Parliamentary Panel Flags Decline In Education Loan Accessibility Amid Rising Costs

Access to higher education loans is in jeopardy, according to a Parliamentary Standing Committee report released today, which revealed that the number of active student loans has fallen while the total debt amount has more than doubled in the last decade, signaling a sharp rise in education costs coupled with declining accessibility.

The Parliamentary Standing Committee on Education, Women, Children, Youth and Sports, led by Digvijaya Singh, today tabled its 372nd Report on the Review of Schemes for Education Loan and Financial Accessibility in Higher Education.

The committee recommended a paradigm shift, calling for income-contingent loan repayment models to shield graduates from unemployment risk, an extension of the loan moratorium to two years, and a four-fold increase in the Credit Guarantee Fund Scheme limit to Rs 20 lakh. The panel also demanded a uniform loan policy with a standardized, reasonable interest rate across all banks, emphasizing that education loans in a welfare state cannot be treated as a "commercial venture."

Declining Accessibility and Steep Rise in Borrowing

The Committee's primary observation points to a significant dichotomy in the education loan landscape between 2014 and 2025.

While the number of active student loans fell from 23.36 lakh to 20.63 lakh, the total credit amount surged steeply from Rs 52,327 crore to Rs 1,37,474 crore. This pattern suggests that fewer students are successfully accessing loans, but those who do are borrowing significantly higher amounts.

The report stated : "The Committee notes that between 2014 and 2025, the number of active student loans fell from 23.36 lakh to 20.63 lakh in 2025... suggesting much higher borrowing per student due to rise in cost of higher education during recent years. The Committee expresses its concerns over these figures since it suggests that the accessibility of educational loans is declining over time, even as educational costs have risen rapidly. "Consequently, the report recommends that the Department of Higher Education and the Department of Financial Services make sincere efforts to ensure educational loans are sanctioned to the maximum number of students, with Below Poverty Line (BPL) families accorded priority.

Push for Income-Contingent Repayment and Uniform Policy

Recognizing the widespread issue of educated unemployment among graduates, the Committee strongly advocated for revolutionary changes in loan repayment mechanisms. It called for the urgent introduction of income-contingent repayment models to protect students and manage risk for banks.

"The Committee, therefore, recommends that the Department of Higher Education should consider on 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," the report states. Furthermore, to ease the burden on new graduates, the Committee recommended 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."

To standardize the lending process, the panel called for eliminating the discretion of commercial banks, which has impacted students' ability to seek credit. "The Committee strongly recommends that the Department of Higher Education, Department of Financial Services, and the RBI to work together to develop a uniform policy for education loans across all banks and determine a uniform reasonable rate of interest that should be applied for all education loans," the report emphasized, stressing that "education loans should be highly subsidized and it cannot be treated as a commercial venture given its criticality to national building."

Enhancing Guarantee Limits and Easing Eligibility Hurdles

The report also addressed practical barriers to accessing loans, particularly the outdated collateral-free limits and the requirement for credit history. Given the rise in education fees, the Committee recommended a massive increase in the guarantee cover under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).

The report recommends that "the guarantee cover be enhanced to Rs 20 lakh under Credit Guarantee Fund Scheme for Education Loans (CGFSEL)" from the current Rs 7.5 lakh, and also calls for collateral-free student loans for amounts up to Rs 8 lakh. In a measure aimed at helping economically weaker sections, the panel suggested abandoning the CIBIL score/Credit Information Report (CIR) requirement for many applicants. The Committee recommends that "categorical mandatory guidelines should be issued by Department of Financial Services and RBI to all Banks and Financial Institutions to exempt CIBIL score/CIR for families which are getting free rations on their ration cards."

In another crucial recommendation, the Committee urged the government to move away from arbitrary income criteria for loan eligibility: "The Committee strongly believes that income criterion for student loans can be arbitrary, difficult to implement, and pose hurdles for students in accessing credit... the Committee recommends that ration-card of the parents be considered as the primary criteria of eligibility for student loans."

PM Vidyalaxmi Scheme Needs Expansion and Transparency

The Parliamentary Panel expressed dismay over the low disbursement rate under the PM Vidyalaxmi scheme, noting that only about 15% of the sanctioned amount has been disbursed in the monitored period. The Committee also highlighted the limited scope of the scheme, which currently covers only 902 Quality Higher Education Institutions (QHEIs).

"The Committee recommends that PM Vidyalaxmi scheme should be extended to students from institutions other than 902 Higher Education Institutions (QHEIs), in view of the fact that majority of higher education institutions are not covered under QHEIs," the report states. To combat the "callous approach" of some banks toward applicants, the panel recommended establishing a "provision for mandatory district-wise dashboard for monitoring of education loan ensuring transparency in its sanctioning and disbursement."

The Committee's recommendations underscore the urgent need for a student-centric reform package to reverse the declining trend in loan accessibility and ensure that financial constraints do not hinder students' pursuit of higher education.