With more and more Indians choosing to pursue their education abroad, lending institutions are keen on providing the best possible financing options to suit every student’s needs. Financing higher education in a foreign country is generally a mammoth task for any middle-tier family in India. Along with regular tuition fees, families also have to bear boarding and lodging costs, books, travel and other related expenses for the student. Proving to be a saviour in this case, is an education loan which is generally given out by banks at attractive interest rates to finance higher studies in reputed institutions abroad. Education loans generally cover a vast number of expenses inclusive of fees, equipment, books, hostel fees, travel, examination fees, etc., for students. Education Loan also covers studies in India as well, with students opting for either graduation or post-graduation courses. Generally, education loans are offered in specific slabs: a) Below Rs.4 lakhs, b) Between Rs.4 lakhs and Rs.7.5 lakhs and c) Above Rs.7.5 lakhs.
While availing any kind of loan, the most important aspect that has to be considered by the borrower is the interest rate offered by the chosen bank. The interest rate for any type of education loan differs according to the loan amount availed, the loan tenure, educational institution chosen and can be a fixed or floating rate. The interest payment for an education loan varies depending on the borrower. Interest rate payments are generally done immediately after the loan disbursal. Most banks offer a moratorium period after the sanction of the loan, during which the borrower does not have to repay the principal portion of the education loan. The scheduled repayment can start after this period, which is generally after the completion of the course. But borrowers can also pay the interest beforehand during the time of disbursal to avoid the burden of repaying higher amounts later.
Another key point to be considered while looking into the interest rate given by any lender is whether the bank is calculating the interest on a quarterly reducing balance basis or on a daily reducing balance basis. The Central Government provides a full Interest Rate Subsidy Scheme to the economically weaker segments of the society, during the moratorium period of the education loan. Some banks also provide concessions for women applicants and offer a slightly lower interest rate.
Sometimes in spite of having good academic excellence and high-grades, students fail to pursue higher studies in their preferred educational institutes due to shortage of funds. In order to provide such bright students the much required financial help, the leading banks have come up with the special education loan scheme. Hence, the purpose of this loan is simply to enable the deserving students attain their desired educational qualification without any stress. In other words, providing the much required financial help to the needy students is the main focus or motto of education loan.
This special loan is granted to every student who is pursuing professional or career-oriented studies either in or outside India in disciplines such as medicine, management, engineering, science, law and several others. The basic requirement to get an education loan approval is that the student must have confirmed admission in the desirable discipline or course either in degree or postgraduate level.
Listed below are some of the key features and benefits of any education loan offered in India:
Loan approval- Usually, banks take around 15 days to approve an education loan. The time is calculated from the official receipt date of the application as the receipt confirms proper completion of the application in every aspect.
Processing fees: Most banks do not charge any processing fee when a student avails an education loan. Though some lenders might levy a processing fee of 1% or an upfront fee, depending on the type of loan availed.
Moratorium Period: Generally, all lending institutions give a moratorium or holiday period ranging from 6 months to 1-1/2 years after the completion of the course. Repayment of the principal amount for the availed education loan can start after this period or after the borrower has secured a job.
Margin: For loan amounts below Rs.4 lakhs, borrowers do not have to put in any amount and the lender will mostly sanction the entire amount. But for loan amounts higher than that, the applicant will be required to bring in a loan margin amount ranging between 5% and 15% depending on the location of the course study.
Quantum of Loan: The maximum loan amount sanctioned by banks is generally Rs.10 lakhs for education within India and up to Rs.20 lakhs for studies abroad. The minimum loan amount varies across different lending institutions.
Security Collateral: Most banks do not request for any security collateral to be provided for education loans taken for an amount below Rs.4 lakhs. Third party guarantee or any other form of security has to be provided by the borrower only for amounts higher than that.
Repayment Tenure: The repayment tenure starts after the moratorium period and can usually go up to 10 years, depending on the bank from where the education loan has been availed.
Type of educational course: The sanctioning of the education loan also depends on the type of course and the institution opted by the student. Education loans given out by most banks cover specific institution types, course types and also countries. Most banks sanctions loans only for approved courses from recognized Indian and foreign institutions.
Tax Benefits: Education loan borrowers can also enjoy tax rebates for the interest they would be paying under Section 80-E of the Income Tax Act, 1961. As per this section, tax is exempted on the education loan interest rate for eight years since the time when the loan bearer has taken the amount or since when he/she has started repaying the interest, whichever is more.
Insurance: Some banks also offer life insurance cover to the student availing the education loan. This facility however might not be available with all banks and might vary from lender to lender. Applicants can enquire with their lending banks to check if the insurance benefit is available, when they procure the education loan.
Pre-payment charges: The prepayment charges vary for education loans across different lending institutions. Some banks do not charge any pre-closure fees, while some might impose a prepayment penalty of up to 4%, depending on the time period during which the loan is being closed.
Other fees and charges: Banks might also levy other charges like administration fees and documentation costs, while the education loan application is being made.
The following study related expenses of the students are covered under education loan:
The interest rate on education loan varies from bank to bank in India. Each bank has its own rate of interest based on the particulars of the applicant as well as the loan amount. The final rate of interest fixed by the banks is the total of the base rate and the loan mark up. Generally, the base rates of banks fall within the bracket of 8% to 10%. As such, the final rate of interest charged on the loan ranges between 8.30% p.a. to 12.25% p.a. In some cases, the educational institute where the student has secured admission is considered as a decisive factor while fixing the interest rate.
There are certain factors that decide the interest rate of the education loan offered to the deserving candidates to pursue their aspirations and touch great heights in future. The main decisive factors is the nature of the loan, whether it is a secure or an unsecure one. The unsecured loans are those which are given without any security or collateral and the secured ones are those for which a security is pledged for by the borrower. Since the unsecured loans are at greater repayment risks, the interest rate on such student loans are higher compared to the loans which are granted against a security.
The interest rate on education loan is calculated at simple basis during the moratorium period or repayment holiday. After the moratorium period, the interest is compounded for the rest of the months.
In India, there are a plethora of private and public sector financial institutions offering education loans to aspiring students wishing to continue their studies in premier institutions within the country or abroad. Here is a comparative table on the interest rates provided by lenders in India:
|State Bank of India||8.30% p.a. to 10.70% p.a.|
|Bank of Baroda||8.50% p.a. to 11.05% p.a.|
|United Bank of India||10.75% p.a. to 10.80% p.a.|
|Central Bank of India||9.80% p.a. to 10.30% p.a.|
|Bank of Maharashtra||10.15 p.a. to 10.65% p.a.|
|Canara Bank||8.50% p.a. to 11.50% p.a.|
|Dena Bank||8.25% p.a. to 10.25% p.a.|
|Indian Overseas Bank||8.60% p.a. to 11.40% p.a.|
|Punjab National Bank||8.25 p.a. - 10.75% p.a.|
|Avanse Financial Services||12.75% p.a.|
|Credilla||11.75% - 12.50% p.a.|
|Axis Bank||10.5% - 12.5% (Till 31 March 2018)|
|HDFC Bank||11.97% p.a.|
|IDBI Bank||8.40% p.a. - 10% p.a.|
|ICICI Bank||11.00% p.a. and above|
The candidate can enjoy some concession on the interest rate of an education loan on the following grounds:
You can get lower interest rate on education loan by opting for the following ways:
Education loan is making the dream of the young guns of the country to fulfil their educational aspirations come true. To help the students further, the banks and financial organisations from time to time roll out several exciting offers on the existing loan interest rate. To avail the offers you just need to apply for an education loan directly on the Bank Bazaar portal by following a few simple steps. Once you are found to be eligible for the loan, you will be provided with all the available offers from the websites banking partners from which you can choose the most beneficial one.
The Government of India makes interest payments on the education loans taken by students whose annual family income is less than Rs.4.5 lakh. Senior officials in the Ministry of Human Resource Development are in the process of making changes to the Interest Subsidy Scheme given the rise in the number of outstanding education loans for the past few years. The Indian Banks' Association had compiled data on the total outstanding education loans which are at Rs.67,678.5 crore in FY2016-17.
The ministry had allocated Rs.1,950 crore for the subsidy scheme in the 2016-17 budget. Although the money is being paid to the banks on time, the outstanding dues have been increasing. That is why, the ministry has decided to transfer the interest payment amount to the students' bank accounts directly so as to maintain transparency. A report by the Planning Commission suggests that by 2020, minimum 20% of the enrolled students will have access to education loans.
22 January 2018
A special camp for education loan was conducted today, 19 January at Virudhunagar Hindu Nadars' Senthikumara Nadar College in Virudhunagar. The district administration and the lead bank in the district will organise an education loan mela for those who are pursuing higher education. The special camp is held between 9:30 a.m. to 2:00 p.m. Parents and students can participate in the mela. The students need to carry a bonafide certificate from the college and (10th and 12th) mark sheets along with identity proofs like Aadhaar card and PAN. At the camp, the students will be given guidance on how to enroll online. 25 banks are participating in the loan mela.
19 January 2018
The Government of Jammu and Kashmir has announced that education loan facility will be provided through banks with interest subvention on loan repayments until the completion of the course. While presenting the Rs.80,000 crore budget for FY2018-19 in the state assembly, State Finance Minister, Haseeb A Drabu said that education loans will be provided to students who aspire to pursue higher education in top universities across the world. Interest subvention on education loans will be provided to those students who belong to the weaker sections of the society and are brought up by single parents.
Around 13,000 students from the state are to be sent on educational tours to different parts of the country. The minister has proposed setting aside Rs.10 crore for this purpose. He also proposed that Rs.5 crore be set aside for the purpose of establishing a proper career counselling framework in the state in order to bridge career counselling gaps.
12 January 2018
Etela Rajender, the finance minister of Telangana, has announced that the state will be giving a loan to nomadic tribes worth Rs.1 lakh. This loan will be given exclusively to begin small businesses. A cabinet sub-committee meeting was held to have a BC Sub Plan along with stakeholders in order to make a decision regarding the BC welfare initiatives. Etela Rajender mentioned that the BC ministers and the chief minister are ready to offer a lot of funds to enhance BCs in the state. He also said that the Telangana government does not want any connection with banks and that they want to transfer money directly to the beneficiaries.
8 January 2018
Jammu and Kashmir Scheduled Castes, Scheduled Tribes and Backward Classes Development Corporation Limited offers financial assistance for higher education in professional and technical courses to students belonging to the reserved categories. Apex Corporation funds this initiative. Education loan up to Rs.10 lakh is given to students pursuing higher education in India and up to Rs.20 lakh is given to students pursuing higher education abroad. Balbir Ram Rattan, Vice-Chairperson of the Corporation along with the Divisional Manager and Jammu District Manager gave Rs.4.5 lakh education loan to an engineering student belonging to a Scheduled Caste to pay for his B.Tech course.
Apex Corporations of the Indian Government have sanctioned education loan facilities for poor students belonging to the Backward Classes, Minorities, Unorganised Sectors, and Scheduled Tribes from National Safai Karamcharis Finance & Development Corporation, National Minorities Development & Finance Corporation, National Handicapped Finance & Development Corporation, National Backward Classes Finance & Development Corporation, and National Scheduled Tribes Finance & Development Corporation.
4 January 2018
In an effort to improve the quality of higher education, India has partnered with countries like Israel, the US, New Zealand, Norway, and the UK to establish joint research programmes. This tie-up is under the Special Scheme for Faculty Development wherein teachers have the opportunity to take up academic research programmes. This move also helps in establishing the Inter University Centers that offer state-of-the-art equipment and facilities.
Uchchatar Avishkar Yojana is another initiative to promote innovation in IITs. Impacting Research, Innovation and Technology (Imprint) is another initiative that identifies relevant and immediate areas requiring innovation and scientific research to ensure higher funding support and measured outcomes for research. 5 new research parks will be built at IIT of Delhi, Kanpur, Guwahati, Bengaluru (IIS), and Hyderabad at the cost of Rs.75 crore.
2 January 2018