Cabinet approves PM Vidyalaxmi education loan scheme; will provide collateral, guarantor free loans

NEW DELHI: The union cabinet, led by prime minister Narendra Modi, has approved the PM Vidyalaxmi scheme, a central sector eduaction loan initiative aimed at offering financial aid to deserving students to ensure that economic challenges don’t hinder access to higher education. Through PM Vidyalaxmi, students admitted to top-ranked institutions in the National Institutional Ranking Framework (NIRF) can receive collateral-free loans covering full tuition fees.

This scheme is in line with the goals set out in the National Education Policy (NEP) 2020, which recommended providing financial assistance to talented students in both public and private higher education institutions (HEIs) to promote educational access and equity.

PM Vidyalaxmi Scheme: Collateral, guarantor-free loans

Through the PM Vidyalaxmi scheme, students who secure admission to quality Higher Education Institutions (QHEIs) can access collateral-free, guarantor-free loans from banks and financial institutions. These loans cover the full cost of tuition and other course-related expenses.

Centralized digital portal for loan applications

The Department of Higher Education will launch a unified portal, “PM-Vidyalaxmi,” enabling students to apply for education loans and interest subsidies through a streamlined application process that will be accessible to all participating banks. The interest subsidy payments will be distributed using E-vouchers and Central Bank Digital Currency (CBDC) wallets.

Applicable for NIRF top-ranked HEIs

The PM Vidyalaxmi scheme will be available for top-ranked higher educational institutions across India, as determined by the National Institutional Ranking Framework (NIRF). This includes all higher education institutions, both public and private, that rank within the top 100 overall, category-specific, and domain-specific NIRF rankings.

Additionally, state government HEIs ranked between 101-200 in NIRF and all centrally governed institutions are also covered. The list of qualifying institutions will be updated yearly based on the latest NIRF rankings. Initially, the scheme will cover 860 qualifying QHEIs, and benefit over 22 lakh students.

PM Vidyalaxmi Scheme: 75% credit guarantee

Under the PM Vidyalaxmi scheme, students can receive a credit guarantee covering 75% for loans up to Rs 7.5 lakh. This measure is intended to encourage banks to provide educational loans more readily to students under this program by reducing financial risk.

Also read JEE Main 2025, NEET, UPSC free coaching schemes to score better; complete list

PM Vidyalaxmi Student Loan Scheme: Interest subvention

Additionally, students from families with an annual income of up to Rs 8 lakh who are not eligible for other government scholarships or interest relief programs can receive a 3% interest subsidy on loans up to Rs 10 lakh during the moratorium period.

This benefit will apply to 1 lakh students annually, with preference for those enrolled in technical or professional courses at government institutions. The scheme is backed by a budget allocation of Rs 3,600 crore for 2024-2031, aiming to assist 7 lakh new students through this interest subsidy during the specified period.

Existing government schemes

This PM Vidyalaxmi scheme will suppliment the Central Sector Interest Subsidy (CSIS) and the Credit Guarantee Fund Scheme for Education Loans (CGFSEL), both part of the PM-USP, implemented by the Department of Higher Education. Through the PM-USP CSIS, students from families with an annual income of up to Rs 4.5 lakhs, enrolled in technical or professional courses from approved institutions, receive full interest subsidy during the moratorium period for education loans up to Rs 10 lakhs.