The education loan programme since its inception has been rapidly growing both in terms of number of students who have taken education loans for pursuing higher education and the amount of education loans released. Nevertheless, these financing mechanisms of higher education do not appear to improve access and equity in the higher education system as evidenced from the National Sample Survey Organization (NSSO) and bank data. Given this, the main thrust of the article is to recognize why and how to identify the threshold level of loans that need to be converted into grants; for addressing the objective of access and equity and for indirectly facilitating education loans to target the affluent and privileged for cost recovery. Accordingly, the article explicates the rationale and the mechanism through which loan can be converted into grants.