PM-USP Credit Guarantee Fund Scheme for Education Loans (CGFSEL)
The Credit Guarantee Fund Scheme for Education Loans, commonly referred to as CGFEL or CGFSEL, supports eligible education loans granted without collateral security and without a third-party guarantee under the Indian Banks' Association Model Education Loan Scheme.
Updated: 5 September 2026
What is the Credit Guarantee Fund Scheme for Education Loans?
The scheme was established by the Government of India to encourage banks to provide education loans to eligible students without insisting on collateral security or a third-party guarantee for the covered loan amount.
The scheme is managed through the National Credit Guarantee Trustee Company (NCGTC) and is linked to education loans granted under the IBA Model Education Loan Scheme.
Its purpose is to reduce lender risk and improve access to higher-education finance for students who may not have property or other assets to offer as security.
Maximum Loan Amount and Guarantee Cover
| Feature | Current Position |
|---|---|
| Maximum education loan covered | Up to ₹7.5 lakh |
| Collateral security | Not required for the covered loan under scheme conditions |
| Third-party guarantee | Not required for the covered loan under scheme conditions |
| Government-backed guarantee | Up to 75% of outstanding default |
The 75% guarantee is a risk-sharing mechanism between the guarantee fund and the lending institution. The borrower remains liable to repay the loan according to the education-loan agreement.
Education Loans Eligible for CGFSEL
An education loan must satisfy the current scheme rules. Broadly, the covered loan should:
- be granted under the IBA Model Education Loan Scheme or the applicable notified education-loan framework;
- be within the prescribed maximum covered amount;
- be sanctioned without collateral security and third-party guarantee for the covered portion;
- be granted by an eligible Member Lending Institution;
- comply with NCGTC's guarantee-registration, reporting and fee requirements; and
- meet applicable regulatory and banking norms.
The lending institution, not the student, applies for and maintains the guarantee cover with NCGTC.
Eligible Lending Institutions
NCGTC's current scheme information identifies eligible Member Lending Institutions as banks participating in the education-loan guarantee framework. These include public-sector, private-sector and eligible foreign banks that satisfy the prescribed membership and scheme conditions.
Students should ask the lending bank whether the proposed education loan is being covered under PM-USP CGFSEL/CGFEL.
Education Loans That May Not Be Covered
Guarantee cover may not be available where the loan or lender fails to satisfy the scheme's eligibility and compliance conditions. Examples can include:
- loans inconsistent with applicable Government, RBI or scheme instructions;
- loans not granted under the applicable education-loan framework;
- credit facilities already covered under another incompatible guarantee arrangement;
- accounts that do not satisfy the prescribed conditions at the time guarantee cover is sought; or
- cases where the lender has not followed NCGTC registration, reporting or guarantee-fee requirements.
Repayment Period and Moratorium
Education loans under the IBA model generally provide a repayment period of up to 15 years after the applicable moratorium period, subject to the bank's loan terms.
The usual moratorium is the course period plus one year. Borrowers should check the sanction letter because repayment terms can vary according to the lending institution and the applicable education-loan product.
CGFSEL and PM-Vidyalaxmi: What is the Difference?
PM-Vidyalaxmi was launched in November 2024 as a new Central Sector Scheme for students admitted on merit to designated Quality Higher Education Institutions (QHEIs). It provides a digital route for collateral-free and guarantor-free education loans and complements the existing PM-USP schemes.
| Feature | PM-USP CGFSEL | PM-Vidyalaxmi |
|---|---|---|
| Main purpose | Credit guarantee for eligible education loans | Digital collateral-free education-loan access for eligible QHEI students |
| Guarantee threshold | Loans up to ₹7.5 lakh | 75% Government guarantee for loans up to ₹7.5 lakh |
| Guarantee cover | Up to 75% of outstanding default | 75% of outstanding default for covered loans |
| Income-linked interest support | Separate from CGFSEL; may arise under CSIS | 3% interest subvention for eligible students with family income up to ₹8 lakh on loans up to ₹10 lakh |
How to Obtain an Education Loan Covered by CGFSEL
The borrower does not separately apply to NCGTC for the guarantee. The lending institution handles guarantee registration and compliance.
- Apply to an eligible bank for an education loan.
- Ask whether the loan is being sanctioned under the IBA Model Education Loan Scheme or an eligible successor framework.
- Confirm whether collateral security or a third-party guarantee is being waived for the covered amount.
- Ask the bank whether the loan will be covered under PM-USP CGFSEL/CGFEL.
- Review the sanction letter carefully for interest rate, moratorium, repayment period and any borrower obligations.
Current Scale of the Scheme
According to the Ministry of Education, from the launch of the credit guarantee scheme in 2015 up to 21 July 2026, more than 14.65 lakh credit guarantees had been issued, covering education loans worth about ₹59,843.74 crore.
This demonstrates that the scheme remains an important component of the Government's broader higher-education finance framework alongside PM-USP CSIS and PM-Vidyalaxmi.
Key Points to Remember
- CGFSEL/CGFEL is a credit-guarantee scheme, not a loan-waiver scheme.
- The current covered loan ceiling is ₹7.5 lakh.
- Guarantee cover is generally up to 75% of outstanding default.
- Collateral and third-party guarantees are not required for the covered loan under scheme conditions.
- The lending bank obtains and maintains the NCGTC guarantee cover.
- Interest subsidy is a separate benefit governed by PM-USP CSIS or PM-Vidyalaxmi, where applicable.