Context: Recently, the Union Cabinet has approved PM Vidyalaxmi, a new Central Sector scheme that seeks to provide financial support to meritorious students so that financial constraints do not prevent anyone from pursuing higher studies.

• According to a government communication, an outlay of Rs 3,600 crore has been set aside for 2024-25 to 2030-31. The scheme is expected to cover over 2.2 million students who can potentially avail PM-Vidyalaxmi benefits every year.

About the Scheme

• Under the scheme, any meritorious student who gets admission to quality higher educational institutions will be eligible for a collateral-free and guarantor-free loan from banks and financial institutions.

• Under the scheme, loan amounts of up to Rs 7.5 lakh will be provided at a 75 per cent credit guarantee by the central government. It will support banks to expand coverage under the scheme. 

• The payments of interest subvention will be made through e-voucher and Central Bank Digital Currency (CBDC) wallets.

• Furthermore, for students having an annual family income up to Rs 8 lakh, the scheme will offer a 3 per cent interest subvention on loans up to Rs 10 lakh. The subvention support will be offered to 100,000 students every year.

• Both government and private banks and financial institutions will be able to participate in PM-Vidyalaxmi.

• The loans will cover the full tuition fees and other expenses related to the course.

• The scheme will be implemented via a unified government portal, through which students who get admission to quality institutes can apply for education loans and interest subvention.

• The list of institutes eligible under the scheme will be updated every year using the latest National Institutional Ranking Framework (NIRF), with 860 institutes qualifying to begin with.

• The Department of Higher Education will have a unified portal “PM-Vidyalaxmi” on which students will be able to apply for the education loan as well as interest subvention, through a simplified application process to be used by all banks. 

Key Criteria

• The criteria of institutes covered under the scheme include those determined by the NIRF as the top 100 in overall, category-specific and domain-specific rankings.

• The scheme will also extend to state government-run institutes ranked between 101 and 200 in the NIRF and higher educational institutions of the central government.

• The scheme aims to supplement the Central Sector Interest Subsidy (CSIS) and Credit Guarantee Fund Scheme for Education Loans (CGFSEL), the two components of the PM-USP scheme being implemented by the Department of Higher Education.