Education loans are a lifeline for students pursuing higher education, but parents’ financial missteps can cast a shadow over their children’s futures. Under the Reserve Bank of India’s (RBI) current rules, if a parent’s loan becomes a non-performing asset (NPA), their child’s education loan is also classified as an NPA. This regulation has left many students deprived of crucial funding. However, banks have recently urged the RBI and the government to review these rules, sparking hope for change. “A parent’s mistake shouldn’t shatter a child’s dreams,” says banking expert Rahul Mehta.

Currently, education loans up to ₹7.5 lakh require no collateral or third-party guarantee, but parents must co-sign as borrowers. This is where the problem lies. If a parent defaults on any loan, RBI rules mandate that the education loan also becomes an NPA. The RBI is now reviewing this policy, with reports suggesting a plan to separate individual borrowers from loan accounts. This could ensure that a default on one loan doesn’t impact others, offering significant relief to students. Such a change would prevent parents’ financial troubles from derailing their children’s education.

Banks, however, want this reform limited to education loans. They argue that existing rules should remain for other loan types. “Education loans shape a student’s future; protecting them is critical,” says a senior bank official. Amid the buzz around the Khalid-Ashraf case, this discussion is igniting optimism among students and parents. The RBI’s review could be a pivotal step in removing barriers to education, ensuring that a parent’s financial error doesn’t cost a child their aspirations.