Education loan access shrinking as outstanding amount surges: Panel

The Committee noted that the number of active student loans fell from 23.36 lakh in 2014 to 20.63 lakh in 2025. During the same period, the total outstanding loan amount rose from about Rs 52,327 crore to Rs 1,37,474 crore.

This indicates that while fewer students are receiving loans, those who do are borrowing much more than before. The Committee described this as a sign of both rising educational costs and shrinking access to institutional credit for young people.

“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. 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,” the Committee said in its 372nd report tabled in the parliament.

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Educationist N V Varghese said loan repayment had become a major issue, especially in engineering and nursing.

“These two categories show the highest levels of repayment difficulty…A large share of student loans is taken by engineering graduates, and many of them remain unemployed or take low-paying jobs of ten to twelve thousand a month. They are simply not in a position to repay. Many engineering students come from capitation-fee colleges that are not of good standard, so they struggle to get employment, which directly affects repayment,” he told The Federal.

The report examined the performance of key government schemes such as PM Vidyalaxmi, PM Uchchatar Shiksha Protsahan Central Sector Interest Subsidy (PM-USP CSIS) and PM Uchchatar Shiksha Protsahan Credit Guarantee Fund Scheme for Education Loans (PM-USP CGFSEL).

The Committee recorded that between February and August 2025, only about 15 per cent of the total Rs Rs 4,427 crores amount sanctioned under PM Vidyalaxmi was actually disbursed. Out of 55,887 loan applications received during this period, loans were sanctioned in 30,442 cases; however, funds reached only 21,967 students.

The Committee flagged several barriers faced by students from rural and low-income families. These include inconsistent documentation requirements across banks, insistence on collateral or guarantors even for small loans, low awareness of government guarantees and subsidy schemes, and limited support from bank branches in remote areas.

“The Committee strongly believes that income criterion for student loans can be arbitrary, difficult to implement, and pose hurdles for students in accessing credit. Rather than income-based criterion 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,” it said in its report.

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In its recommendations, the Committee asked the higher education and financial services departments to expand loan coverage for all Below Poverty Line families and to treat education loans as a public welfare measure rather than a purely commercial product. It called for standardised rules across banks, particularly in relation to interest rates, documentation and collateral requirements.

The Committee also urged the government to extend the moratorium on loan repayment from one year to two years after course completion. Members said that the current one-year window is unrealistic because a large number of graduates take longer to secure jobs, especially in non-technical fields.

The Committee also made a broader observation about the nature of higher education in India.

“Financial accessibility in higher education in India plays a pivotal role in bridging socio-economic gaps and enabling millions of students to pursue advanced studies, despite rising costs of tuition, accommodation, and related expenses. Due to increasing young population and rapidly evolving economy, financial accessibility through educational loans in higher education is essential for bridging socio-economic gaps and fostering equitable opportunities, enabling credit-constrained students to pursue advanced studies without upfront financial burdens that could otherwise deter enrollment or lead to dropouts,” it said.

Experts, however, say the concept of education loans itself is problematic.

“The government is trying to withdraw its own responsibilities of funding public education and it's forcing colleges and universities into HEFA (Higher Education Financing Agency) loans. Furthermore, if we expect students to get loans then the entire purpose gets defeated because young students are supposed to be encouraged from all socio-economic backgrounds to come to universities and not be indebted even before they study,” pointed out educationist Anita Rampal.

“People who come from more endowed homes will take loans, and as soon as they get a job, they will get a good salary, so they will be confident that they can return the loan. But this is not true of the large majority. We must remember that about 85 per cent of our university students are first-generation learners and they need support. We cannot put them under debt even before they enter college. This problem causes more precarity for it mortgages the future of the vulnerable families and students when employment itself is not certain,” she added.