In order to reform the higher education system in India, the Central Government is planning to set up a Higher Educational Refinance Corporation that would provide lower interest rates on loans as compared to the current rates of interest i.e. 13.5%.

A fund of Rs.2500 crore will be released by the Centre for setting up the Higher Educational Refinance Corporation during the 11th Five Year Plan.

The Centre has already given its approval to increase the number of colleges and universities, and now is also keen on increasing the gross enrollment ratio from 9.7% to 15% for higher education till 2012.

The Centre wants to ensure that no student is denied from higher or professional education due to his/her poor financial background.

According to a survey conducted by the Associated Chambers of Commerce and Industry of India (ASSOCHAM), it was found that a majority of the student population is backed by poor financial assistance and is not able to pursue any higher or professional education.

Moreover, only 3% students, belonging to middle class families take loans for higher education.

The survey, released on the first day of the 3rd education fair organized by ASSOCHAM, also stated that around 85% students in the UK, 77% in the US and 70% in Germany & France took loans to pursue their higher education.

ASSOCHAM Education Committee Chairman, Mr. Vinay Rai said "India spends about $ 3.5 million USD for the merit-cum-scholarship schemes whereas US spends nearly $ USD 80 billion on higher education annually mostly in the form of students aid."

It was also stated that the growth of India's higher education system has been aided by the initiatives of the private sector enterprises. Public expenditure on higher education is not even 0.5% of the GNP (Gross National Product).

The engineering colleges in India are growing at a rate of 2% annually, whereas business schools are growing at 60% annually.