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Education loan waivers have remained a popular poll plank. However, experts feel that such promises have led to students not repaying their loans, resulting in their CIBIL scores getting affected.

The Congress, the DMK, the AIADMK, and the PMK have promised waiving off education loans in their respective manifestos for the upcoming Lok Sabha election. K. Srinivasan, convener, Education Loan Task Force, said that during elections, parties promise to write off education loans, but they are never done. Such promises result in students not repaying the loans, and their accounts become Non Performing Assets (NPAs), thereby affecting their CIBIL score, he added.

Instead parties should make promises to grant interest-free loans; offer loans at reduced interest rates; and provide flexible repayment terms; bring down the cost of education; and offer more scholarships, among others, Mr. Srinivasan said.

Many banks have filed cases against students for non-repayment, leading to students running to courts at a young age. This affects their employment prospects, he further said.According to data from State Level Bankers Committee, Tamil Nadu, the outstanding education loan portfolio of banks under the priority sector lending stood at ₹11,122.65 crore as of December 31, 2023, a decline of ₹467 crore from ₹11,589.93 crore as of September 2023. Education loan NPA under priority sector lending stood at ₹4,123.91 crore as of December 2023. Banks in the State have sanctioned education loans to the tune of ₹2,857.75 crore from April 2023 to December 2023 and disbursal of loans (including those sanctioned during the previous years) are to the tune of ₹2,064.06 crore, the data showed.

The Indian Banks Association has a Model Education Loan Scheme. Under the Central Sector Interest Subsidy scheme, full interest subsidy is provided for the moratorium period (course period plus one year) on education loans of up to ₹7.5 lakh taken from scheduled banks. The benefits are applicable to students from economically weaker sections with a parental income of up to ₹4.5 lakh per annum.

R.S. Dhuriyan, advocate, Indian Bank, said most of the education loan cases come for settlement before Lok Adalat and most students said that they did not repay loans as they were anticipating a waiver announcement.

Moreover, banks sell education loan portfolios to private companies (asset reconstruction companies). These private firms wait for five years and take up the cases of non-repayment. And the interest rates on the loans spike too, he added.

He also pointed out there has been a trend of decline in disbursement of education loan and especially students from rural areas are unable to avail of loans.

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