Choosing the right career option is a big challenge for many students. But so is the problem to sort out the finances. Not many have the privilege of funding their higher education on their own, and that’s where a student education loan steps in. Whether you want to pursue a MBA in the best business school in the US or a degree in law in India, an education loan is an answer to all your worries.
We will explain the process of obtaining an education loan in India within this article.
What is an education loan?
Before we talk about how to get education loan let’s see what it is. Simply put, it is a form of financial assistance offered by banks to help students pursue higher education, whether in India or abroad. All scheduled commercial banks in India offer education loans.
Benefits of Education Loan:
A few of the attractive features of a typical education loan in India are listed below:
• The financial assistance is available for pursuing all types of academic courses, including graduation, post-graduation, vocational or certificate courses.
• The quantum of the loan is also flexible and covers a broad spectrum. For an educational course in India, the minimum loan amount is INR 10 lakh up to a maximum of INR 15 lakh. When applying for an education loan for abroad studies, you should know that the amount varies. The maximum loan (for international studies) that can be availed is INR 20 lakhs. However, these numbers are at the discretion of banks and may change from time to time.
• Loans can be availed by anyone – there is no age bar of the student who is planning to pursue a course and has secured admission.
• In the case of a female candidate, some banks also offer attractive interest rates, making education loan a more natural option to pursue.
• The applicant does not have an obligation to repay the borrowed amount immediately. Once the course is completed, the repayment tenure of the loan can be stretched up to 5-7 years. But there is no such thing as an education loan at 0 interest rate.
• Where the quantum of the loan availed is up to INR 4 lakh, there is no need for any collateral or security or a guarantor for the loan.
• Tax benefits are available when the repayment commences: the interest amount can be deducted from the taxable income.
Education Loan Eligibility Conditions
The criteria for education loan eligibility are usually standard across various banks. There may or may not be an age restriction of a student who wishes to apply for an education loan. The joint applicant or the guarantor of the loan should be a minimum of 21 years at the time of availing the loan and maximum age at the time of maturity of the loan can be 70 years. To apply for an education loan in India, the student must be an Indian national. However, the loan can be obtained irrespective of whether the student has secured admission in India or abroad. These loans are provided only when the selection of the student has taken place through an entrance exam or a merit-based selection process.
What are the essential documents to be furnished for obtaining an educational loan?
Bank usually have an extensive checklist of education loan eligibility documents. These need to be furnished for processing the loan application. An essential list is set out below. A particular bank may also request additional documents/information to be provided, depending on the profile of the applicant.
• Duly filled in loan application form.
• Proof of admission, i.e., letter of acceptance from the university.
• Self-attested documents for proof of age.
• Proof of address and identification
• Passport size photographs of the applicant and the guarantor (if applicable).
• Copies of highest educational qualification obtained by the applicant (i.e. Class XII mark sheet/ graduate degree/post-graduation, etc.).
• Income tax returns of the parents of the applicant or the guarantor.
• Bank statement for the last 6 months (of the applicant or the parent).
• Details of the collateral or security offered, in case of a secured loan.
• Copy of passport and visa, if the loan is availed for a degree to be pursued abroad.
Interest subsidy scheme
The Ministry of Human Resources Development has announced a Central Scheme for Interest Subsidy for providing interest on any education loan in India. This subsidy is for students who belong to the Economically Weaker Sections, and it comes in effect during moratorium for technical and professional courses for studies. To qualify as a member of the Economically Weaker Section, the annual gross parental/family income should be below INR 4.50 lakh per annum. The subsidy is provided for the moratorium period which is 12 months after completion of the course or six months after getting the job, whichever is earlier. Once the moratorium period expires, the interest on the outstanding loan is paid as per the terms of the education loan.