What is the Padho Pardesh Scheme of Interest Subsidy for Education Loans?

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Padho Pardesh Interest Subsidy Scheme Education Loans

An Interest Subsidy on Education Loans for Overseas Studies for Students from Minority Communities

The Govt. of India started this interest subsidy scheme in 2006. The goal was to help reduce the debt burden of students from economically weaker sections of notified minority communities who are pursuing higher education abroad. Its full name is Padho Pardesh Scheme of Interest Subsidy on Education Loans for Overseas Studies for the Students Belonging to the Minority Communities; or you may simply call it the Padho Pardesh Interest Subsidy Scheme.

The Central Government takes care of the interest payable during the moratorium period of an education loan under this scheme. Once the moratorium period ends, the students must repay the loan as per the repayment schedule of the education loan scheme availed.

Let us take a look at the Padho Pardesh Interest Subsidy scheme in detail.

What is the Padho Pardesh Interest Subsidy Scheme?

It is an interest subsidy scheme under which the Central Government pays off the interest component that arises during the moratorium period of the education loan availed by students belonging to economically weaker sections of notified minority communities. The students must be pursuing approved courses of studies abroad at Masters, MPhil or PhD levels.

What are the Eligibility Criteria for the Padho Pardesh Scheme of Interest Subsidy?

Here are the eligibility criteria for the Padho Pardesh Interest Subsidy Scheme:

  • Students belonging to economically weaker sections of the notified minority communities who are pursuing courses at Masters, MPhil or PhD levels abroad are eligible for this interest subsidy [‘Minority Communities’ declared as such under Section 2(c) of National Commission for Minorities Act, 1992 are eligible]
  • This interest subsidy is linked to education loans based on the Indian Banks’ Association (IBA) model loan scheme offered by Indian banks. This means that only students who have availed a student loan based on the IBA model loan scheme are eligible for this interest subsidy
  • The family must have a combined annual income of Rs. 6 lakh or less
  • Eligible students who apply for it in their first year of studies can avail this interest subsidy. It cannot be availed later
  • Students can only avail this interest subsidy once, either for post-graduate degree or higher degree levels
  • Students who give up Indian citizenship or stop pursuing studies cannot avail the benefits of this scheme

What are the Eligible Courses for the Padho Pardesh Interest Subsidy?

The eligible courses are:

  • All courses in arts, humanities, social sciences, commerce, pure sciences and related fields
  • All engineering and related courses such as marine engineering, petrochemical engineering, cryogenic engineering and so on
  • All medical and veterinary courses as well as biomedical courses
  • All food and agricultural courses such as plant pathology, horticulture, farm power & machinery, etc.
  • MCA, MBA and IT courses

Can All Eligible Students Avail the Padho Pardesh Interest Subsidy Scheme?

Eligible students who apply for the Padho Pardesh Interest Subsidy Scheme in their first year of studies can avail it. They cannot avail it after the first year of the course even if they meet all other eligibility criteria.

As of September 2020, the maximum number of students who can avail this subsidy in a year is 400 for the whole country; a specific number of ‘seats’ are allocated to students from each community in each state or UT. 35% of the approved applications are assigned to girls which means that out of 400, at least 140 girl students get to avail the interest subsidy.

Where Can I Apply for the Padho Pardesh Interest Subsidy Scheme?

You can apply through a specific portal that is opened once every financial year for fresh applications by the bank (education loan lender) on the direction of the Ministry of Minority Affairs. Please get in touch with your bank to know the link where you need to apply.

Is It Worth Applying for Padho Pardesh Interest Subsidy Scheme?

Yes, it is.

Let’s answer this question arithmetically. Suppose you take a loan of Rs. 20 lakh with an interest rate of 10.5% and a moratorium of 3 years. (Note: moratoriums usually are for the study period and an additional time which is the earlier of 1 year after passing out or 6 months after getting a job).

Now, the total interest you will accrue on the loan during the 3 years is Rs. 6,98,465.25, which is nearly one-third of the loan amount.

If you apply and are approved for the Padho Pardesh Interest Subsidy Scheme, you don’t have to pay it. Applying does not mean you will get the subsidy but if you do, you stand to benefit significantly if you get an approval. So, it makes sense to apply.

A Final Word

Now that you know about the Padho Pardesh interest subsidy scheme on education loans, you may want to know which education loan option would be best suited for you. Please check our Education Loan page for details if you are interested.

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