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For loans up to ₹7.5 lakh, banks have a government guarantee covering 75% of any default (the Credit Guarantee Fund Scheme for Education Loans) and should not be asking for collateral or a third-party guarantor; parents are joint borrowers and that is all. Above ₹7.5 lakh, security can be asked for. Interest relief: families with income up to ₹4.5 lakh get full interest subsidy during the course and moratorium under CSIS for technical and professional courses; under PM Vidyalaxmi (November 2024), families up to ₹8 lakh get a 3% subsidy on loans up to ₹10 lakh for courses at listed quality institutions; and in Kerala the state's Education Loan Repayment Support Scheme has helped families in default, in rounds that the state announces. Interest paid is also deductible under Section 80E for eight years, without a ceiling.
5 lakh, banks have a government guarantee covering 75% of any default (the Credit Guarantee Fund Scheme for Education Loans) and should not be asking for collateral or a third-party guarantor; parents are joint borrowers and that is all. 5 lakh, security can be asked for.
5 lakh get full interest subsidy during the course and moratorium under CSIS for technical and professional courses; under PM Vidyalaxmi (November 2024), families up to ₹8 lakh get a 3% subsidy on loans up to ₹10 lakh for courses at listed quality institutions; and in Kerala the state's Education Loan Repayment Support Scheme has helped families in default, in rounds that the state announces. Interest paid is also deductible under Section 80E for eight years, without a ceiling.
A family in Adoor with ₹5 lakh income applies for a ₹6 lakh loan for a nursing degree at a NAAC-accredited college. The branch asks for the title deed of their house. Under CGFSEL the bank has a 75% guarantee on this loan and its own scheme says no collateral up to ₹7.5 lakh. A written reference to the scheme and the bank's education-loan circular removes the demand.
5 lakh (parents as co-borrowers), tangible security above that; moratorium of course period plus one year; repayment up to 15 years; no processing fee for loans within India; no prepayment penalty. 5 lakh regardless of family income, which is why the collateral-free rule exists. 5 lakh on loans up to ₹10 lakh for technical and professional courses at NAAC/NBA accredited institutions.
PM Vidyalaxmi: for admissions to institutions in the top NIRF bands and government institutions (the list updates annually), 3% interest subvention during moratorium on loans up to ₹10 lakh for families up to ₹8 lakh, not stackable with another scholarship or subsidy, applied through the unified pmvidyalaxmi portal where a student applies to several banks at once.
Section 80E: interest on an education loan for self, spouse or child from a bank, notified institution or charitable body is deductible for eight years from the year repayment starts. Kerala's Education Loan Repayment Support Scheme (2016 onward) has paid a share of outstanding loans for eligible families in distress in announced rounds; NORKA and minority welfare schemes add specific supports.
Loan amount: ≤ ₹7.5 lakh means collateral-free under the model scheme and CGFSEL Family income certificate from the village office: ≤ ₹4.5 lakh (CSIS) or ≤ ₹8 lakh (Vidyalaxmi) Institution: NAAC/NBA accredited (CSIS) or on the Vidyalaxmi QHEI list The bank's written reason if it still demands security Interest certificates each year for 80E
Signing the house as security for a ₹6 lakh loan because the branch asked. Also: not claiming 80E; on a ₹10 lakh loan it is worth tens of thousands of rupees a year in the old regime.
Kerala's education-loan defaults were high enough that the state created a repayment support scheme; families in trouble should ask the bank about it and about the Lok Adalat (Legal 2). Nursing, paramedical and engineering loans dominate in Pathanamthitta; most are within ₹7.5 lakh and should never have been collateralised. For overseas study loans, which are larger, security is lawfully asked; compare bank and NBFC terms.
Loan ₹6 lakh, income ₹4 lakh, BSc Nursing at an accredited college: collateral-free; full interest during the course under CSIS; after moratorium, EMI on principal plus post-moratorium interest; 80E deduction on that interest for eight years. Same loan, income ₹7 lakh, college on the Vidyalaxmi list: 3% subvention during moratorium.
Loans above ₹7.5 lakh, loans for institutions without accreditation, and loans from NBFCs outside the IBA scheme follow their own terms. Subsidies are one-per-student and cannot be stacked. Default still damages the student's credit record from day one.
Get the income certificate; check the institution's accreditation or NIRF listing Apply through the Vidyalaxmi portal to several banks at once If collateral is demanded on ≤ ₹7.5 lakh, cite the IBA model scheme and CGFSEL in writing
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Family finances
IBA Model Education Loan Scheme (current revision); CGFSEL guidelines (NCGTC) · PM-USP CSIS guidelines; PM Vidyalaxmi scheme guidelines, Department of Higher Education, 2024 · Income-tax Act, Section 80E; Kerala Education Loan Repayment Support Scheme orders Last checked: 22 August 2026. Rates, limits and whether you may qualify change. Confirm with the official source before you act. Ask Kerala Rising: Use only general, non-identifying facts.
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