Education should reach all. Keeping this thought in mind, the Government is planning to introduce a refinance scheme which would facilitate borrowers to get education loans at rates as low as 4%. The Govt. also plans to extend the repayment period for students opting for courses like medicine, engineering, fashion designing and IT.

The Government had earlier extended the tax concession on education loan interest rates.

According to the scheme a special purpose vehicle (SPV) would be set up which would be refinancing the banks for loans granted to students below prime lending rate (PLR).

The current interest rate for education loan lies between 10% to 12%. Government officials also say the ministry of human resource development (HRD) which has chalked out the plan wants the repayment period to be extended from the current period of 5-7 years to 6-12 years.

"In the next one month, the entire concept will be crystallised," HRD minister Kapil Sibal said.

"They have appreciated the idea and asked us to submit a formal note," he said referring to the Planning Commission.

Students whose parents have an annual income of less than 4.5 lakhs would be granted loans at 4%.

The interest rate would be 7% for those students whose parents' income is more than the 4.5 lakh threshold but the loan amount sought is less than Rs. 12 lakh. Loans amounting to more than Rs. 12 lakh would be charged an interest of 9%.