Parliamentary Panel Flags Decline in Education Loan Accessibility Amid Rising Costs

Access to higher education loans in India has come under scrutiny following the release of the 372nd Report of the Parliamentary Standing Committee on Education, Women, Children, Youth and Sports, led by Digvijaya Singh. The report, which reviews schemes for education loans and financial accessibility, highlights a stark contradiction: while total student debt has more than doubled over the last decade, the number of students actively availing loans has declined.

Between 2014 and 2025, active student loans fell from 23.36 lakh to 20.63 lakh, yet the total credit amount surged from ₹52,327 crore to ₹1,37,474 crore. The report interprets this pattern as evidence that fewer students are able to access loans, and those who do must borrow substantially higher amounts to meet rising education costs.

The Committee expressed concern that financial barriers are limiting access to higher education, particularly for students from economically weaker backgrounds. It urged the Departments of Higher Education and Financial Services to prioritize Below Poverty Line (BPL) families and maximize loan sanctions for all eligible students.

Income-Contingent Repayment and Standardized Loan Policy

One of the Committee’s key recommendations is the introduction of income-contingent repayment models. With graduate unemployment rising, this mechanism would link loan repayment to income levels, protecting students from undue financial burden and reducing risk for banks.

The report states:
"The Committee recommends urgent implementation of income-contingent repayment models to prevent an increase in Non-Performing Assets (NPAs) in banks."

Additionally, the Committee advocated for extending the loan moratorium to two years after course completion, replacing the current system of study-period plus one year. This would give graduates additional breathing space before repayment begins.

The panel also emphasized the need for a uniform loan policy across banks, including a standardized reasonable interest rate. The Committee argued that education loans are a welfare necessity, not a commercial venture, and should be highly subsidized to facilitate access to higher education nationwide.

Enhancing Guarantee Limits and Easing Eligibility

The report highlights several practical barriers preventing students from obtaining loans:

• Outdated collateral-free limits
• Credit history/CIBIL score requirements
• Arbitrary income-based eligibility criteria

To address these issues, the Committee recommended:

1. Raising the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) cover from ₹7.5 lakh to ₹20 lakh.
2. Providing collateral-free loans up to ₹8 lakh.
3. Exempting families with ration cards/free rations from CIBIL score/CIR requirements.
4. Using parents’ ration cards as the primary eligibility criterion, instead of complex income-based thresholds.

These measures are intended to simplify access for students from economically weaker sections and ensure that bureaucratic or financial hurdles do not prevent deserving students from pursuing higher education.

Revamping the PM Vidyalaxmi Scheme

The Committee also examined the PM Vidyalaxmi scheme, which aims to provide education loans to underprivileged students. The report noted:

• Only 15% of the sanctioned amount has been disbursed in monitored periods.
• The scheme currently covers just 902 Quality Higher Education Institutions (QHEIs), leaving a majority of students excluded.

To improve efficacy, the Committee recommended:

• Extending coverage to students from all higher education institutions beyond QHEIs.
• Establishing a mandatory district-wise dashboard for monitoring education loan sanctioning and disbursement, ensuring transparency and accountability in banks’ processing.

These measures would prevent delays, increase reach, and make the scheme more student-centric.

The Case for Student-Centric Reforms

The Parliamentary Panel’s report underscores a critical gap between education financing and accessibility. While tuition and associated costs have escalated, existing mechanisms have failed to keep pace with demand, creating financial bottlenecks for aspiring students.

Key takeaways from the Committee’s recommendations include:

1. Income-contingent repayment to align repayment obligations with actual earning capacity.
2. Extended moratoriums to ease the initial repayment burden.
3. Uniform loan policies and interest rates to eliminate discrepancies between banks.
4. Expanded collateral-free loan limits and guarantee coverage to accommodate rising fees.
5. Simplified eligibility criteria focusing on ration cards rather than complex income documentation.
6. Expansion and monitoring of PM Vidyalaxmi to improve outreach and transparency.

Collectively, these recommendations signal a paradigm shift towards a student-first approach in higher education financing, ensuring that financial constraints do not hinder academic aspirations.

Why Reform Is Critical

The report highlights that while the average loan per student has increased, accessibility has decreased. This suggests that students from lower-income households are disproportionately affected, unable to secure loans sufficient to meet escalating tuition and living costs.

By implementing the Committee’s recommendations, India can:

• Expand access to higher education for underprivileged groups.
• Reduce the financial risk for both students and banks.
• Prevent economic exclusion in critical areas of skill development and professional growth.
• Promote social equity, ensuring that talent and merit, rather than financial means, determine access to education.

Conclusion

The Parliamentary Standing Committee’s 372nd report sends a clear message: education loans cannot remain a purely commercial instrument. Rising costs and declining accessibility threaten to exclude students from financially weaker backgrounds, undermining the country’s broader goals of equitable higher education and skill development.

By adopting income-contingent repayment, uniform loan policies, expanded guarantee limits, collateral-free loans, and transparent monitoring mechanisms, the government can restore financial accessibility and equity in higher education.

The Committee’s recommendations provide a roadmap for student-centric reforms, ensuring that the next decade of higher education in India is not limited by financial barriers, but rather driven by talent, ambition, and opportunity.