Education is considered as the biggest investment for a child, especially in India. Since our childhood, we all get a similar advice from our parents to give more and more attention to education. Parents do most of the savings and investment for their kid’s education. But the quality education is sometimes costly and all the savings and other investments couldn’t bear its cost. The education loan appears as a relief at this time.
Let’s know more about the education loan.
What is the Education Loan
Basically, an education loan is a facility for students so that the students can complete their higher education even in the financial crisis. Students can avail the facility of education loan to complete their post secondary education.
According to a study, the cost of education is increasing at the rate of 15% per year. In this case, Education loan can help out the bright students. Almost all private and public government banks in India offer education loan to students, to bear the expenses of their education so that they can complete their higher education.
Banks offer the amount of 10 Lakh as education loan for education from Indian Institute and amount of 20 Lakh for an education from abroad. Banks can finance up to 100% of the amount of education expenses depending upon the total amount. Presently bank can provide the loan of 4 Lakh without any margin amount. Once the loan application is approved the banks disburse the amount directly to the college/university as per their fees structure.
Here are the few other terms and conditions which students need to fulfill if they want to avail the facility of education loan.
Required Eligibility for Education Loan
An Indian citizen can avail the facility of the education loan in India. To apply for the education loan the student’s academic record should be good. Student should not be younger than 18 years and elder than 35 years. If any employed person wants to avail the education loan for his further studies than the age should not be more than 45 years.
The parents of the students must be having a stable earning source for a secure repayment of the educational loan. Students must be having a confirmed admission in a well reputed and recognized University of India or abroad.
Any student can apply for the education loan but only for post secondary education. The bank also checks the loan repayment criteria of the family. In a few cases, the bank can demand some tangible security for the loan. This demand depends on the amount of loan and family income.
To improve your eligibility for the education loan, you will have to score good grades in your examination. And if you get admission in a job oriented course in a reputed university, than also it will become easy for you to get the educational loan from the bank. Bank also offers education loan easily, on the basis of the good financial background of the student’s parents or guardians, or good prospects for the future income generation by the student.
Tenure and Re-payment of Education Loan
Tenure of Educational Loan
The tenure of education loan is usually 7 years but it can be a maximum of 10 years for the loan amount of 7.5 lakhs and 15 years for the loan amount above 7.5 lakhs.
Repayment of Educational Loan
The students need to repay the EMIs of the loan within the above mentioned time period. The installments for repayment of loan starts one year after the end of studies or six months after getting a job, whichever is earlier. Most of the banks follow this rule.
Leading Banks and their Interest rates on Education Loan
Since 2004 there is a rise in the education loan applicants. Indian Government considers education loan as important as home loan, and all the banks are directed by the government to give the education loan to needy and eligible students. So, almost all banks in India offers education loan to students. Here are the names of a few banks with their interest rates on education loan.
- SBI offers the educational loan on the interest rate of 10.25% to 10.50%.
- Punjab National Bank also offers the educational loans. Its interest rate is 8.55% to 10.45% depends on the loan amount.
- Bank of Baroda offers education loan on the interest rate of 8.50%.
- Canara Banks has the education loan facility and its interest rates are 6.60% to 10.40% depends on the loan amount and the loan scheme.
- Axis bank offers the educational loan on the interest rate of 13.70% to 15.20 %.
- HDFC provides the education loan on the interest rate of 9.005 to 13.86%.
- Kotak Mahindra Bank has an interest rate of 11.5% to 24% for all types of loans including the education
- Indian Bank offers education loan in the interest of 8.60% to 9.60%.
- United Bank of India offers the interest rate of 10.75% to 10.80% on education loan.
Like this many banks provide this facility to their customers and they have their own interest rate for education loan. Generally, the interest rate falls in the brackets of 8.5% to 10.5% but it can be varied according to the educational course and amount of approved loan.
The interest rate depends on the tenure of the loan. Here the interest rates of different banks can be changed with the time according to the policies of RBI (Reserve Bank of India).
Required Documents for Educational Loan
As we have mentioned earlier that there are two types of students who can apply for an education loan.
- The students who want to study within the country.
- The students who want to go to aboard for their further studies.
Here is the list of the documents for students seeking a loan to study in India.
- Duly-filled loan application form of the bank.
- 2 passport size photographs.
- Educational certificates of the student.
- Identity proof like Aadhar Card, address proof like Driving License, and age proof like certificate of class 10th.
- Signature Proof of student and his/her parents or guardians.
- Income Proof of parents or guardian.
- Documentation for the Immovable property, Fixed Deposits, etc.(if the collateral is required)
- Proof of admission to the university and the course.
Here is the list of the documents for students seeking a loan to study aboard.
The students, who want to go to a foreign country for their further education, need all the above mentioned documents. Along with all the mentioned documents, the bank needs few additional documents as well. Here is the list of the additional documents.
- Copy of Foreign Exchange permits if you have it.
- Proof of Schedule of course and its expenses.
- Bank account statement of the borrower, parents or guardian for the last six months.
- Last 2 years’ Income Tax assessment of the borrower, parents or guardian.
Other Important Information
When you plan to apply for the education loan, you need to know a few important points about it. Here we have mentioned them for your ease.
Courses Covered Under Education Loan
Students can apply for an education loan for the following courses.
- All type of vocational and training courses
- All graduate and postgraduate degree courses from recognized colleges or universities affiliated under UGC/ AICTE/IMC/Govt. etc.
- Regular diploma or degree courses from IIM and IIT etc.
- Engineering or medical courses within India or from aboard.
Study Expense Covered Under Education Loan
The education loan not only covers the tuition fee of the student for that particular course but it also includes the expenses of accommodation if available. Every type of fee like library fee is also covered in the amount of education loan. Any traveling charges or tour expenses are also included in education loan.
Bank Approval and Processing Fee
Usually, the bank takes 15 working days to take a decision on the application of the loan. And in most of the banks, no processing fee is charged on education loan but in few banks, 1% is charged as processing fee. Bank may also charge some amount from the applicant as administration or documentation fee.
The education loan borrower gets the tax benefits under Section 80-E of the Income Tax Act, 1961. According to this section the interest of education loan is exempted from the income tax.
Smart Ways to Repay the Education Loan
As we mentioned above that the repayment of education loan is the responsibility of the student, so the student needs to prepare a strategy for his/her loan EMI just after completion of his/her studies. Always remember that the amount of your EMI should not be more than 30% of your take-home salary.
One more thing you need to take care while repayment of your education loan is not to waste your moratorium period. Education loan offers the borrower a feature of not to pay the EMIs, for up to 12 months after the course ends or six months after the student starts working, whichever is earlier. This period is called a moratorium period. The borrower is suggested to use this period to settle himself/herself properly. If you are settled immediately after the completion of your course then start repaying your loan immediately. It is also suggested to check with your bank, about the prepayment of the loan, because different banks have different policies about it.
The Bottom Line
Education loan is getting popular among the students. It makes it easy for students to continue their higher studies. But students should also be responsible for the repayment of education loan. Education loan is a good facility, so use it wisely.
We have given a brief idea about education loan in this article and if you have any query related to education loan, you can visit banks website and read the terms for education loan. In case you need any more relevant information, then you can reach us through comment box.