Education Loan

Nothing can replace quality education when it comes to building a bright and successful future for your child and education is the only thing that can get a happy life going. However, due to the rising cost of higher education for students in India as well as abroad, parents are finding it more and more difficult to self-finance their children’s education hence there is a huge demand for loans to cover education expenses. Unlike most educational institutions today, educationalloans are given to meritorious and deserving students so that nothing hinders their progress and they achieve the best of education in India or abroad. At present, almost every Indian bank and NBFC offer education loans in India to students interested in pursuing a wide range of graduate, post graduate, professional and doctoral courses/degrees.

The quantum of expenses covered by this type of loan covers not just the direct expenses such as tuition fees and registration/examination fees, but also allied expenses such as those for uniforms, lab equipment/tools required for the course, travelling expenses and laptop. Aside from the fee payable to the school/college, other expenses covered by most education loans include:

• Amount required towards the purchase of books, uniforms, equipment and instruments.
• Purchase of computers/laptops, if deemed necessary for the completion of the course.
• Fees paid for Exams, Library, Laboratories, Hostel, etc.
• Building fund, Caution deposit, Refundable deposit (must be supported by receipts/bills).
• Costs incurred in travel, specifically for studies abroad.
• Additional costs that are required to successfully complete the course, including but not limited to, Study tours, Thesis work, Projects, etc.

Education Loan: Features and Benefits

An Education loan plan is a safe and efficient way to gain finance for when compromising on your child’s education is not an option. It is a long-term investment in your child’s secure future. It has the following features:

• Anyone can opt for Education loan to study abroador in India for graduate, post graduate, professional and/or doctoral courses/degrees.
• Loan cannot be assigned to the student alone, the parent or guardian needs to be co-signor for the loan.
• Female students are usually offered discounts and/or lower interest rates when it comes to education loans.
• The annual family income and the course pursued by the education loan applicant are primary determinants of the loan amount.
• Generally, loans below Rs.4 lakhs do not require a security or guarantor.
• For an education loan plan up to a specific amount, no collateral is necessary for a higher loan amount (usually above 7.5 Lakhs), security in the form of fixed deposit, property or other bank approved collateral is required.
• Usually, the maximum loan limit for students studying in India is capped to Rs.10 – 15 lakh and up to20 lakh for those who wish to study abroad with an Educational loan.
• The normal student loan repayment period is 5 to 7 years, but flexible options for settlement of education loanswith longer time period, i.e. 10to15 years is also available.
• One can get aneducational loanat the time of study, but that educational loandoes not need to be serviced during the course time period and also features a moratorium period of up to 1 year or till the borrower gets regular employment, whichever is earlier.
• The interest on this loan is eligible for student loan tax benefits under Section 80E of the IT Act. Also, a few government sponsored subsidy schemes like theCentral Scheme to provide Interest subsidy on education loans to help students from the economically backward sections of society avail the benefits of education loans.

There are numerous advantages of education loansover a personal loan, or the money collected in your savings account. Loans for Education are versatile and offer the following benefits-

• With the recent inflation and shifting prices, you cannot be fully certain about money saving. An all-encompassing education loan liberates you from the constant worry of accumulating sufficient money to fund your child’s higher education. In today’s time, agood education is expensive and these expenses have been increasing continuously.A good education loan keeps you safe from any unexpected costs that can obstruct your child’s future dreams.
• There are many expenses that incur throughout a course apart from just studies- library fees, building deposits, laboratory fees, caution deposits, books, uniform, travel etc. All the aspects relating to the course can be covered with a comprehensive education loan without ever running out of money.
• They have been popular recently and one can easily avail education loan for studying overseas. RBI lists these loans as a part of the priority sector and so do banks. Conforming to some basic requirements and confirming your ability to repay the borrowed amount is all it takes to get on-board.

Courses covered under the Education Loan:

Under education loans from any particular financial institution in India, the following courses are applicable for students who wish to study in the country: Graduation, Post-Graduation, Diploma programs, Technical courses, Management courses and other professional courses. Whereas, courses applicable for students who wish to study abroad include the following: Graduation, Post-Graduation, Certificate Degree courses from CIMA- London, CPA-USA and other such well known educational entities.

Any of the following courses, as offered by recognized universities, is eligible for education loans in India-

• Professional courses including Engineering and Medicine
• Management courses (both full time and part time)
• ICWA, CA, CFA etc.
• Courses conducted by IIMs, IITs, IISc, XLRI. NIFT,NID etc.
• B.A/B.Com/M.A/M.Com/MCA/MCM etc.
• Architecture, Agriculture studies, Fine Arts and Designing etc.
• Hotel and Hospitality
• Courses such as SAP, ERP, GNIIT, Air Hostess Training programs etc.
• Distance learning programs and online certifications.
• Degree/Diploma courses like Aeronautical, pilot training, shipping, etc.,
• Aircraft Maintenance Engg., Pre-Sea Training courses and the like.
• Nursing and Para Medical courses (includes admission via management quota).
• Courses offered by reputed institutes that assure employment and are Govt. certified.
• Courses offered in India by reputed and certified foreign universities.

Education Loan- Eligibility Criteria

The education loan eligibility differs from provider to provider. However, the basic criteria are as follows:

• You should be an Indian citizen
• If the applicant is a Non-Resident Indian (NRI), he/she must hold a valid Indian Passport
• You should fall in the age bracket defined by the respective bank
• You need to have a confirmed admission offer from a recognized college/institution (banks usually have a list of institution that they update from time to time)
• You need to apply for an education loan with a co-applicant who has a regular source of income
• A good academic record and good credit history of the co-borrower (parent or guardian) helps with quick education loan approvals.

Some banks require the applicant to have qualified through a national level entrance exam.

Loan Guarantor

Taking up an education loan requires a co-applicant which can be the applicant’s parent, spouse, siblings or in-laws. For loans of amounts up to Rs.4 lakh, most banks do not ask for any guarantor or security. However, some banks may ask for some kind of security such as gold, shares, fixed deposits, LIC policies and real estate other investments etc.  Moreover, some banks might ask for a third party guarantee from someone who’s not in blood relation. These guarantors may include one’s uncle, father’s friend or any of the relatives can make this third party guarantee, first being the applicant and second being the co-applicant of the borrowed loan. This is to ensure if the first/second guaranteed person is unable to pay then the third party person have to bear the loan.

The following table applies for most educational or student loans offered by various banks and financial institutions.

For loans up to 4 lakhs	Co-obligation of parents is required.
For loans above Rs.4 lakh and up to Rs7.5 lakh	Co-obligation of parents together with third party guarantee is required.
For loans above Rs.7.5 lakh	Co-obligation of parents together with tangible collateral security of suitable value.

Education Loan- Documents Required

Along with a duly filled education loan application form of the lender bank/ institution and photographs, the applicant is required to submit the following documentation:

• Letter of admission confirmation received from the college/institution
• Fee breakdown, stating the tuition fees and other charges provided by the college/institution
• Copies of mark sheets starting from class 10th to the last qualifying exam cleared
• A declaration/affidavit to confirm no other loan has been availed for the same or another course
• Identity and signature proof [Passport, Pan Card, Driving License, Voter ID Card, Adhaar Card or the Employee identity Card in case of government employees]
• Address Proof [Bank statement, Rent Agreement, Voter ID Card, Ration Card, Passport, Driving License; telephone, electricity, or water bill;Credit Card Bill or Property Tax]
• Age Proof [Voter ID Card, Secondary School Certificate (class 10), Birth Certificate, Passport or Aadhaar Card]
• Income proof of co-borrower or the applicant if he/she is employed

• In case of a salaried individual [Latest salary slip with Form 16 or Salary account bank statement for the six months prior to applying for an education loan]
• Self-employed businessmen/professionals [Latest ITR, computation of income, Profit & Loss and Balance Sheet certified by a CA, Business continuity proof]

• Qualification proof of highest professional degree acquired.

Education Loan Interest Rates

The interest rates on Education Loans tend to vary from bank to bank. There are some standard factors that affect interest rates on like education loan tenure, the amount borrowed and the competitive market rates being an important factor. In case of education loan, girl students are eligible for an additional discount of 0.5% on the rate offered to male borrowers. Usually, the education loan interest rate is computed as a certain percentage usually, between 1.5-2.5% over base rate hence interest rate start from as low as 11.25%. However, in India, education loans usually charge floating interest rates ranging from 12.00% to 16.00% and repayment periods upto 10 years.

Top Banks Offering Education Loans in India

Almost all private and public sector banks in India offer educational loans to deserving and eligible borrowers. Some of the leading education loan providers are State Bank of India, Punjab National Bank, HDFC Bank, Axis Bank, Union Bank, Oriental Bank of Commerce, Andhra Bank and Dhanlaxmi Bank. These are just a few of the many banks where you can apply for an education loan. Following is a list of top banks offering education loans at best rates and flexible tenure options:

SBI Education Loan – The State Bank of India is India’s largest public sector bank and is popular amongst the masses for its education loan offerings, apart from a number of other financial services. It offers up to Rs.10 lakhs for studies in India and Rs.30 lakhs for studies abroad. SBI offers a full-fledged Education Loan with customer friendly features and benefits. Some of the key highlights of the SBI Education Loan are as its friendly interest rates, immensely student friendly terms, coverage of a wide spectrum of educational courses in India and abroad and the backing of SBI’s legendary name and reliability.

SBI Bank Education Loans
Loan Amount/ Interest Rates	Up to Rs.4 lakhs Rs.4 lakhs – Rs.7.5 lakhs Above Rs.7.5 lakhs	13.35% p.a. 13.60% p.a.   11.60% p.a.
Max. Amount offered	For studies in India- Rs.10 lakhs For studies Abroad- Rs.30 lakhs
Repayment Tenure	5 to 7 years

Axis Bank Education Loan–

India’s third largest private sector bank, Axis Bank, is a strong contender in student – friendly loans for education. The Axis Bank Education Loan is a highly featured with offering likequick turnaround times, friendly interest rates, loan amounts of Rs.10 lakhs for studies in India and Rs.20 lakhs for studies abroad, a comprehensive listing of funded educational courses (in India and abroad) and Axis Bank’s famous brand of customer support and banking innovation.

Axis Bank Education Loans
Loan Amount/ Interest Rates	Up to Rs.4 lakhs Rs.4 lakhs- Rs.7.5 lakhs Above Rs.7.5 lakhs	16.95% p.a. 17.95% p.a. 15.95% p.a.
Max. Amount offered	For studies in India- Rs.10 lakhs For studies Abroad- Rs.20 lakhs
Repayment Tenure	up to 7 years

HDFC Education Loan

HDFC is considered a veteran in offeringbroad-featured and student friendlyloans.It offers devoted education loan schemesavailed by students aspiring for higher education for studentsin India and abroad compromising of competitive interest rates, a whole range of student centric options and features, funding for an elaborate list of educational courses in India and overseas, alongside HDFC’s constant popularity and new-age banking methodologies.

HDFCBank Education Loans
Loan Amount/ Interest Rates	Up to Rs.4 lakhs Rs.4 lakhs- Rs.7.5 lakhs Above Rs.7.5 lakhs	12.00% p.a. 13.00% p.a 12.50% p.a.
Max. Amount offered	Rs.10 lakhs for studies in India
Repayment Tenure	Up to 15 years

PNB Education Loan Scheme–

The Punjab National Bank Education Scheme aims at providing financial assistance to deserving and meritorious students pursuing higher education in India or abroad. Courses like ICWA, C.A., CFA, etc., courses conducted by IIM, IIT, IISc, XLRI, NIFT, etc., Regular Diploma/Degree courses conducted by Colleges/Universities approved by UGC/Govt./AICTE/AIBMS/ICMR, Regular Degree / Diploma courses like Aeronautical, Pilot training, Shipping etc. approved by DGCA/ etc., Courses offered by National Institutes and other reputed Private Institutes, are all covered under the scheme.

PNBBank Education Loans
Loan Amount/ Interest Rates	4 to 10 lakhs	Interests calculated on individual basis
Max. Amount offered	Rs.10 lakhs for studies in India
Repayment Tenure	Up to 15 years

Avanse Education Loan–

The first thing that fascinates you about education loan byAvanse is the vast number of options they offer – Loans for studies in India, abroad, executive education, pre-admission loans, pre-visa disbursement loans and fast track loans are some of the popular offerings.Complementing the convenient student friendly loans is theadaptable terms and conditions. Avanse,along withfocused and dedicated customer service, has an interactive and straightforward loan processing and disbursal system that will ably match the best on offer in India.

Avanse Education Loans
Loan Amount/ Interest Rates	Calculated individually based on course being pursued and the accompanying cost
Max. Amount offered	Minimum- Rs.50,000 to Maximum requirement
Repayment Tenure	1 to 10 years

Calculate EMI Interest Rates for Education Loans

Are you finding it a bit tricky to calculate your Education Loans’ EMI? Calculating your EMI is an important step in determining your education loan eligibility. The usually exhaustive task of calculating your Equated Monthly Installments can be done in a few clicks with the use of the PaisaBazaar EMI calculator and figure out if you are able to service the loan afterwards. This useful tool is very efficient and offers the following advantages-

• It saves a lot of your precious time by producing EMIs in mere seconds for your varied inputs. This doesn’t have a limit too; calculate as many times you wish!
• Using the tool you can know it all in one place- the applicable EMI amount, amortization details and everything else relating to your education loan.
• With no limits on the number of times you can use the calculator for different interest rates and applicable tenures and figure out the combination that works the best for you.
• And yes ofcourse, the tool is absolutely free!
• Follow the link to the education loan calculator- http://www.paisabazaar.com/education-loan-emi-calculator/   or you can find the calculator on ‘Tool’ option of the navigation bar on the website’s home page.

When does the repayment start?

Normally, the repayment of a general loan begins after it is disbursed. The payments or Equated Monthly Installments (EMIs) have to be made each month. But for education, it is different;for ensuring convenience to the students, loan repaymentusually starts 6 months after the course completion or the starting of a job, whichever is earlier. The period during which borrower is not required to make any repayment is called the moratorium period. Interest calculations do not start on the entire loan amount at once, but only when amounts are disbursed. During the moratorium period, on an education loan the bank will calculate interest on your loan on simple interest basis and will be accumulated until the end of the moratorium period.There are some banks that offer a concessional interest rate if one agrees to pay the interest portion of the loan in the moratorium period.

Steps to secure an education loan:

With Paisa Bazaar, loan application is simple and involves minimal education loan procedure. Follow the steps below to secure an education loan online or offline:

1. Application

Search, decide and compare education loans as per your preference using our helpful tools and fill up the forms and other application details. Buying a loan at your present bank will get you extra benefits and better interests.

2. Verification

Once you submit the relevant documents, the lender will verify your admission status with the mentioned institute/ university. The credit history, if any will also be checked.

3. Know your course

A personal interview with the lender is generally held where questions regarding the course, institution and potential future income will be asked. It will be good to be prepared for answers.

4. Promissory note

Once the loan is sanctioned, the student will get a promissory note from the bank that they will need to sign.

5. Final disbursal

Following the documentation, verification and signing formalities the lender will disburse the loan.

Education Loan FAQs

Who is eligible for an education loan?

Ans. Any Indian citizen over 18 years of age with a proven academic track record and a confirmed letter of admission from an Indian or international institute is eligible for an education loan.

Are there age restrictions for borrowing an education loan?

Ans.There are no restrictions, generally most banks and financial institutions do not impose any rule regarding this. However, certain education loan lenders do mark an age limit spanning from 16-35 years.

How is the education loan disbursed?

Ans. The education loan is usually provided to the applicant in the form of a draft payable to the institution. The draft amount is based on the fee structure provided by the institute.

What courses are covered by an education loan?

Ans. An education loan covers all courses covered recognized by UGC within India and most banks maintain a list of colleges and courses for which they provide loans to students seeking to pursue studies abroad.

How much time does it take for the loan to be sanctioned?

Ans. Sanction or rejection of a loan is generally communicated within 15 days of receipt of duly completed application. In case of rejection, students can demand reasons of rejection of loan application in writing from banks.

Am Ientitled to anyStudent loan tax benefits?

Ans.Yes, you can save tax on education loanafter you start repaying your loan amount, by deducting the loan interest amount from your total income when calculating tax. But, there are no such benefits immediately.

How does the bank track my educational progress through the study course?

Ans. The applicant is mandated to submit his/her progress reports periodically. The progress reports could be mark sheets or a suitably attested letter from the applicant’s school/college.

What is education loan subsidy scheme?

Ans. Government of India approved the education loan subsidy scheme to provide full interest subsidy during the period of moratorium on loans taken by students belonging to economically weaker sections (with an annual gross parental/ family income upper limit of Rs. 4.5 lac per year) for pursuing any of the approved courses of studies in technical and professional streams, from recognized institutions in India. The interest will be paid to the banks by the Government of India.

Is there a penalty for pre-payment?

Ans. Nationalized banks usually do not have any pre-payment charges, but private and foreign banks usually charge a penalty that ranges from 0.25% to 2% of the outstanding loan amount.

What if one doesn’t get a job after completion of the course?

Ans. For exceptional and genuine cases where the student is not getting a job, lenders may consider extending the repayment period. Usually education loans have tenures of 5 to 7 years. However, as per the guidelines, the tenure can be extended up to 10 years only for loans up to Rs 7.5 lakh and 15 years for loans above it.