more accessible by offering a guarantee to the lending bank, ensuring financial support. It covers various expenses, including tuition fees, living costs, and other academic expenses. There is no margin required on loans up to ₹ 4 lakh, making it an easy way for students requiring funds to study.

Rate of Interest

The interest rate for the education loan covered under CGFSEL is capped at 2% per annum above the Repo Linked Lending Rate (RLLR) or any other external benchmark interest as per RBI guidelines.

Features of the Scheme

Here are the key features of the scheme:

• The scheme covers education loans of up to ₹7.5 lakh without collateral or a third-party guarantee.

• It provides a guarantee cover of 75% of the loan amount in case of default.

• Loans up to ₹4 lakh do not require any margin. Loans above ₹4 lakh but below ₹7.5 lakh have a margin of 5% for studying in India and 15% for studying abroad.

• The scheme includes education loans for both studying in India and studying abroad.

• The loan is eligible for a tax deduction under Section 80E of the Income Tax Act.

• The loan interest is capped per the RBI guidelines at 2% over the base rate or MCLR.

• It reduces the financial burden, supporting a child education plan for long-term academic goals.

Investment

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Eligibility of Scheme

Here is the eligibility criteria under the scheme:

• To be an Indian national studying in India or even abroad for higher studies.

• Loan amount up to ₹7.5 lakh, without collateral or third-party guarantee.

• Parents or guardians must be co-borrowers, and married students can also include their spouse or parents/in-laws as co-borrowers.

• The credit should be obtained under the IBA Model Educational Loan Scheme.

Documents Required

• Proof of admission in a recognised educational institution.

• Identity and address proof of the borrower and co-borrower.

• Academic records (for the student).

• The bank statement shows the last six months of transactions.

• Proof of income for the co-borrower (if applicable).

Most Important Terms and Conditions

• The loan is disbursed in instalments based on your course requirements.

• You’ll have a moratorium period until your course is completed, plus one year after that.

• Prepayment can be made without any penalties.

• Your co-borrower will be responsible for repaying the loan if needed.

• The interest rate may vary based on market conditions.

• The scheme aligns with a child investment plan by providing structured financial assistance for education.

• Repayment begins after your moratorium period ends.

• You can claim a tax benefit under Section 80E of Income Tax Act.