Guide on Credit Guarantee Fund Scheme for Education Loans (CGFSEL)

In our previous blogs and YouTube videos, we have emphasized enough how a loan with collateral can save you big in study abroad loans. But what if you are unable to pledge collateral for your education loan?

CGFSEL stands for Credit Guarantee Fund Scheme for Education Loans. Other than unsecured loans from private banks and NBFCs, one of the solutions is the Credit Guarantee Fund Trust Scheme for micro & small enterprises and students.

Under the CGFSEL, the borrower is eligible to get loans from lenders without pledging any security or providing any third-party guarantee. Let’s explore in-depth about the scheme and related terms and conditions.

Credit Guarantee Fund Scheme for Education Loans

The Credit Guarantee Fund Scheme for Education Loan(CGFSEL) was launched by the Government of India in 2015. This scheme was launched to guarantee education loans to students from the economically weaker sections under the Model Education Loan Scheme of the Indian Banks’ Association (IBA).

This scheme is meant for student borrowers who are unable to pledge any collateral for their loan and are also unable to provide any third-party guarantee. Under this scheme, a student can get a collateral-free loan, and without a third-party guarantee, of INR 7.5 lakhs.

Features of the Credit Guarantee Fund Scheme for Education Loans?

Some prominent features of this scheme are as follows:

• 
  The scheme provides a guarantee for the education loan to deserving and eligible students. The guarantee is for loan amounts up to INR 7.5 lakhs. 
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  Eligible students to get a subsidy on loan amounts up to INR 7.5 lakhs. Even if the total loan amount exceeds INR 7.5 lakhs, they are still eligible for subsidy up to 7.5 lakhs.
• 
  The subsidy is valid during the course period and the moratorium period only. 
• 
  A student will be eligible for the subsidy only once in their lifetime - either for their first Bachelor's degree or for a Postgraduate degree. It should also be remembered that the subsidy is valid only for courses in India. 
• 
  The student has to submit proof of income. A knowledgeable authority who is appointed by the State Government should be approached for this proof. 
• 
  The lending institution can charge an interest of 2% per annum above the base rate on education loans under the CGFSEL scheme. 
• 
  The lender cannot charge any margin money on CGFSEL scheme education loans for amounts up to INR 4 lakhs. For loan amounts higher than INR 4 lakh and up to INR 7.5 lakhs, the lender is allowed to charge 5% as margin money for studying in India. For studying abroad, they can charge a margin of 15%. 

CGFS Education Loan - Covered Expenses 

An education loan typically covers a wide range of expenses associated with your studies:

1. 
   Tuition and Related Fees: This includes college, school, hostel, examination, library, and laboratory fees.

1. 
   Travel Expenses for Studying Abroad: Travel costs or passage money for students studying abroad can be included in the loan.

1. 
   Insurance Premiums: If applicable, the loan may cover insurance premiums for the student borrower.

1. 
   Deposits: Caution deposits, building funds, and refundable deposits, provided they are supported by institutional bills or receipts, may be considered.

1. 
   Books and Equipment: The loan can include costs for books, equipment, instruments, and uniforms.

1. 
   Computer Purchase: If a computer is required for the course, it can be purchased at a reasonable cost and included in the loan.

1. 
   Other Necessary Expenses: Expenses essential for completing the course, such as study tours, project work, and thesis, may also be covered.

1. 
   Scholarships and Fee Waivers: Scholarships or fee waivers received by the student may be taken into account when calculating the loan amount.

1. 
   Management Quota Fees: Fees for management quota seats will be considered if approved by the State Government or a government-approved regulatory body, subject to repayment feasibility.

1. 
   Accommodation: Reasonable lodging and boarding charges may be included for students opting for accommodation outside the institution.

1. 
   Expense Limits: Some expenses may be capped, such as limiting certain costs to 10% of the total tuition fees, and a maximum of 20% for items like books, equipment, and other course requirements not specified in the institution’s fee structure. 

Requirements for the Credit Guarantee Fund Scheme for Education Loans

Students have to meet a few criteria in order to avail of an education loan under the Credit Guarantee Fund Scheme. These requirements are as follows:

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  The student should belong to the EWS (Economically Weaker Section) category.
• 
  The annual income of the family should be less than INR 4.50 lakhs. 
• 
  The student should have got admission to a recognized University in India or abroad. They should have got admission to an approved technical or professional course after Class XII.

CGFS Education Loan - Eligibility Criteria 

To qualify for the scheme, students must meet the following criteria:

1. 
   Nationality: Applicants must be Indian citizens.

1. 
   Education: Candidates should have completed Higher Secondary Education (HSC), which is Class 12 or its equivalent.

1. 
   Course Admission: Students must have secured admission to a higher education program at recognized institutions in India or abroad.

   • 
     Admission should be obtained either through an entrance test or a merit-based selection process after Class 12.
   • 
     For postgraduate courses or research programs, eligibility and admission may be determined by factors beyond just marks in the qualifying examination, such as entrance exams or other selection processes.

Quantitative Eligibility Criteria:

• 
  The borrower's loan account must not have any overdue payments as of the reference date (typically the loan disbursement date).
• 
  No margin is required for loan amounts up to INR 4 lakh. For amounts exceeding INR 4 lakh, a margin of 5% applies for studies in India, and 15% for studies abroad.

CGFSEL Scheme – Eligible Courses

According to the Indian Banks Association (IBA) under its Model Education Loan Scheme, the following courses are generally eligible for education loans. It is recommended to consult the specific bank or lending institution for a definitive list of approved courses and institutions under their loan scheme.

For Studies in India:

• 
  Approved courses at recognized colleges/universities acknowledged by UGC/Government/AICTE/AIBMS/ICMR, leading to undergraduate/postgraduate degrees and PG diplomas.
• 
  Professional courses such as those offered by the Institute of Cost Accountants of India (ICWA), Chartered Accountant (CA), Chartered Financial Analyst (CFA), among others.
• 
  Courses from prestigious institutions like IIMs, IITs, IISc, XLRI, NIFT, NID, etc.
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  Regular degree/diploma programs including Aeronautical, pilot training, shipping, nursing, or any other discipline approved by the Director General of Civil Aviation/Shipping/Indian Nursing Council, or any other regulatory body.
• 
  Courses offered in India by reputable foreign universities.

For Studies Abroad:

• 
  For undergraduate studies, loans are available for job-oriented professional/technical courses offered by reputable universities.
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  For postgraduate studies, loans cover programs like MCA, MBA, MS, and other equivalent degrees.
• 
  Education loans may also be available for courses conducted by professional bodies such as CIMA in London, CPA in the USA, and similar institutions.
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  Degree/diploma courses recognized by competent regulatory bodies in India or abroad, which are valid for employment in India or abroad, including fields like aeronautical studies, pilot training, shipping, etc.

Note:

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  Banks may approve other job-oriented courses leading to technical/professional degrees or postgraduate degrees/diplomas offered by recognized institutions under this scheme.
• 
  Courses offered by reputable institutions not listed above may also be considered based on their employability potential.

CGFS Education Loan - Application Process 

Applications for the Credit Guarantee Fund Scheme can be submitted either directly at bank branches or online. To apply online, students should follow these steps:

1. 
   Visit the Vidya Lakshmi Portal: Go to PM-Vidyalakshmi Portal and fill out the online application form for the Credit Guarantee Fund Scheme.

1. 
   Register an Account: Click on the ‘Register’ tab and provide the necessary details to create an account.

1. 
   Login: After registration, click the ‘Student Login’ tab and enter your registered email ID, password, and captcha code.

1. 
   Complete the Application Form: Navigate to the ‘Login’ tab and fill out the application form, including your name, email ID, phone number, and other required documents.

1. 
   Download the Application: After submission, download the application form for future reference.

CGFS Education Loan - Security Amount 

When applying for an education loan under the Model Education Loan Scheme of the Indian Banks Association (IBA), the security requirements depend on the loan amount. These measures are in place to ensure repayment and reduce risks for the lending institution. Here are the security requirements for different loan amounts:

1. 
   Loan amount up to INR 4 lakh:

   • 
     Parents must be joint borrowers.
   • 
     No collateral security or third-party guarantee is required.

    
2. 
   Loan amounts above INR 4 lakh and up to INR 7.5 lakh:

   • 
     Parents must be joint borrowers.
   • 
     Collateral security in the form of a third-party guarantee is required.
   • 
     In certain cases, the bank may waive the third-party guarantee if the bank is satisfied with the financial standing or net worth of the parents.

    
3. 
   Loan amount above INR 7.5 lakh:

   • 
     Parents must be joint borrowers.
   • 
     Tangible collateral security of suitable value, acceptable to the bank, is required.
   • 
     The student’s future income will be assigned for the repayment of installments.

    

Note:

• 
  The student and the parent/guardian must sign the loan documents as joint borrowers.
• 
  Collateral security can include land, buildings, government securities, public sector bonds, UTI units, NSC, KVP, life insurance policies, gold, shares/mutual fund units/debentures, bank deposits, or any other tangible security acceptable to the bank with an appropriate margin.

Loans Covered Under the Credit Guarantee Fund Scheme for Education Loans

The following kind of loans are covered under the Credit Guarantee Fund Scheme -

Read Also:

• 
  Central Sector Interest Subsidy (CSIS) Scheme

• 
  IBA Model of Education Loan Schemes

• 
  SBI Global Ed-vantage Scheme

• 
  Interest-Free Education Loans for Your Students

• 
  Education Loan Without Collateral For Abroad Studies

• 
  International Student Loan Without Cosigner

Loans not Covered Under the Credit Guarantee Fund Scheme for Education Loans? 

The following kinds of loans are not covered under the Credit Guarantee Fund Scheme for education loan-

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  Loans sanctioned by banks with an interest rate of more than 2% above the base rate for the banks.
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  Loans that do not follow the guidelines, laws, provisions, and instructions laid down by the RBI or the Central Government.
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  A loan where the risk is already covered by the Government or other authority in any manner.

Now that you know all about the Credit Guarantee Fund Scheme for Education loans, apply for it if you are eligible.

CGFS Education Loan - Participating Banks 

The CGFS Education Loan scheme collaborates with respected regional, private, and public sector banks to offer financial support to students pursuing higher education in India and abroad. Below are some of the participating banks:

Regional Rural Banks:

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  Andhra Pradesh Grameena Vikas Bank
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  Baroda Gujarat Gramin Bank
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  Chhattisgarh Rajya Gramin Bank
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  Telangana Grameena Bank
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  Puduvai Bharathiyar Grama Bank
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  Kerala Gramin Bank
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  Sarva Haryana Gramin Bank
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  Jharkhand Rajya Gramin Bank
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  Andhra Pragathi Grameena Bank
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  Tripura Gramin Bank
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  Tamil Nadu Grama Bank
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  Rajasthan Marudhara Gramin Bank
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  Prathama U.P. Gramin Bank
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  Mizoram Rural Bank
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  Himachal Pradesh Gramin Bank
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  Baroda Rajasthan Kshetriya Gramin Bank
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  Saptagiri Grameena Bank
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  Uttar Banga Kshetriya Gramin Bank
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  Saurashtra Gramin Bank
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  Punjab Gramin Bank
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  Chaitanya Godawari Grameena Bank
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  Maharashtra Gramin Bank
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  Aryavart Bank
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  Uttarakhand Gramin Bank
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  Meghalaya Rural Bank
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  Karnataka Vikas Grameena Bank
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  Baroda U.P. Bank

Public Sector Banks:

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  State Bank of India
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  Union Bank of India
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  UCO Bank
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  Canara Bank
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  Bank of India
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  Central Bank of India
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  Punjab National Bank
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  Indian Overseas Bank
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  Bank of Maharashtra
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  Indian Bank
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  Punjab & Sind Bank
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  Bank of Baroda

Private Sector Banks:

• 
  Tamilnad Mercantile Bank Ltd.
• 
  The Karur Vysya Bank Limited
• 
  Karnataka Bank Ltd.
• 
  The South Indian Bank Ltd.
• 
  Jammu & Kashmir Bank
• 
  Dhanlaxmi Bank

Frequently Asked Questions