Students aiming at higher education now have a reason to cheer. Education loan is now going to be available at a rate that will be lower than the rates charged by the banks. Students will just have to repay a part of the loan and the rest would be paid by the Government.

After a Cabinet meeting on Thursday, budgetary announcement of the State Government declares the interest rates for education loans to be 6 percent.

Rural Development and Panchayat Raj Minister Shobha Karandlaje said "Banks are offering loan at higher interest rates. But as per our scheme, students will have to repay the loan at an interest rate of six per cent. The government will take care of the rest." The students who have taken loan since August 1 for the current academic session would be able to enjoy the advantages of the scheme. Students can avail loans up to Rs 5 lakh.

The government had announced to bring private primary schools and high schools which were started during the academic year 1993-94 and 1994-95, under the grant in aid scheme.This scheme is expected to benefit to as many as 537 primary schools, 410 high schools and 103 pre-university colleges.

The education loan segment has already made the banks happy despite of RBI's moves to raise interest rates. 2007-08 saw a growth of about 30-40 percent in the education loan portfolio of banks. The introduction of such schemes is likely to enhance the growth of this segment even further. According to senior bank officials, the education loan portfolio of banks is expected to see a growth of about 40 percent in 2008-09.

Earlier the public sector banks, SBI and PNB had decided not to raise interest rates on education loans.