Education Loan

The Complete Guide

Education Loan

We arrange Education loans from leading Indian banks to support students in accomplishing their academic goals. Interest rates for an education loan with a payback term of up to 15 years start at 6.60 percent per year. Education loans are available for both in-country and out-of-country higher education.

These loans are for undergraduate and Post Graduate professional courses in both Indian and overseas colleges. Although the eligibility for an education loan will be determined by the banker.

Education Loan Eligibility

  • Indian citizens
  • Non-Indian Residents (NRIs)
  • Overseas Citizens of India (OCI)
  • Persons of Indian Origin (PIOs)
  • Students born to Indian parents abroad and wish to study in India
  • Undergraduate programs
  • Postgraduate programs
  • Doctoral courses and PhDs
  • Certificate courses with 6 months or longer duration
  • Job-oriented courses
  • Technical/diploma/professional courses
  • Recognized institutions and government colleges
  • Private institutes aided by government
  • Professional institutions
  • International colleges and universities
  • Collateral-free loans up to Rs.15 lakh from leading lenders
  • Collateral-free loans up to Rs.50 lakh for select courses/institutions from select lenders
  • With collateral- Residential or commercial property or plot, fixed deposits, insurance, as per lender’s choice up to Rs.1 crore

List of Courses that are covered under an Education loan

  • Graduation and Post-Graduation courses (technical/professional/diploma) conducted by approved universities or colleges under UGC/IMC/AICTE/government.
  • Regular degree/diploma courses administered by autonomous institutions such as IIM/IIT, etc.
  • Regular degree or diploma courses such as pilot training, aeronautical, shipping, and more approved by the Director-General of Civil Aviation/Shipping/other regulatory authority.
  • Job oriented courses (professional/technical) for Graduation/Post Graduation/Diploma such as MBA/MCA/MS offered by reputed educational institutions, courses conducted by the Chartered Institute of Management Accountants (CIMA) – London or Certified Public Accountant (CPA) – USA.
  • Loans for skill development.
  • Abroad
  • Job oriented courses (professional/technical) for Graduation/Post Graduation/Diploma such as MBA/MCA/MS, etc. offered by reputable institutions.
  • Courses conducted by CIMA and CPA.

List of Expenses Covered in Education Loan

  • Tuition fees
  • Hostel fees
  • Travel expenses passage money for students studying abroad
  • Insurance premium
  • Cost of books/equipment/instruments/uniform
  • Examination/laboratory/library fees
  • Cost of a computer/laptop required for course completion
  • Caution deposit, building fund/refundable deposit supported by institution bills/receipts
  • Any other expense required to complete the course such as study tours/thesis/project work

Features & Benefits of Study Loan

  • Loan financing up to Rs.1 crore available.
  • Loan repayment tenure up to 15 years.
  • Get Education loans for studies in India and abroad.
  • Some lenders offer loan disbursal before applying for a Visa.
  • Door-step service to collect required documents.
  • Children of the bank’s employees enjoy preferential rates at several banks.
  • Certain banks offer concessional interest rates to female students.
  • Enjoy a moratorium period of up to 1 year after course completion. During this period, you do not have to make payments on the loan.
  • Enjoy tax benefits up to 8 years on the interest paid.

Tax Benefits on Education Loan

In accordance with Section 80E of the Income Tax Act of 1961, you can deduct the interest you pay on your student loans. It is available exclusively to students for higher education and only available to individual borrowers. The deduction is applicable to all fields of study, both in India and abroad. It applies to vocational and conventional courses.

Please keep in mind that the tax deduction is only applicable to the interest portion of the EMI, not at the principal amount. However, there is no upper limit set on the number of times you can claim this benefit. To qualify for this benefit, you must obtain a statement from your bank or financial institution segregating your principal and interest.

This benefit is available for 8 years from the date you began repayment or until the interest component of your loan is paid off, whichever comes first.

List of Documents Required for Education Loan

Here is an indicative list of documents that most lenders ask:

  • Admission letter from the educational institution
  • Mark sheets (previous education – school/college)
  • Age proof
  • ID proof
  • Address proof
  • Signature proof
  • Salary slips
  • Recent bank account statements
  • ITR with the income computation
  • Audited balance sheet
  • Recent bank statements
  • Proof of turnover (service tax return/sales receipt)
  • Completed application form with signature
  • Latest passport size photographs
  • Appropriate Visa for studies abroad
  • ***Document charges may be levied by the lender.

How to Apply for Education Loan

There are several ways of applying for a student loan:

    Apply Online:
  • There are two ways of applying online. The first is a straightforward application form that you will fill out online, attach the necessary documents, and submit the form.
  • The second is where you apply by providing all the requested details and the lender will then get in touch with you to discuss the terms of the loan before proceeding with the application.

Education Loan Repayment Process

    The loan repayment period usually starts 24 months after completing your course or when you get a job, whichever occurs first. Different lenders provide different moratorium periods to applicants to repay the loan. You will have to repay your loan through EMIs.

    Here are the different modes of repayments usually available:

  • Internet Banking - Pay online through the lender’s website or mobile app.
  • Cheque – Drop a cheque at any of the branches.
  • Direct debit – Set up recurring payments for your EMI to be directly debite from your bank account on the payment due date.
  • Demand Draft – Pay through a DD.

The preferred method of repayment varies between lenders. Therefore, it is advisable to check with your lender when taking the loan.

Discussed below are a few important details regarding the education loan repayment process:
  • Moratorium period: In the case of education loans, the beneficiaries will be able to start paying off the loan after the completion of the educational course or after successful employment.
  • Part-payment of education loans: The beneficiaries of education loans will be allowed to make part payments towards their loans. As an applicant, you can pay back a lump sum amount to make part repayment of the loan.
  • Pre-payment of education loan: If an applicant can manage the funds for the pre-payment of the loan amount, he or she will be able to do the same. However, it should be kept in mind that this might invite a processing fee.

If money is the only obstacle in your way from achieving your professional goals, then consider taking an education or student loan to fulfill your goals. You can get collateral-free goals wherein you need not provide any security to the lender and your repayments will not start immediately after graduation.

Frequently Asked Questions

No, usually education loans for courses in India do not offer the same amount as for comparable level courses abroad. Education loans offer higher amounts for courses abroad as fees and other expenses may be higher there than for courses in India (which also depends on the educational institution).

Yes! Practically all education loans from banks and other lenders are collateral-free till a certain amount, there after collateral which can be fixed deposits, property, shares, bonds, etc. may be required. However, you can still avail of an education loan without having to give any collateral. This can be achieved through the Credit Guarantee Fund for Education Loan (CGFEL) Schemes which cover a collateral-free loan of up to Rs.7.5 lakh. This is only for education loans dispersed under the Model Education Loan Scheme of the Indian Banks’ Association (IBA). To avail of this, you have to apply for an education loan under this scheme through a scheduled commercial bank. You don’t need to provide security or collateral for amounts of up to Rs.7.5 lakh but anything above that will require collateral.

For courses abroad, education loans are typically paid directly to the educational institution in the local currency of that country.

The moratorium period on education loans differs from lender to lender. However, it is usually until the borrower gets employed or for up to 2 years of the course being completed, whichever is earlier. If you choose to take a sabbatical and want an extension of your moratorium, it would depend on the bank whether to grant it or not, so it is best to have a discussion about this with the lender.

One of the eligibility criteria for education loans that are offered by banks and other financial institutions in India is that the individual should be an Indian national. This means that any student who is a citizen of India can apply for and avail of an education loan from a lender in the country. Collateral or documents which can be taken as security should be those that are enforceable in India.

Lenders consider the following factors when approving a loan: • The course and institute you choose • The amount you need • Your academic performance • Repayment capacity of your family • Family assets • Annual income

In case you choose to discontinue the course mid-way, you must start repaying the loan immediately after getting a job.

Yes, you can move your education loan from one bank to another. However, your current bank might charge a refinance fee. Therefore, it is important to consider all factors of the existing bank and the new bank before moving the loan.

Yes, education loans cover 100% of the education expenses. However, full coverage may only be provided for expenses under a certain limit. Lenders have a margin if the expenses go above the limit.

Some of the additional expenses covered by education loans are: • Hostel fees • Exam fees, laboratory and library fees • Cost of books, uniforms, projects, etc. • Travel expenses for overseas education • Deposits required by the educational institute