Education loan is a loan which can be avail for fulfilling education related requirements. These days, the cost of all facilities in every field is being increased, hence the cost of education has also increased a lot. Many times, due to the financial condition of the family, many youths are not able to complete their studies and their dreams remain unfulfilled.
To end this problem, many banks and economic institutions are starting the program of giving loans for studies, so that more and more youth can get opportunities to fulfill their dreams. With the help of this loan, youth can go abroad and study according to their mind. These loans are given by these institutions on certain conditions.
What is Education Loan?
In education loan, you can take loan from bank for college, studies, hostel, library, expenses of going abroad for studies, buying computer, studying abroad. You are given 15 years after completing the course or job to repay the loan.
Apart from this, many banks also give you an additional time of one year. The special feature of education loan is that you get tax exemption on interest under Section 80-E of the Income Tax Act. However, this exemption is available only for 8 years of repayment of the loan. Next you will have to pay tax.
Eligibility criteria to get a study loan
- To get an education loan, the applicant must first be a citizen of India.
- It is necessary for the applicant to have admission in any authorized university of the country.
- Applicant should have completed Higher Secondary. However, there are some banks that give loans even before admission.
- Although there is no upper age limit for availing this loan as per the rules of Reserve Bank of India, but many banks keep the maximum age limit in their terms and conditions.
Documents required
The bank often asks for some additional documents, these additional documents often include admission letter from educational institutions, fee structure, list, result of class 10th, 12th board exam and if required result up to graduation, salary Slip, ITR etc.
Some of the essential documents that are often asked for in every financial institution for an education loan are as follows.
- Residential proof such as ration card, bank passbook, voter ID etc.
- Admission Certificate.
- Proof of last fee paid.
- Aadhar and PAN card of the student and parent.
Types of Education Loan
Considering the education system of India, there are four types of education loans.
1. Undergraduate :
Students who have completed their higher secondary education, and want to complete three or four years of graduation course, can apply for this loan.
2. Graduate :
Only graduate students / students can take advantage of this. They can take education loan for their higher education.
3. Career Loan:
Career Education Loan is available to those students who want to study in any technical school or institutes in the country according to their interest, such as engineering.
4. Loan for parents:
Those parents or relatives who are not able to educate any of their children, that is, they are not able to bear the expenses of their studies and other things, they can apply for this loan to educate their children. This will lead them to encourage their children towards education.
Major benefits of education loan
There are many benefits of this type of loan, but some major benefits are as follows.
1. Accessible way to higher education:
In the immediate era, it has become imperative for the students to bear the burden of their own education. This enables them to understand their responsibilities as soon as possible. Also, after taking a loan, when you get a job, the loan money is deducted at that time. Therefore, studying in such a situation does not seem like a burden.
2. Available to different levels of people:
Education loan is available to all sections of people. Generally, education loan is meant to enhance education, so that common youth can also get higher education.
3. Tax Benefits:
This loan also provides tax benefits for the parents of the students. By taking education loan, all the taxes are waived while studying. Therefore, education loan is a good way to study while saving tax.
4. Low interest rate:
In many public banks, education loan is subsidized by the government. Along with this, the tax rates of the government are also reduced. Many times the government also gives various exemptions for the advancement of its students in different countries.
5. Better repayment terms:
Education loan has an easier mode of payment than other loans. Students do not have to worry about payment till the completion of their studies. Once the job is found, the loan can be repaid gradually.
6. Ease of availing loan:
The process of getting an education loan is very easy as compared to other loans. Loan for higher education can be obtained by following very simple procedures.
7. Helpful in making students responsible quickly:
People studying with education loan feel the need to repay the loan after a period of time. So they keep trying to get a job as soon as possible and repay the loan. With this effort, they get a job soon and they become responsible very soon in life.
8. Ease for parents:
The worries of parents of students studying with education loan are greatly reduced, as it proves to be a kind of financial support for their child at that time. These days the fee for education in private educational institutions has become very high. Therefore, education loan proves to be very worthwhile to pay that fee.
9. Confidence:
A student studying with an education loan knows that his role in his education is the most important. Therefore, they study and write with a new enthusiasm and passion.
10. Awareness of Education loan
People need to be aware about this facility. There are still many people who know about this facility, but do not take advantage of it due to fear of hesitation and trouble. With the help of this, many youth will get an opportunity to study according to their interest and they will be able to shape their future. There is still less awareness about this facility in the village areas, but the government bank continues to promote it.
While taking an education loan, all the conditions related to the loan should be known and tested, so that there is no problem or interruption in the middle of education.
It is very important to know that for studying in India, a maximum loan of up to Rs 10 lakh is given and for studying abroad, a maximum loan of 20 lakh is given. No guarantee is required for loans up to Rs 4 lakh, but for loans above Rs 4 lakh, different banks may ask for different types of guarantees.
Area of education loan
The money in the loan is made available to you for all the expenses incurred in education which are necessary to complete the education. You can also get loan for higher education like class 12 school education to graduation, post graduation, PhD, engineering, medical, agriculture management, computer course, CA. If you want to study in the country or abroad also, then you can take education loan for that also. This loan will be given to you by any government and private bank.
How to get Education Loan
After filling the application form of an education loan with all the documents, you have to submit all the documents and application form to the bank, after that the bank will verify your documents and send it to the next process, after that according to your course you will be studying Keeping in mind the expenses, the installment of your loan will be decided and then you will be given money according to the same installment.
Education loan Interest Rates:
Education loan has a low interest rate compared to other loans and you also get a discount in interest rates on it by many banks. Government of India also gets subsidy on education loan which depends on the loan and their amount.
SBi Education Loan
State Bank of India, the largest lender in India, offers education loans for higher education. The bank provides this facility to Indian citizens to study both in the country or abroad. According to SBI’s website http://www.sbi.co.in, the interest rate on education loan given by the bank starts from 10.5 percent. According to the website, the time period for repayment of this loan is up to 15 years.
Who can apply for the SBI loan:
Any such Indian citizen can apply for the education loan given by the State Bank of India, whose enrollment has been ensured in any institution in the country or abroad. The bank does not charge any processing fee on education loan.
SBI Interest Rate on Loan:
State Bank of India charges 10.5 percent interest rate on loans up to Rs 7.5 lakh. At the same time, a total interest of 10.75 percent is charged on the amount above Rs 7.5 lakh.
For which courses loan is available:
Loans are available for undergraduate, postgraduate courses including regular technical and professional degree/diploma courses conducted by colleges/universities recognized by UGC/AICTE/IMC/Govt etc.
- Loans are available for regular degree/diploma courses by autonomous institutions like IITs, IIMs etc.
- Loans are available for teacher training / nursing courses recognized by the central government or state government.
- Loans are available for regular degree/diploma courses like civil aviation/shipping/aeronautical engineering, pilot training, shipping etc. recognized by the relevant regulatory authority.
To study abroad:
- Loans are available for job oriented professional / technical graduation degree courses / post graduation degree and diploma courses like MCA, MBA, MS etc. offered by reputed universities.
- Loans are available for courses conducted by CPA at CIMA London, USA.
- Maximum 10 lakhs is available for studying in India and maximum 20 lakhs for studying abroad.
Under the education loan, money is available for these expenses:
Under the SBI education loan, money is available for depositing college, school, hostel, examination, library, laboratory fees and buying other things necessary for the course including books, instruments, clothes, computers. At the same time, it also gives money for the travel expenses of students going abroad and for buying a motorcycle up to Rs 50 thousand.
10 important things to considered before applying education loan
1. Compare all the education loans available in the market and understand their advantages and disadvantages
Today, non-banking financial institutions along with many government and private banks offer education loans for MBA on their own terms. The terms and conditions on which an MBA education loan is offered are completely different from each other according to each institute.
Therefore, by taking information about all the education loans available in the market, compare those loans among themselves and apply for your education loan in the institute whose education loan policy suits you best.
In fact, once you have collected the information about various education loans, you can easily compare them and find out which one is the most suitable education loan as per your requirement.
2. Select a loan that not require the payment of Margin Money
Most education loan institutions have prepared their education loan metrics according to the top MBA colleges in India and their MBA courses. Based on these loan metrics, banks/NBFCs decide whether they can finance complete MBA education. This can include tuition fees as well as other educational expenses.
If not, these banks will partially finance the student’s education and ask the borrower to arrange margin money for the rest of the amount. However, this situation is not perfect but it can be negotiated.
There are many public sector banks and some private banks which do not demand margin money on education loan. To take an education loan, students should always accept the loan offer that does not require the payment of margin money.
Most of the banks or lenders giving education loan already have prescribed conditions regarding margin money and they make the details available online on their website which students must read before applying for their education loan.
3. Choose a bank that not charge Processing Fee
It is well known that most of the banks and NBFCs charge a processing fee for sanctioning the loan. Education loan is also no exception to this. The processing fee of education loan varies from bank to organization. Some banks charge 0.5 per cent to 2 per cent of the total amount while many other institutions charge a flat charge of Rs 5000 or more.
But, this fee is negotiable and can be waived by the bank through negotiation. There are many public sector banks which do not charge processing fee from eligible candidates. Similarly, some private banks and NBFCs also do not charge processing fee for education loan. Therefore, in the matter of processing fee, always find a solution by talking to it and try that you do not have to pay this fee.
4. Thoroughly Examine the Interest Rate Structure
Education loan is one such loan on which you have to pay loan interest. All banks set their base rate and give loan to anyone at the same rate. Education loan is given at the base rate fixed by the banks. Its closing rate of interest can be higher or lower than the base rate depending on the policy of the bank or the financing company.
Generally, banks charge interest rate on education loan by combining base rate of their bank + extra rate of interest. Before applying for their loan, students should thoroughly research both the base rate of the banks and the rate set by them.
5. Interest Rate in Moratorium Period
Generally, education loan is provided with a grant and no interest rate is charged during the moratorium period. If put in clear words, the candidate taking the loan does not have to pay any interest during the moratorium period. But just because you do not need to repay the loan during this period, it does not mean that the bank will not charge you interest for it.
The period of study and the grace period are included in the moratorium period. Sometimes by mistake, the bank employees impose interest rates for this period as well. Therefore, students should always be aware of this and take care of the moratorium period in their system and the entire loan process and check that their bank is not taking any interest during this period.
6. Choosing a floating interest rate is the right option
Banks extend the tenure of the loan at a fixed interest rate or a floating interest rate. Students should always prefer floating interest rate and choose the same as it can prove beneficial in the long term. The floating interest rate on education loan means that the rate of interest will be revised based on the change in the base rate.
That is, if the base rate is reduced, then the effective rate of interest on the education loan will also come down. Hence, students should always prefer an education loan that is offered at a floating interest rate.
7. Repayment during the Moratorium Period
If students are able to pay off their education loan during their moratorium period, they can negotiate with the concerned bank to reduce the interest rate as some banks offer this interest rate for students to as low as 0.25%. Get ready to reduce up to 1%.
A reduction in the interest rate can significantly reduce the financial burden of the students. Hence, students should always try to make the loan repayment during the moratorium period.
8. Take Advantage of Work Experience
If it is a matter of taking admission in any top college in India, then your work experience there can be very useful. This can prove to be an asset for you. Do you know that banks also give you some concession on the interest rate of education loan if you have work experience? For this, such students who have work experience, they can negotiate with the bank and get their interest rate slightly lower (between 0.25% to 0.50%). So make the most of your work experience while taking an education loan.
9. Women students get better rate of interest
Considering the gender diversity in India’s top colleges, especially IIMs, women students are provided with relaxation in many cases during admission. Women students who have secured their seats in top colleges are provided concession in matters of interest, moratorium period and other terms of education loan.
10. Repayment Term
The repayment term for education loan starts at the end of the moratorium period of the loan of the students. Generally, the repayment tenure can range from 1 year – 9 years depending on the loan amount and other terms and conditions of the loan product.
In fact, students also prefer a shorter repayment term to end the loan cycle soon. But, students should understand that the interest rate paid for education loan does not attract income tax and hence, paying it over a long period of time can prove beneficial.
Similarly, many banks promote shorter repayment terms with lower interest rates. Hence, after determining which option will be more beneficial in the long run, students should take the right decision on the repayment tenure.
Questions/Answers
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Q. What does an education loan do?
Ans. An education loan often bears the entire cost of a student’s basic college fees and expenses for education and other things.
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Q. Who can apply?
Ans. To get education loan from any financial institution, first of all the student has to apply. Only the student will give the main application. The guardian is the sub-applicant.
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Q. Who can get the loan?
Ans. This loan can be available to those Indian students who want to complete their studies by staying in India or going abroad. For this the maximum amount given by the institutes depends on the institutes.
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Q. What can be the courses?
Ans. This loan can be availed for various part time, full time, vocational, graduation, post graduation, engineering courses, management, medical, hotel management etc.
Any student can apply for education loan or their parents, relatives etc. But if a student applies for an education loan, then his parents or relatives will have to give a guarantee for that.