Pursuing a higher-level education, whether in India or abroad, comes with a lot of financial stress. For hundreds of thousands of students, student loans have created an opportunity to pursue their goals without the burden of financial stress in the short term. However, continuing to pay for the increased costs of tuition, living expenses, and additional academic costs can create stress further along in repayment. In order to help ease this burden and eliminate the lack of access to education for deserving students due to economic disadvantage, the Government of India has enacted special subsidy programs on education loans.
Some of the Government of India’s subsidy programs include the Central Sector Interest Subsidy Scheme (CSIS) and the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) are both major flagship initiative for creating equal rights and opportunities for students through financing education. Both subsidies reduce the interest burden for beneficiaries of economically weaker backgrounds getting married and loaning money without in order to grant access to percentage of equity for better education loans.
In working with banks and educational bodies, the two schemes sought to build the capacity for professional and technical courses by increasing attendance for professional and technical subjects, and at the same time trying to train the whole country by developing and providing under privilege, first generation learners to equal and fair access to professional, technical and educational learning in the respects to them. For students and parents, understanding the benefits, eligibility criteria, and application process of CSIS and CGFSEL can make a significant difference in planning their education journey.
What is an Education Loan Subsidy Scheme?
An education loan subsidy scheme is a government scheme that alleviates the burden of a student’s education loan by providing relief on the interest portion of the education loan. This is the opposite of a regular education loan where the borrower has to repay the loan principal and interest, the subsidy schemes will provide the government:
- Pay the interest during the moratorium period (i.e., the course duration + some months after).
- Partial/complete waiver of the interest for students who qualify.
- Offers credit guarantee support, making loans accessible without the need for collateral or third-party security.
The main goal of these schemes is to make higher education more affordable for students from economically weaker sections (EWS), minority communities, or underrepresented groups. By partnering with banks, the government ensures that deserving students can access loans for professional, technical, or higher studies in India and abroad without financial stress.
Central Sector Interest Subsidy Scheme (CSIS)
Central Sector Interest Subsidy Scheme (CSIS) is one of the key projects of the Government of India to promote access to higher education for students from economically disadvantaged backgrounds. It is operated by the Ministry of Education (previously MHRD), and strives to provide a benefit in the form of full interest subsidy on education loans during the moratorium period (whether the length of the program + 1 year after graduation or 6 months after getting a job, whichever comes first) for the educational financing needs of students.
The students can focus on their academics without having to worry about paying interest during those years of study. The Government of India pays interest to the bank, so when the student starts to repay the loan, they only need to repay the principal amount, plus interest accrued after the moratorium period.
Key Features of Central Sector Interest Subsidy Scheme (CSIS)
Eligibility requirements:
- Students from Economically Weaker Section (EWS) families with parental income of less than Rs.4.5 lakh per annum.
- Admission secured in professional or technical courses offered by institutions of repute, recognized in India.
Coverage:
- Available to education loans under the Indian Banks’ Association (IBA) Model Education Loan Scheme only.
- Loans of any amount should not exceed Rs.7.5 lakh.
Subsidy period:
- An EWS subsidy will only cover the moratorium period (i.e course period + 1 year/ 6 months after employment).
- After the moratorium period, students are required to pay both the principal as well as the interest.
Implementation:
- Operated through Scheduled Banks across India.
- Students must submit the required income proof (usually an income certificate issued by a competent authority) at the time of loan application.
Benefits of Central Sector Interest Subsidy Scheme (CSIS)
- Reduces the financial burden on students through their years of study.
- Empowers students from low-income backgrounds in their pursuit of higher education.
- Supports equity in education by keeping professional / technical studies affordable.
In summary, the CSIS Scheme provides a financial buffer that allows students from disadvantaged sections to concentrate on education instead of worrying about loan interest during their circumstances.
Credit Guarantee Fund Scheme for Education Loans (CGFSEL)
Credit Guarantee Fund Scheme for Education Loans (CGFSEL) is another key initiative of the Government of India to ensure that all deserving students, irrespective of collateral or third-party guarantee, can avail higher education opportunities. The scheme was established under the Ministry of Finance and is implemented by the National Credit Guarantee Trustee Company (NCGTC).
It is aimed at providing a credit guarantee for education loans to banks and financial institutions for education loans provided under the Indian Banks’ Association (IBA) Model Education Loan Scheme; if a student was to default on repayment due genuine reasons, the government-supported guarantee protects the risk taken by the lending bank, therefore allowing students to access loans free of collateral.
Key Features of Credit Guarantee Fund Scheme for Education Loans (CGFSEL)
Eligibility:
- Students obtaining education loans up to Rs.7.5 lakh under IBA Model Scheme.
- No collateral or third party guarantees are needed.
- The scheme aims at students from economically weaker sections (EWS) and middle-income families.
Coverage:
- It alone guarantees banks the loan up to Rs.7.5 lakh.
- Loans must be for pursuing professional and technical courses, or vocational diplomas, from an institution in India or abroad.
Guarantee Mechanism:
- In the case of default, the CGFSEL trust will pay off the bank for their loss thus reducing its risk profile.
- This has the potential of encouraging banks to lend freely to students who, in the absence of this guarantee, have no collateral.
Benefits of Credit Guarantee Fund Scheme for Education Loans (CGFSEL)
- Facilitates education loans without the need for collateral, ensuring higher education is accessible to all.
- Eases the burden on students and parents (who may not have property or assets to pledge).
- Provides more peace of mind for banks in granting education loans for students from weaker sections.
- Acts in accordance with the government’s vision of inclusive education and skill development.
In short, the CGFSEL Scheme is a safety net for both students and banks that do not allow finances (including no collateral) to derail higher education in India or abroad.
Key Differences Between CSIS and CGFSEL
Central Sector Interest Subsidy Scheme (CSIS) and the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) are two major schemes initiated by the Government of India to help students access higher education through affordable loan opportunities. Even though they both aim to reduce costs, each scheme has different parameters and benefits.
1. Objective
- CSIS: Provides interest subsidy during the moratorium period (period of course + 1 year) so that students don’t pay interest while they are studying.
- CGFSEL: Provides a credit guarantee to banks for loan amounts of up to Rs.7.5 lakh for students so that students can obtain a collateral-free loan.
2. Target Beneficiaries
- CSIS: Focused on students from Economically Weaker Sections (EWS) with their parents’ annual income up to Rs.4.5 lakhs.
- CGFSEL: Targeted for all students seeking a collateral-free loan (regardless of income) for loans up to Rs.7.5 lakh under the IBA Model Education Loan Scheme.
3. Loan Coverage
- CSIS: Applicable to education loans taken under the IBA scheme where students can avail a loan maximum of Rs.7.5 lakhs for a professional/technical course in India.
- CGFSEL: Covers education loan amounts of up to Rs.7.5 lakhs but focuses on guarantee coverage as opposed to subsidy.
- Financial Benefit
- CSIS: Student benefits directly as the student does not have to pay interest during the moratorium period as the government is paying the interest.
- CGFSEL: Student benefits indirectly since banks are allowed to provide a loan without collateral or 3rd party guarantee because of the credit guarantee given by the government.
5. Implementation
- CSIS: Managed by the Ministry of Education through Canara Bank as the nodal agency.
- CGFSEL: Managed by the National Credit Guarantee Trustee Company (NCGTC) under the Ministry of Finance.
How to Apply for Education Loan Subsidy Schemes?
Subsidy schemes have been issued by Government of India, which include the Central Sector Interest Subsidy Scheme (CSIS) and the Credit Guarantee Fund Scheme for Education Loans (CGFSEL). These schemes are then accessible to students as lower-cost higher education loans when they are taking loans from scheduled banks. The process utilizes the following Step-by-Step:
- Choose Your Bank and Loan Scheme
- Go to the bank that conforms to the IBA Model Education Loan Scheme.
- Check whether the loan and your eligibility are under CSIS or CGFSEL.
- CSIS: Parents income under Rs.4.5 lakh for students of EWS.
- CGFSEL: The guarantee of commercial banks for collateral-free loans up to Rs.7.5 lakh.
2. Submit Loan Application with Documents
- Prepare and submit the required documents along with your loan application:
- Admission letter from recognized institution.
- Proof of course and fee structure.
- KYC documents (ID, address proof).
- Income certificate (mandatory for CSIS).
- Previous academic records.
3. Bank Sanctions the Loan
- The bank will find your application as per eligibility and guidelines.
- If eligible under CSIS, the bank will mark the loan account for interest subsidy for the duration of moratorium period.
- If eligible under CGFSEL, the loan is sanctioned for you as a collateral free loan without third-party guarantee with the credit guarantee from the government.
4. Automatic Subsidy Tagging
- Students do not need to apply separately for these schemes.
- The bank itself applies for subsidy/guarantee through the designated nodal agencies:
- Canara Bank (for CSIS).
- NCGTC (for CGFSEL).
5. Repayment after Moratorium
- Under CSIS, students start repaying the loan after the course + 1 year, but without interest burden of the study period.
- Under CGFSEL, repayment terms remain standard, but no collateral is required.
FAQs: Government Education Loan Subsidy Schemes (CSIS & CGFSEL)
Q. What is the Central Sector Interest Subsidy Scheme (CSIS)?
A. The CSIS is a scheme of the Government of India that pays the interest on an education loan during the moratorium period (course duration + 1 year) for students from economically weaker sections (EWS), and whose family income is up to Rs.4.5 lakh/annum.
Q. Who is eligible for the CSIS scheme?
A. Indian nationals from EWS with annual parental income ≤ Rs.4.5 lakh. Students who have secured admission to professional/technical courses in India under recognized institutions. Loans taken under the Indian Banks’ Association (IBA) model education loan scheme.
Q. What is the Credit Guarantee Fund Scheme for Education Loans (CGFSEL)?
A. CGFSEL is a scheme that provides government guarantee fund to banks to provide loans up to Rs. 7.5 lakh to students without requiring any collateral or third-party guarantee.
Q. How is CSIS different from CGFSEL?
A. CSIS provides assistance for borrowers by covering the interest during the moratorium period and CGFSEL supports the borrowers by providing collateral-free loans with up to Rs.7.5 lakh limit. Both schemes help reduce the financial burden but there purpose is different.
Q. Can a student avail both CSIS and CGFSEL together?
A. If a student gets a loan that is collateral-free under CGFSEL and also qualifies for CSIS subsidy amount, then they can avail of both the schemes simultaneously.
Q. Do I need to apply separately for CSIS or CGFSEL?
A. You don’t need to apply separately. The lending bank will automatically process eligibility for these schemes at the time of loan sanction, provided you submit the required income and category documents.
Q. What documents are required to avail subsidy under CSIS?
A. Proof of family income (income certificate issued by a competent authority). Admission letter from the recognized institution. Loan sanction documents. KYC documents of student and parents.
Q. Is there any upper limit on loan amount under CSIS?
A. No upper limit on the loan amount. However, the interest subsidy is available only on the amount up to Rs.7.5 lakh. If the loan exceeds Rs.7.5 lakh, interest subsidy is restricted to this limit.