NEW DELHI: The Union Human Resource Development (HRD) Ministry has sought Rs. 2,500 crore during the 11th Five Year Plan to set up a Higher Educational Refinance Corporation to provide student loans at low interest rates for pursuing higher education. The Ministry has pushed for this in the Working Group report submitted to the Planning Commission for the 11th Plan.

The proposal assumes significance in the wake of Prime Minister Manmohan Singh's intervention last Friday to give a major push to improving access to higher education. According to the Working Group report: "There is a large number of students who are not in a position to pursue higher studies due to lack of resources. The Government should provide some avenues to enable them to mitigate their financial problems."

While pressing for an institutional mechanism for student loans, the Working Group has anchored its proposal on the 172nd report of the Parliamentary Standing Committee for the HRD Ministry. In the report — tabled in Parliament in May 2006 — the committee recommended that an Educational Development Bank of India be set up "as suggested from time to time for helping financially poor and needy students."

Such an institutional mechanism has been suggested as a counter to the student loans offered by many commercial banks which, according to the Standing Committee, shift the onus of higher education from society on the individual.

Also, commercial banks charge prohibitive rates of interest and demand collateral guarantee, making them inaccessible to the weaker sections.

Further, there is a view that the prevailing form of student loans creates distortions.

For one, only those courses which enjoy a premium market will be preferred by loan providers as a result of which professional courses are likely to elbow out regular degree programmes.

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