No shortage of funds for education! Central government preparing to double education loans..
The government is preparing a nationwide campaign to boost the education loan disbursement process. The aim is to nearly double the distribution of education loans by next year by implementing measures such as faster approvals, campus outreach, and simplified lending norms. The Ministry of Education is collaborating with the Ministry of Finance to develop a roadmap involving state education departments, State Level Bankers' Committees (SLBCs), and higher education institutions to improve access to education finance. Banks disbursed education loans worth approximately ₹39,000 crore in the 2026 fiscal year, compared to ₹40,253 crore in the 2025 fiscal year.
**Camps to be organized**
A government official familiar with the matter told *The Economic Times* that banks would organize camps at approximately 50,000 higher education institutions to facilitate on-the-spot loan approvals. Banks have been instructed to reduce the loan approval processing time to 10 days—meaning approvals must be finalized within this deadline. A senior bank official stated in a media report that around 1,000 institutions have already been identified where students are being offered on-the-spot loan approval facilities. The official added that, in some cases, other associated charges are also being waived. Over 380,000 education loan applications were approved in the 2026 fiscal year.
**Education loans disbursed by banks in FY2026**
**Bank** | **Loan Amount (in ₹ crore)**
SBI | 13,370
Canara | 4,306
UBI | 4,274
ICICI Bank | 3,775
BoB | 2,871
**Proposal to increase credit guarantee cover**
The government is also considering increasing the credit guarantee cover for collateral-free education loans. This move will enable banks to extend collateral-free loans exceeding the current limit of ₹7.5 lakh. Under this scheme, interest rates are pegged to the bank's external benchmark lending rate plus a spread of up to 50 basis points. The aforementioned official stated that they are also considering waiving the requirement for a co-applicant for loans covered by the guarantee.
CGFSEL Coverage
Currently, the ‘Credit Guarantee Fund Scheme for Education Loans’ (CGFSEL)—managed by the National Credit Guarantee Trustee Company—provides 75% coverage for loans up to ₹7.5 lakh under eligible schemes, including the Model Education Loan Scheme. In December 2025, a Parliamentary Standing Committee recommended raising the CGFSEL guarantee cover to ₹20 lakh, citing the rising cost of education, fee hikes, and the increasing need for collateral-free loans. On Tuesday, Finance Minister Nirmala Sitharaman informed the Lok Sabha that ₹3,600 crore would be spent on interest subsidies under the Pradhan Mantri Vidya Lakshmi Yojana (PMVLS) for the period from 2024-25 to 2030-31.
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