Education Loan in India
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Education Loan in India

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India is one of the world’s most exciting and advancing education hub. The world knows that Indians are good in software programming, good in accounts, good in analysis, good in creativity, good in R&D, etc. Indians are working all over the world. If we go to Silicon Valley, a lot of Indians are working in Microsoft, Intel, and Google. Even a lot of Indian scientists are working in NASA. New age Universities and educational institutes offer a lot of advanced courses and programs for students. For higher studies, some of the students go abroad. Previously it was very difficult for poor and middle-class family but now there are a lot of banks who are offering Education Loan for higher studies.

In a competitive environment, quality education is a must for a successful life. Our new generations are very intelligent & pro-active and they decide their career path at the age of 10-12. But the education fees are increasing every year. Sometimes it looks very difficult for a family to provide quality education for their kid.

Education in India, especially in premier educational institutions, is quite expensive. And in many cases, even if a student is qualified to get admission purely on merit, it becomes difficult to study in such institutions due to financial constraint. According to studies, the cost of education is increasing at an average of 15% per annum. For undergraduate courses, the fees could be 5-10 Lakh, while for a five-year medical course at a private college, this could go up to 50 Lakh. Business schools in India charge more than 10 Lakh. The cost of higher education is much higher abroad.

But now students who want to study more can opt for education loans for their further studies. There are several banks; both public and private sector from which a student can avail an education loan.

According to the Indian Banks Association norms, banks offer loans of up to 10 Lakh for courses in Indian colleges and up to 20 Lakh for studies abroad and for post-graduate courses such as those in management, banks offer loans of up to 10-20 Lakh.

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What does an education loan cover?

It covers fees for tuition, examination, library, laboratory, and hostel; money for purchasing books, equipment, instruments, and uniform; travel expenses for studies abroad; caution deposit or refundable deposit, etc. In some cases, banks are providing loan for study tours expenses and for project work.

Features and Benefits of Education Loans

  1. Applicable for all students: – Any student who wants to study can apply for an education loan even though he belongs to Below Poverty Level (BPL) family. He/She can take education loans under the government-sponsored subsidy schemes such as ‘Central Scheme to provide Interest subsidy’ (CSIS).
  2. Applicable for all courses: – Education loan can be used to pursue any types of courses; it could be graduation, post-graduation, diploma courses, degree courses, vocational courses, etc. whether in India or foreign universities.
  3. Easily access available: – As per RBI guideline, Education Loan is the priority product of all banks whether it is nationalized or private. Education loans are widely and easily available in all banks.
  4. Customized loan amounts: – Education loan amount depends on the course applied for and it depends on the location (within the country or abroad) also.
  5. 100% finance options available: – Education loans provide 100% finance option which can include many additional benefits like caution deposits, library fees, building deposits, laboratory fees, tuition fees, examination fees, hostel fees, money for buying books, instruments, and uniform, travel expenses for studies abroad, etc.
  6. The low-interest rate for females: – To raise awareness of female education, banks offer low-interest rates for female students.
  7. Easy repayment: – The repayment process will start after 6 months to 1 year of completion of the course; it will not starts just after the completion of the course.
  8. Subsidy on Loan: – For minority students, Government of India sponsored subsidies for higher study.

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What the eligibility criteria are for Education Loans?

  1. One must be an Indian citizen
  2. NRI applicants must have a valid Indian Passport
  3. Applicant must have completed his higher secondary level schooling
  4. Must have secured admission into a recognized course in India or abroad
  5. An applicant pursuing full-time courses needs to have a co-applicant who can be either parent/guardian or spouse/parent-in-law (in case of married candidates)
  6. For loans between 4-7.5 Lakh third-party guarantor is required
  7. For loans above , 7.5 Lakh lenders will ask for collateral
  8. Repayment starts six months to one year after completion of the course
  9. Default in payment will affect the credit history of student and co-applicant
  10. If a student goes abroad, the lender will recover from co-applicant, that is, parents
  11. For abroad studies, loan alone might not suffice; look for a part-time job or sponsorship
  12. Insurance is compulsory for foreign courses

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Educational courses (Age criteria for education loan eligibility)

  • Undergraduate courses–18-27 years
  • Post Graduate Courses–21-35 years
  • Doctoral courses–27-55 years
  • Postdoctoral courses–27-65 years

Security required as collateral for Loan

The banks can finance up to 100% of the loan depending on the amount. Currently, there is no security or guarantor required up to 4 Lakh and even no margin money required.

For loans above 4 Lakh up to 7.5 Lakh, a third-party guarantee is required and if the loan amount is more than 7.5 Lakh than a bank can ask for collateral. 

Once the loan application is accepted, the banks disburse the amount directly to the college/university as per the given fees structure.

Interest rates

Currently, interest on education loan is between 8.50% to 16.50 %; depending on the loan amount and the college concerned. For premier institutions, lenders offer a discount of 25 basis points.

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Repayment of Education Loans

The repayment of education loan will not start just after the disbursal which is common in all other loans. The repayment process will start after 6 months to 1 year of completion of the course, though it can be extended to 5 to 7 years. The applicant can avail of benefits under Section 80-E of the Income-Tax Act.

Here is some information which can help you.

Best Banks for Education Loan in India (up to 7.50 Lakhs)

  • HDFC Bank
  • Axis Bank
  • Vijaya Bank
  • Union Bank of India

Best Banks for Education Loan in India for Foreign Studies

  • State Bank of India
  • Punjab National Bank
  • ICICI Bank

Best Bank for Education loan in India for Vocational and Skill development courses

  • Corporation Bank
  • Canara Bank

Best Bank for Education Loan in India for School studies

  • Bank of Baroda
  • Allahabad Bank

Taking an education loan helps you to build a good career and a good future. It helps to fulfill your dreams. If you repay the loan timely without fail, it will build your credit score also and it will help you to get a home loan, vehicle loan, business loan, personal loan, etc. in the future.

 

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