Education Loan in India

Note: Public sector banks such as SBI, Bank of Baroda, and PNB generally offer lower interest rates. On the other hand, private banks such as Axis, HDFC, ICICI, and so on may provide faster and easier approvals of loans. 

Eligibility Criteria for Education Loans 

Most banks usually follow the basic eligibility criteria to make sure that the applicant is genuinely pursuing higher studies and can repay the loan after a period of time. In order to get education loan, you must fulfil the conditions given below: 

• You must be a resident of India. 

• You must have admission in any one of the following: undergraduate and postgraduate programmes, PhDs, diploma courses (six months or longer), or in job-oriented, technical, and professional courses.  

• You should have secured admission in an approved or recognised institution such as government institutions, UGC/AICTE-approved colleges, professional institutes, or reputed international universities. 

• A co-applicant is required, usually a parent, guardian, spouse, or parent-in-law (for married applicants). 

Note: In case of a co-applicant with a steady income, there is a chance of quicker loan approval and better loan terms. 

Documents Required for Education Loan

The following documents are generally required by most lenders to process an education loan: 

Student Documents 

• Proof of age  

• Identity proof  

• Proof of address 

• Recent passport-size photographs 

• Admission letter from the educational institution  

• Marksheets of previous education (school/college) 

• Completed loan application form 

• Valid visa (for studying abroad)  

Co-applicant / Financial Documents 

• Salary slips (if salaried)  

• Income Tax Returns (ITR) with income computation  

• Past six months bank account statements  

• Audited balance sheet (if self-employed)  

• Proof of turnover (such as sales receipts or service tax/GST returns)  

Note: Documents may vary slightly from bank to bank, so it is always best to confirm the exact documents with your lender before applying. 

Types of Education Loans

The following are the types of education loans: 

By location: If you plan to study within India, a domestic education loan is suitable. It covers expenses for courses in recognised Indian institutions. On the other hand, if you are going abroad to countries like the US or UK for a degree, then you will need an international education loan, which usually covers tuition fees, travel, and living costs. 

By collateral: Some loans are secured in which you have to provide collateral such as property, fixed deposits, or other assets as security. On the contrary, some loans may be approved with a guarantor (a parent or relative with a stable income can act as a guarantor). In this, a third party is required for your application instead of physical collateral. 

By course type: Loans are also based on the level of study. Undergraduate loans are for students who want to pursue a bachelor’s degree of 3 to 4 years in different fields. On the other hand, postgraduate loans are for those who want to complete a master's degree of 2 years.

Features & Benefits of Study Loans

An education loan is very helpful in managing the cost of higher studies without financial burden. Mentioned below are several features and benefits of study loan: 

• You can get loan amount of up to Rs.1 crore for studying in India and Rs.3 crore for studying abroad. 

• Repayment is flexible, with a tenure of up to 15 years. You do not need to repay until after you graduate. 

• A moratorium period of up to 6 months to 1 year after course completion is provided. 

• Some banks offer lower interest rates for female students or under special schemes.  

• You can claim Tax benefit under Section 80E on the interest paid for up to 8 years. 

• Extra expenses like student exchange programs, travel costs, and a laptop are also covered.

Expenses Covered in Education Loans 

Education loans not only pay college fees but also cover important expenses. These are as given below: 

1. Academic Costs 

• Tuition fees 

• Examination, laboratory, and library fees  

• Caution deposit, building fund, or other refundable deposits (as per institution receipts) 

• Costs related to study tours, thesis, or project work  

2. Living & Travel 

• Hostel fees  

• Travel expenses 

• Insurance premium  

3. Equipment & Study Material 

• Cost of books, instruments, and uniforms  

• Laptop or computer required for the course completion 

Tax Benefits on Education Loans

Did you know you can save tax on your education loan interest? Under Section 80E of the Income Tax Act, you can deduct the full interest paid on your education loan from your taxable income for up to 8 years.  

This benefit can be claimed once you start repaying the loan, and it applies only to the interest portion of your EMI, not the principal amount. There is no upper limit on how much interest you can claim as a deduction. For claiming the benefit, you may require a certificate from the bank as proof. 

How to Apply for an Education Loan in India? 

You can either apply for an education loan online or by visiting a bank branch. Given below are the steps for both methods: 

Online Process

Step 1: Go to the official website of the bank where you want to apply for the loan. 

Step 2: Navigate to the section ‘Education Loan’ and select the education loan scheme.

 Step 3: Click on the option ‘Apply Now’ and fill out the application form accurately. 

Step 4: Attach the required documents and submit the form. 

Step 5: The bank will check your documents and confirm your eligibility. 

Step 6: Once your eligibility is confirmed, you can get a doorstep service (if available) or visit the bank branch to complete the further loan process. 

Note: Most banks approve online applications faster. Therefore, keep your documents ready and scanned. 

Offline Process 

Step 1: Visit the bank branch from where you wish to apply for the loan. 

Step 2: Request for an education loan application form. 

Step 3: Fill out the form accurately with required details. 

Step 4: Submit the completed application form and documents. 

Step 5: You need to wait for the bank to process the application and release the loan amount. 

Note: While visiting the branch, keep both originals and photocopies of your documents in order to avoid multiple bank visits. 

Education Loan EMI Calculator 

Before applying for an education loan, you can use our free EMI calculator to know the exact amount you need to repay each month. The EMI calculator helps you to quickly estimate your monthly EMI based on the principal amount (P), time duration (N), and rate of interest (R) 

How to Use It? 

You need to enter the following values to instantly see your estimated monthly EMI: 

1. Loan amount  
2. Tenure (repayment period)  
3. Interest rates

Education Loan Repayment Process 

You can start repaying the loan after you complete your course or once you get a job. Most banks give you a 6 to 12 months of grace period (moratorium) after your course ends and before starting EMIs. The grace period might vary from lender to lender. After that, you start repaying the loan in easy monthly instalments (EMIs). 

Repayment can be done through internet banking, cheque, direct debit from your account, or demand draft, depending on what your bank allows. You can also make part payments or full pre-payments to pay your loan faster and save interest. However, you should always check with your bank first, as some lenders may charge a pre-payment penalty. 

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