#. EDUCATION LOAN IN INDIA :
In today’s world, education costs are on the rise. Whether you're looking to study in India or abroad, the financial strain on your parents can be significant. Affording higher education can feel overwhelming due to these expenses. However, there are ways to tackle this challenge, such as scholarships, financial aid, and education loans.
Let's explore the basics of education loans: what they are, their advantages, disadvantages, and how to apply for one.
What is an Education Loan?
Education loans are specifically designed for students pursuing higher education. They are offered by banks, government bodies, and universities, enabling students to finance their studies both domestically and internationally. In India, various banks provide education loans with competitive interest rates. It's important to note that interest rates can vary between banks.
Usually, students don't need to start repaying the loan immediately after finishing their studies. Repayment typically begins a few months after completing the program.
Types of Education Loans
Based on Location
- Domestic Education Loan
If you're looking to pursue education in India, you can apply for this loan. Approval is contingent upon admission to an Indian educational institution and meeting other lender criteria.
- Overseas Education Loan
For those dreaming of studying abroad, this loan covers airfare, accommodation, and tuition fees. Eligibility criteria must be met.
Based on Course
- Undergraduate Loans
Designed to support undergraduate students, this loan helps cover expenses during a 3 to 4-year degree program across various specializations, paving the way for better job opportunities.
- Postgraduate Loans
Many undergraduates opt for postgraduate courses to deepen their knowledge in a specific area, typically spanning a 2-year program in India.
- Career Development Loans
Professionals seeking to enhance their skills often pursue professional courses after a few years of corporate experience. These loans support enrollment in top business and technical schools to advance their careers.
Based on Collateral
- Loan Against Property, Deposits, and Securities
You can secure financing by pledging assets like agricultural or residential properties, fixed deposits, gold deposits, bonds, debentures, or equity shares.
- Third-Party Guarantee
A guarantee letter from a bank employee or a co-borrower can facilitate obtaining an education loan.
Are Student Loans and Education Loans the Same?
Yes, "student loan" and "education loan" are terms used interchangeably. Both are aimed at assisting students in funding their higher education.
Features and Benefits
Loan Amount: Up to Rs.1 crore for international students and up to Rs.50 lakh for domestic students.
100% Financing: Available under certain conditions.
Additional Expenses Covered:Includes student exchange travel costs and laptop purchases.
Preferential Forex Rates: May be offered for international disbursements.
Joint Borrowers: Parents are required as joint borrowers.
Repayment Tenure: Extends up to 15 years.
Moratorium Period: Up to 6 months to 1 year after course completion.
Tax Benefits: Enjoy tax benefits on loan interest payments for up to 8 years.
Expenses Covered by Education Loan
Fees for educational institutes.
Examination/library/laboratory fees.
Travel expenses for studying abroad.
Insurance premiums for student borrowers (if applicable).
Caution deposits and other institutional fees.
Purchase of books, equipment, and uniforms.
Cost of computers necessary for coursework.
Other essential expenses like study tours and project work.
Covered Courses
Graduation and post-graduation courses from approved universities or colleges.
Courses from institutions like IIMs, IITs, NIFT, etc.
Job-oriented courses such as MBA, MCA, and courses from international bodies like CIMA and CPA.
Loans for skill development.
Documents Required
KYC documents.
Mark sheets of 10th, 12th, graduation, and entrance exams.
Admission letter and fee structure.
Co-applicant's KYC and income proof in some cases.
Additional documents may be requested.
Tax Benefits on Education Loan
Section 80E Deduction: Interest payments on the loan qualify for income tax deduction.
No Limit on Deduction Amount:Obtain a certificate from the bank to claim deduction.
Duration: Available for eight years from the start of loan repayment or until the interest is fully repaid.
How to Apply for an Education Loan: Step-by-Step Guide
Applying for an education loan can vary depending on the bank, but most follow these common steps:
Step 1: Choose a Bank
In India, numerous public and private banks offer education loans. The first step for students or parents is to select a bank. It's essential to review the bank’s terms, interest rates, and other requirements before making a decision.
Step 2: Check Eligibility
Before applying, it’s crucial to check if you meet the eligibility criteria set by the bank.
Step 3: Fill out the Application Form
While application forms differ, all banks typically require certain documents. These include passport-size photos, graduation certificates, high school marksheets, and proof of identity and address (like Voter ID, PAN card, or Aadhaar card). For loans for studies abroad, additional documents like university admission proof, course schedule, and scholarship letters may be needed.
Step 4: Bank Consultation
After submitting the form, many banks arrange a discussion with the student and their parents or guardians. This helps clarify details about the loan terms and the educational program.
Step 5: Loan Approval Process
The bank then assesses the application, often requiring a guarantor (usually a parent or guardian) with a good credit history. This step is crucial in deciding whether to approve or deny the loan.
Step 6: Loan Disbursement
Once all formalities are complete and the loan is approved, the bank disburses the funds. The tuition fees are usually paid directly to the educational institution.
Study Loan Repayment System
Upon completing your course, some lenders offer a grace period of 6 months to 1 year to find a suitable job before beginning loan repayment. This grace period varies by lender policy. Once employed within this timeframe, you can initiate repayment through EMIs.
Contact bank officials to discuss your monthly income, and they will recommend an appropriate EMI amount. If the suggestion suits you, you can start making monthly repayments. Alternatively, you have the option to negotiate the EMI amount. Typically, the maximum repayment period allowed is eight years.
