From now on, banks may grant education loans to high scoring students at cheaper interest rates. In a meeting held between finance minister P. Chidambaram and public sector banks, banks were asked to disburse education loans to deserving students speedily and at lower rates of interest.
But, it is reported that before banks advance loans to students, they will ensure the credit worthiness of the loans seekers by getting credit information providers to make a credit score of the student, wanting to avail the loan. This credit score will be used to rate the ‘worthiness' of the student. In addition to this, educational institutes may also be rated by the agencies to help banks in disbursing loans.
A credit score for a student can be defined as the chances of default of the loan seeker, which will be rated on factors such as status of previous loans, merit of the student, the course and institute in which the student has secured admission and employability of the student.
It is reported that banks may also lighten the lending norms for educational loans given for vocational courses.