The CGFSEL education loan scheme stands out as a financial support for students from economically weaker backgrounds and aiming to achieve their academic goals. It offers flexible terms and streamlined application processes.
This article will delve into the following details:
- The complete details of the scheme and its key features.
- Not all education loans are covered under the scheme. You would know which ones are covered and which are not.
- Know if you and your course are eligible for the scheme, its benefits and how to apply for the scheme.
What is the CGFSEL Education Loan Scheme?
The CGFSEL full form is Credit Guarantee Fund Scheme for Education Loans (CGFSEL). The government of India introduced it on September 16, 2015, to facilitate accessibility to education loans for students from economically weaker sections.
This initiative is part of the Model Education Loan Scheme developed by the Indian Banks’ Association (IBA). It aims to support students who face challenges in providing collateral or third-party guarantees.
Under the CGFSEL, the Central Government offers a guarantee for education loans up to INR 7.5 lakhs. This means that students can secure loans without having to pledge any collateral or provide a third-party guarantee.
What is the Full Form of CGFSEL?
CGFSEL's full form is Credit Guarantee Fund Scheme for Education Loans (CGFSEL). It facilitates access to higher education by guaranteeing education loans up to ₹7.5 lakh without requiring collateral or third-party guarantees.
The scheme covers 75% of defaulted loans through the National Credit Guarantee Trustee Company Ltd. (NCGTC), encouraging lenders to support more students.
CGFSEL Education Loan Scheme: Key Features
The table below provides a quick overview of the credit guarantee fund scheme for education loans.
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Requirements for the CGFSEL Education Loan Scheme
The Credit Guarantee Fund Scheme for Education Loans is designed to provide financial support to students who lack the means to offer collateral or third-party guarantees. Understanding the requirements for this scheme is crucial for students seeking to benefit from its provisions.
Here’s what you need to know about the requirements for availing of this scheme.
1. Belong to the Economically Weaker Sections (EWS)
The student must come from an economically weaker family.
2. Family Income Limit
The household income should be below INR 4.50 lakhs annually.
3. Admission to a Recognised Institution
The student must have secured admission to a recognised university in India or abroad, specifically to an approved technical or professional course following Class XII.
4. Nationality
Candidates have to be citizens of India.
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Eligibility for CGFSEL Education Loan Scheme
To qualify for the CGFSEL scheme, applicants must meet certain eligibility criteria as follows.
- Must be an Indian citizen.
- Must have completed Class 12 or its equivalent.
- Must have secured admission to a recognized institution in India or abroad, either through an entrance test or merit-based selection.
- For postgraduate or research programs, additional criteria such as entrance exams may be required.
- The loan account should not have any overdue payments at the time of disbursement.
- No loan margin is required for loans up to ₹4 lakh. For loans above ₹4 lakh, there is a 5% margin for studies in India and 15% for studies abroad.
Which Loans Will Be Covered Under the CGFSEL Education Loan Scheme?
The CGFSEL scheme provides a government-backed guarantee for education loans, making it easier for students to secure funding without needing collateral or a third-party guarantee.
- The types of loans covered under the credit guarantee fund scheme for education loans are listed below.
- Central Sector Interest Subsidy (CSIS) Scheme
- Interest-Free Education Loans for Your Students
- SBI Global Ed-vantage Scheme
- IBA Model of Education Loan Schemes
- International Student Loan Without Cosigner
- Education Loan Without Collateral For Abroad Studies
Which Loans will not be Covered Under the CGFSEL Education Loan Scheme?
While the Credit Guarantee Fund Scheme for Education Loans provides substantial support for students seeking education loans, specific types of loans and conditions must be covered under this scheme.
Here’s a detailed overview of the loans and situations the CGFSEL does not cover.
1. Excess Loan Amounts
The CGFSEL covers loans up to INR 7.5 lakhs. Loans exceeding this amount are not covered under the scheme.
2. High Interest Rates
Loans sanctioned by banks with an interest rate exceeding 2% above the base rate are not covered. The CGFSEL is designed to support loans with reasonable interest rates.
3. Non-Compliance with Regulations
Loans not adhering to the guidelines, laws, provisions, and instructions laid down by the Reserve Bank of India (RBI) or the Central Government are excluded from coverage.
4. Already Covered Risks
The scheme does not cover loans where the Government or another authority already covers the risk in any manner.
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Eligible Courses Under the CGFSEL Education Loan Scheme
The Credit Guarantee Fund Scheme for Education Loans supports various educational programs in India and abroad. The types of courses that are eligible for financial assistance under this scheme are listed below.
For Studies in India
1. Graduate and Postgraduate Degrees
Courses that lead to degrees or diplomas at recognised colleges or universities accredited by bodies such as UGC, AICTE, AIBMS, ICMR, and similar authorities are eligible.
2. Professional Certifications
The scheme covers professional courses such as those for the Institute of Cost Accountants of India (ICAI), Chartered Accountants (CA), and Chartered Financial Analyst (CFA).
3. Prestigious Institutions
Programs offered by renowned institutions like the Indian Institutes of Management (IIMs), Indian Institutes of Technology (IITs), Indian Institute of Science (IISc), XLRI, National Institute of Fashion Technology (NIFT), and National Institute of Design (NID) are eligible.
4. Specialised Courses
Courses include aeronautical studies, pilot training, shipping, nursing, and other disciplines approved by regulatory bodies such as the Director General of Civil Aviation, Director General of Shipping, or the Indian Nursing Council.
5. Programs by Foreign Universities
Courses from reputable foreign universities operating in India are also eligible for financial assistance.
For Studies in Abroad
1. Undergraduate Programs
Loans are available for undergraduate courses that are job-oriented and offered by reputable universities abroad.
2. Postgraduate Programs
Loans cover postgraduate programs such as Master of Computer Applications (MCA), Master of Business Administration (MBA), Master of Science (MS), and other equivalent degrees.
3. Professional Courses Abroad
Education loans may be provided for courses conducted by internationally recognised professional bodies, such as CIMA (UK), CPA (USA), and other institutions.
4. Degree and Diploma Courses
Degree and diploma courses recognised by relevant regulatory bodies in India or abroad for employment purposes are eligible.
CGFSEL Education Loan Scheme: Application Process
Students must follow a specific process to ensure their application is successful when applying for the Credit Guarantee Fund Scheme for Education Loans.
Here's a detailed breakdown of how you can apply.
You can follow these steps through the Vidya Lakshmi portal to apply for the Credit Guarantee Fund Scheme for Education Loans (CGFSEL).
Step 1
Go to the Vidya Lakshmi website at vidyalakshmi.co.in and access the online application form for the CGFSEL scheme.
Step 2
Select the ‘Register’ option and fill in the necessary details to create a new account.
Step 3
Banks will require documents to verify your identity, financial status, admission proof, and other details. Essential documents usually include:
- Proof of admission
- Income certificate
- Identity proof (Aadhar card, PAN card)
- Address proof
- Educational qualifications
Step 4
Once registered, use the ‘Student Login’ option to enter your email, password, and the captcha code.
Step 5
After logging in, complete the application form with your personal information, such as name, email address, phone number, and any required documentation.
Step 6
Upon submission, save and download the completed application form for future reference.
Also check out the list of colleges under Vidya Lakshmi Portal
Benefits of the CGFSEL Education Loan Scheme
The key benefits of the CGFSEL Education Loan Scheme are listed below.
1. Collateral-Free Loans
One of the CGFSEL's most significant advantages is that it allows students to obtain loans without the need for collateral. This is particularly beneficial for students from economically weaker backgrounds who may not have assets to pledge.
2. No Third-Party Guarantee Needed
The scheme eliminates the requirement for a third-party guarantor, which can be a significant hurdle for many students.
3. Financial Support for Up to INR 7.5 Lakhs
CGFSEL provides a substantial loan amount of up to ₹7.5 lakhs. This amount is designed to cover significant educational expenses, including tuition fees, books, and living costs.
4. Safety Net Against Default
The CGFSEL education loan scheme provides an additional layer of security by ensuring that the National Credit Guarantee Trustee Company Ltd. (NCGTC) will cover 75% of the defaulted amount if a borrower defaults on their loan.
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Expenses Covered Under the CGFSEL Education Loan Scheme
Under the Credit Guarantee Fund Scheme for Education Loans, various expenses can be covered to support students in their educational journey. Here’s an overview of what can be included.
1. Education Related Fees
The scheme typically covers tuition, hostel accommodation, examination fees, library access, and laboratory expenses.
2. International Study Costs
Expenses such as travel and passage fares may also be covered for students pursuing education abroad.
3. Insurance Premiums
If applicable, insurance premiums for the student borrower can be included in the loan coverage.
4. Deposits and Refundable Fees
Costs related to caution deposits, building funds, or other refundable deposits, provided institutional receipts or bills support them, may be considered.
5. Academic Supplies
The loan amount can include expenses for books, equipment, instruments, and uniforms necessary for the course.
6. Computers
If a computer is essential for completing the course, its reasonable cost can be added to the loan.
7. Additional Course-Related Costs
Other essential expenses such as study tours, project work, and thesis-related costs might also be covered.
8. Scholarships and Fee Waivers
Any scholarships or fee waivers received by the student can reduce the total loan amount.
9. Management Quota Fees
Fees for seats under the management quota are eligible if approved by the State Government or a government-recognised regulatory body and provided repayment conditions are feasible.
10. Lodging and Boarding
Reasonable costs for lodging and boarding for students living off-campus may be considered.
11. Expense Caps
Certain expenses might be limited to a percentage of the total tuition fees, with caps like 10% for particular items and up to 20% for books, equipment, and other unlisted college-related fees.
Repayment Guidelines for Loans Under the CGFSEL Education Loan Scheme
Under the Credit Guarantee Fund Scheme for Education Loans, the repayment process is designed to be flexible and manageable for student borrowers, particularly those from economically weaker sections.
Now, let’s examine the specific repayment guidelines for loans under the CGFSEL, highlighting important details that borrowers should be aware of.
1. Moratorium Period
Moratorium period includes the time to complete the course plus an additional year or six months after gaining employment, whichever comes first.
2. Course Extensions
If students cannot finish their course within the scheduled time frame, they may be granted an extension of up to two years to complete it.
3. Course Discontinuation
In cases where students discontinue their studies, the bank will work with the student and their parents to devise an appropriate repayment plan.
4. Interest Concession
Some banks may offer a 1% interest rate reduction if the borrower opts to pay the interest during the study period and throughout the moratorium.
5. Repayment Duration
Loans of up to INR 7.5 lakh must be repaid within a maximum period of 10-15 years.
6. Repayment Method
Repayment is done through equal monthly instalments (EMIs), and there is no penalty for early loan repayment at any point.
Also Read: Education Loan without Collateral 2024: Banks & Interest Rates
CGFSEL Education Loan Scheme: Participating Banks
Multiple banks play a key role in the CGFSEL Education Loan Scheme, providing access to funds for students who need financial support for their education.
Let’s help you explore the list of participating banks and the critical points related to their involvement in the CGFSEL Education Loan Scheme.
- Regional Rural Banks
- Andhra Pragathi Grameena Bank
- Chaitanya Godawari Grameena Bank
- Saptagiri Grameena Bank
- Chhattisgarh Rajya Gramin Bank
- Baroda Gujarat Gramin Bank
- Saurashtra Gramin Bank
- Sarva Haryana Gramin Bank
- Himachal Pradesh Gramin Bank
- Jharkhand Rajya Gramin Bank
- Karnataka Vikas Grameena Bank
- Kerala Gramin Bank
- Maharashtra Gramin Bank
- Meghalaya Rural Bank
- Mizoram Rural Bank
- Puduvai Bharathiar Grama Bank
- Punjab Gramin Bank
- Baroda Rajasthan Kshetriya Gramin Bank
- Rajasthan Marudhara Gramin Bank
- Tamil Nadu Grama Bank
- Andhra Pradesh Grameena Vikas Bank
- Telangana Grameena Bank
- Uttar Banga Kshetriya Gramin Bank
- Tripura Gramin Bank
- Aryavart Bank
- Baroda U.P. Bank
- Prathama U.P Gramin Bank
- Uttarakhand Gramin Bank
Public Sector Banks
- Bank of India
- Bank of Baroda
- Bank of Maharashtra
- Canara Bank
- Central Bank of India
- Indian Bank
- Indian Overseas Bank
- Punjab & Sind Bank
- Punjab National Bank
- State Bank of India
- UCO Bank
- Union Bank of India
Private Sector Banks
- Dhanlaxmi Bank
- Jammu & Kashmir Bank
- Karnataka Bank Ltd.
- Tamilnad Mercantile Bank Ltd.
- The Karur Vysya Bank Limited
- The South Indian Bank Ltd.
Also Read: Banks That Give Education Loans without Collateral for Abroad
CGFSEL Education Loan Scheme: Security Amount
Different security requirements are applied based on the loan amount when applying for a loan under the Credit Guarantee Fund Scheme for Education Loans. The security structure under CGFSEL is designed to make education loans more accessible, while also providing adequate safeguards for the banks.
Here’s how the security requirements are structured under the CGFSEL scheme.
For loans up to INR 4 lakh
- Parents must act as joint borrowers for the loan.
- No collateral security or third-party guarantee is required.
For loans above INR 4 lakh and up to INR 7.5 lakh
- In addition to parents being joint borrowers, a suitable third-party guarantee may be required as collateral security.
- In some instances, the bank may waive the third-party guarantee if it is satisfied with the financial standing or net worth of the parent(s) who are joint borrowers.
For loans exceeding INR 7.5 lakh
- Parents will need to be joint borrowers.
- Tangible collateral security of a value acceptable to the bank is required.
- The student's future income will be committed to the loan repayment through instalments.
In conclusion, the CGFSEL Education Loan Scheme offers a lifeline for students from economically weaker sections, providing collateral-free loans and flexible repayment options. With the government's backing, this scheme makes quality education accessible without the financial burden often associated with higher education.
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