Assessing Parent’s Financial Position Not Required for Education Loans, states Kerala High Court
MAS Team | 16 July 2021
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The Kerala High Court recently held that repayment possibilities of education loans should not be assessed based on the financial position of the parents, but on the projected future earnings of the students on employment after education.
 
The judgment followed a writ petition filed by Devik Soniraj, a second-year BAMS student, challenging the decision of Bank of India that rejected her request for an educational loan. 
 
Devika had secured admission through the centralized allotment process of the State in 2019 on the basis of her rank in the National Eligibility Cum Entrance Test, 2019. She had paid the fees for the first year and for a portion of the second year, and had applied for a loan of Rs 7.50 lakh to pay the remaining fees. However, the bank turned down her loan request on the grounds that her father’s liabilities were not disclosed in her loan application.
 
Justice P.B Suresh Kumar while allowing the petition observed the revised guidance notes on Model Education Loan Scheme issued by the Indian Banks' Association in 2015 said that repayment possibilities of education loans under the scheme should not be assessed based on the financial position of the parents, but should be based on the projected future earnings of the students on employment after education.
 
Therefore, the liability of the parents shall not be an impediment for the bank in considering an application for an educational loan.