NEFC to provide student loans at low interest

The Ministry of Human Resources and Development has written to the heads of the scheduled commercial banks to implement interest subsidy scheme on education loans for poor students pursuing higher studies. Now Kapil Sibal is planning to ask state governments to share with the Centre financial burden of starting a new agency that will offer soft loans to newly upcoming education institutions and students.

But the states are already complaining about the inadequate funds to implement the historic right to education law and have been demanding for additional funds from the Centre therefore this move of human resource development minister can increase their cries of distress.

On the other hand such helplessness will only help the minister in projecting the Centre as the lone fighter for education reforms in the country, a role that forms the part of several Sibal policies.

According to top government sources Sibal will be asking state education ministers to give financial support to the proposed National Education Finance Corporation (NEFC) in a meeting to be held on June 18.

A source said, “It is a win-win situation for the Centre. If states help in funding the NEFC, it reduces our financial bill. If not, it strengthens our position at a time when we face opposition from them on other education reforms.”

However several state governments, including Bengal and Tamil Nadu, have raised apprehension over the powers of the proposed NEFC. Thus, their apprehensions will be discussed by the Central Advisory Board on Education (CABE) — which includes all state education secretaries and the HRD ministry. The meeting will be held on June 19, a day after the NEFC is discussed.

The CABW will also take up discussion on fund-sharing arrangement between the Center and states for the right to education law, the other area of contention.

Earlier, in the Eleventh Five-Year Plan (2007-12) the promised NEFC is seeing along the lines of the National Bank for Agriculture and Rural Development (Nabard), which is providing assistance to self-help groups by offering small loans.

As per the HRD ministry’s draft, the funds to NEFC will be provided through three sources - budgeted funds, a higher education cess already in place but unused, and bonds gift-wrapped in tax concessions. In case states agree to give financial support, the Centre might reduce its budgetary allocation for the NEFC.

The proposed lending agency will be providing student loans at low interest. The arrangement will be implemented parallel to an existing scheme that subsidizes education loans.

The NEFC will also give financial support to the new upcoming government and private higher educational institutions.

According to sources Sibal will put forward his argument that as state government –run institutions will also get benefit from NEFC loans, therefore they should try and give financial support to the proposed agency.