Education is the essence of life. To ensure that no deserving student is denied education for want of funds, the government is promoting education loans in a big way. The basic aim or idea behind education loan is to bring education within the reach of students and help them improve their prospects in life. Any student who has secured admission in an institute of repute, whose degree/diploma is recognized by University/Institute affiliated to any Central/State Statutory Body or recognized by AICTE (All India Council of Technical Education) and other institutes of repute, is eligible for educational loan.
Education loans cover cost of the school/college fee, hostel expenses, and cost of books and stationery. Apart from this, any other expense required to complete the course can also be considered. The maximum amount of education loan is up to Rs. 7.50 lakh in case of studies in India and Rs 15 lakhs for studying abroad. The sum of money offered is against a third-party guarantee. The third-party guarantee can come from an uncle, neighbor or friend standing guarantee for the full amount of the loan.
On an average, an education loan has to be repaid over a period of 5 to 7 years, with the provision of a grace period of one year after completion of studies. The loan money has to be repaid within 84 months in equated monthly installments (EMIs), commencing 12 months after course completion or 6 months after getting the job, whichever is earlier. In case of overseas study loan of 7 lakhs or above, the sum of money is usually given against fixed deposits, NSC certificates and property worth the loan amount.
Loans for courses
Students those who are applying for Management and Technology courses, Medical and Engineering courses and Master's degree in the recognized institutions/universities can get the loan.
- The exact rate of interest for education loan differs from one bank to the other. However, it usually varies from 10 to 15 percent.
- Apart from the fee of the course, a list of other expenses is also covered by education loans. However, the list depends upon the bank from which you are taking the loan.
- Education loan can be offered at fixed as well as floating interest rate. The interest is usually charged on a daily or monthly reducing balance.
- Generally, nationalized banks have been seen to offer variable interest rates, while private and foreign banks charged fixed interest rates on education loans.
- While applying for education loan, you will have to pay a percentage of the loan amount, as processing fee.
- In most of the cases, the entire fee for a course is not financed by the bank. A certain proportion, called margin, has to be paid by the applicant. The margin requirements on education loans are not very rigid, with the average being 5 percent for studying in India and 15 per cent for abroad.
- The applicant should be an Indian national.
- He/she must have secured admission to professional/technical courses, through entrance test/selection process
- He/she should be around 16-26 years of age or any other range specified by the bank.
- He/she should not be a minor.
- He/she should have a good academic track record.
- He/she should have parents or guardians with stable source of income.
- He/she should have secured admission to a recognized university in India or abroad.
Documents Required for applying a student Loan
All students are required to submit mark sheets of last qualifying examination, proof of admission scholarship, schedule of expenses for the specified course, his/her bank account statement for the last six months, an income tax assessment order for the previous two years, a brief statement of assets and liabilities, of the co-borrower, which is usually the parent or guardian and proof of income, if any. Students have to furnish all or any of the following documents
- Mark sheet of last qualifying examination for school and graduate studies in India
- Proof of admission to the course
- Schedule of expenses for the course
- Copies of letter confirming scholarship, if any
- Copies of foreign exchange permit, if applicable
- 2 passport size photographs
- Statement of Bank account for the last six months of borrower/parents
- Income tax assessment order, not more than 2 years old
- Brief statement of assets and liabilities of borrower/parents
- If not an existing bank customer, Proof of Identity and Residence
- Two passport size photographs
The repayment of an educational loan is deductible under section 80E of the Income Tax Act. The annual limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans borrowed for higher education (fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses) may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start paying back.
Banks offering Education Loans
Students can get the loan details of the following bank