Education Loan for Studies Abroad
An education loan for studies abroad is a loan from a bank or NBFC that funds tuition, accommodation and living costs for students admitted to a recognised overseas university. Loans above Rs.7.5 lakh usually need collateral, and repayment starts after the course ends. This guide covers eligibility, documents, lenders and how to apply.
This guide covers everything you need to know about education loans in India for studying abroad, including the loan application process, eligibility criteria, and required documents. We also provide insights into Indian banks offering student loans and the role of guarantors, helping students secure the funds needed for their educational journey abroad.
What is an Education Loan for Studying Abroad?
An education loan for studying abroad is a service or product provided by financial institutions or banks to help students cover the costs of pursuing higher education outside of their country. These loans typically cover expenses such as tuition fees, accommodation, and other related living expenses.
They are offered to students who meet certain eligibility criteria, such as admission to a recognised university abroad, and often require collateral or a guarantor. Repayment usually begins after the completion of the course, with flexible tenure options and interest rates.
Steps to Secure an Education Loan
If you're new to borrowing and need an education loan for overseas studies, the following roadmap will guide you through the process.
Step 1: Determine how much you need to finance your education.
Step 2: Compare various loan schemes and shortlist two to three options.
Step 3: Check the eligibility criteria for education loans.
Step 4: Gather the necessary documents for the loan application.
Step 5: Apply for education loans from banks and Non-banking Financial Companies (NBFCs).
Step 6: Upon document verification, the bank will disburse the approved loan amount.
Benefits of Education Loans for Studying Abroad
An education loan offers several advantages, particularly when family income and resources are insufficient to cover educational expenses. Here are some key benefits:
- Financial Flexibility: Education loans cover tuition fees and additional expenses without straining family finances.
- Wide Coverage of Expenses: These loans can cover university fees, living expenses, accommodation, and more.
- Flexible Repayment Terms: Banks offer flexible repayment options, including moratorium periods.
- Tax Benefits: You can claim tax deductions on the interest paid under Section 129 of the Income-tax Act, 2025 (erstwhile Section 80E), reducing your taxable income. The deduction is available only under the old tax regime.
- Improved Credit Score: Repaying an education loan on time helps build a strong credit history, which is beneficial for future loans.
- Early Sanction: Lenders such as SBI allow loan sanction and disbursement before the I-20 or visa is issued.
Eligibility Criteria for Education Loans
Before applying for an education loan, it's essential to ensure you meet the eligibility criteria. These conditions are generally consistent across most banks, though individual institutions may have specific guidelines.
- The applicant must be an Indian citizen.
- If the applicant is under 18 years old, their parents must take out the loan.
- The applicant must have a solid academic record.
- The applicant must have secured admission to a recognised overseas institution.
- The course should be technical or professional, as banks prefer job-oriented programmes.
Documents Required for Education Loans
To apply for an education loan, you'll need to provide the following documents:
- A completely filled-out loan application form.
- Passport-size photographs of the applicant and co-applicant.
- Photo ID of the applicant and co-applicant (e.g. PAN card , driving licence, Aadhaar card).
- Residence proof for both the applicant and co-applicant.
- Admission letter from the university or college.
- Six month's bank statements of the co-applicant.
- Income proof of the co-applicant.
- Collateral documents (property title deeds, approved building plans, NOCs if required).
Technical Documentation for Study Loans: In addition to the general documents, you may also need technical documents like property deeds, revenue documents (e.g., Khata or Patta), and urban clearance certificates.
How to Apply for an Education Loan?
Applying for an education loan can take time, so it's advisable to start early. Follow these steps:
Step 1: Ensure the course is recognised by banks.
Step 2: Determine how much you need to borrow.
Step 3: Compare education loans offered by different banks.
Step 4: Submit your loan application to the bank of your choice.
Step 5: Once approved, the bank will issue a loan document outlining the loan terms.
Step 6: After signing, the loan amount will be disbursed in instalments or as requested by the university.
Top Education Loan Providers in India for Studying Abroad
Some of the leading banks offering education loans for studying abroad include:
- HDFC Bank: Offers loans covering the entire cost of education with no upper limit with collateral, and unsecured loans of Rs.45 lakh to Rs.75 lakh.
- ICICI Bank: Provides loans up to Rs. 3 crore for international courses.
- SBI: Rs. 7.50 lakh to Rs. 3 crore depending on the scheme.
- Axis Bank: Provides loans up to Rs.1.5 crore without collateral, with no margin on loans up to Rs.4 lakh.
- Punjab National Bank: Offers loans under the PNB Udaan scheme for various courses abroad.
Education Loans from NBFCs
In addition to nationalised banks, students can access education loans from Non-banking Financial Companies (NBFCs) to study abroad. These companies provide full tuition coverage, with loans generally requiring collateral for amounts over Rs. 7.5 lakh. Here are some NBFCs offering loans for overseas education:
- Credila: An independent NBFC — HDFC Bank fully divested its stake in Credila by March 2024, so it is no longer an HDFC Bank subsidiary, offering competitive floating rates, repayable over a tenure of up to 15 years.
Crowd-funded Companies as Loan Providers
Some companies specialise in offering loans to students attending specific institutions, providing loans in the currency of the student's destination country. Borrowers must repay the loan in the same currency.
Education Loan Schemes from Indian Banks for Studying Abroad
- SBI Student Loan Scheme: Rs. 7.50 lakh (extendable up to Rs. 3 crore under SBI's Global Ed-Vantage scheme) for domestic or foreign education at competitive rates, up to 15-year repayment.
- SBI Global ED-VANTAGE Scheme: Offers loans up to Rs.3 crore for full-time overseas courses, with repayment commencing six months after course completion.
- HDFC Bank Education Loan for Foreign Education: Loans covering the entire cost of education with no upper limit with collateral are available for students wishing to study abroad which also offers tax benefits
- Oriental Bank of Commerce Education Loan: Oriental Bank of Commerce merged into Punjab National Bank with effect from 1 April 2020; its education loan schemes, including for overseas study, are now offered under PNB (see PNB Udaan above).
Important Considerations for Education Loans Abroad
- Moratorium Period: This is a grace period where no repayment is required. It varies across lenders and often extends until after the course completion.
- Loan Margin: Public sector banks generally finance up to 85% of education costs on loans above Rs.4 lakh, leaving the borrower to arrange the remaining 15%.
- Effect of Exchange Rates: Be mindful of currency exchange fluctuations, as they may impact the final loan disbursement.
- Interest During the Moratorium: Lenders such as SBI charge simple interest during the course period and the moratorium, and the accrued interest is added to the principal before the EMIs are fixed.
Vidya Lakshmi Portal and PM-Vidyalaxmi Scheme
The Government of India's 'Vidya Lakshmi' portal allows students to apply for loans as per each participating bank's own scheme limits rather than having one fixed cap of its own, for overseas education. Loans up to Rs.7.5 lakh require no collateral; loans exceeding this amount face collateral requirements.
The government's PM-Vidyalaxmi scheme, approved by the Union Cabinet, offers collateral-free and guarantor-free education loans with an interest subvention for meritorious students admitted to top-ranked institutions in India, and can be accessed through the PM-Vidyalaxmi portal.
Collateral Rules for Education Loans Abroad
Most education loans for studying abroad require collateral, which could include assets like property, fixed deposits, or life insurance policies. The collateral acts as security for the lender in case of default.
- Accepted Collateral: Movable or immovable assets like property, fixed deposits, shares, or bonds are commonly accepted. Agricultural land is typically excluded.
- Loans Without Collateral: Loans up to Rs. 7.5 lakh can be obtained without collateral, or a third-party guarantee, with a parent or guardian as co-borrower. For loans exceeding Rs. 7.5 lakh, collateral is generally required.
- Select Premier Institutions: SBI's Global Ed-Vantage Scheme offers collateral-free loans up to Rs.50 lakh for select premier institutions.
- Guarantor's Responsibility: A guarantor for an education loan is legally obligated to repay the loan if the borrower defaults. For loans exceeding Rs.7.5 lakh, a guarantor may be required by the bank.
- Read the Loan Agreement Carefully: Before committing to a loan, thoroughly review all terms and conditions. Seek expert advice if necessary and ensure clarity on the repayment terms, interest rates, and any other stipulations in the agreement.
Summary
In summary, an education loan for abroad studies helps Indian students fund tuition, living costs and other expenses at recognised overseas universities, with eligibility, collateral and interest rates varying by lender. Comparing banks and NBFCs on interest rate, loan margin and collateral requirements before applying can reduce the overall cost of financing. Explore the loan options in this guide and use BankBazaar to compare education loan offers before you apply.
Summary
In summary, an education loan for abroad studies helps Indian students fund tuition, living costs and other expenses at recognised overseas universities, with loan limits, margin and collateral requirements varying by lender. Loans up to Rs.7.5 lakh need no collateral at several banks, while higher amounts generally need security. Compare banks and NBFCs on these terms before applying, and use BankBazaar to compare education loan offers.
FAQs on Education Loan for Abroad Studies
1.Can I claim a tax deduction on an education loan for abroad studies?
Yes, the interest paid on an education loan for abroad studies is generally eligible for a tax deduction under the Income-tax Act, subject to conditions such as the tax regime you opt for. The deduction applies to the interest paid and not to the principal repaid. Check the current provisions or consult a tax adviser for the conditions that apply to you.
2.Who is eligible for an education loan for abroad studies?
An Indian citizen with a solid academic record who has secured admission to a recognised overseas institution is generally eligible for an education loan for abroad studies. Lenders prefer technical or professional courses, and parents must take the loan if the applicant is under 18. Individual banks and NBFCs may add their own conditions, so confirm them before applying.
3.What courses are eligible for an education loan for studying abroad?
Most banks and NBFCs offer an education loan for abroad studies for undergraduate and postgraduate programmes at a recognised overseas university. Job-oriented and professional courses are generally preferred by lenders. Always confirm with the lender whether your specific course and institution qualify before applying.
4.Which documents are required for an education loan for abroad studies?
An education loan for abroad studies generally requires a filled application form, photographs, photo ID and residence proof of the applicant and co-applicant, academic records, the admission letter, and the co-applicant's income proof and bank statements. Collateral documents are needed if the loan is secured. The exact list varies by lender, so check the documents section above and your bank's checklist.
5.How do I apply for an education loan for abroad studies?
You can apply for an education loan for abroad studies by comparing lenders, confirming your course and university are recognised, and submitting the application with the required documents to your chosen bank or NBFC. The lender verifies your eligibility and collateral, if applicable, before issuing a sanction letter. Disbursement usually follows in line with the university's fee schedule.
6.Which is the best bank for an education loan for abroad studies?
There is no single best bank for an education loan for abroad studies, as the right choice depends on your course, university and collateral position. Public sector banks such as SBI, Bank of Baroda, Punjab National Bank and Indian Bank are often preferred for their lower rates, while private banks like HDFC Bank, ICICI Bank and Axis Bank suit applicants with a strong credit profile. Compare a few lenders before deciding.
7.What is the maximum amount available under an education loan for abroad studies?
There is no single fixed cap on an education loan for abroad studies; the maximum amount depends on the lender, the course and whether collateral is offered. Loans backed by adequate collateral generally allow a higher sanctioned amount than collateral-free loans. Check the current limit with your chosen bank or NBFC before applying.
8.Does an education loan for abroad studies cover the entire cost?
An education loan for abroad studies can cover the entire cost of tuition, accommodation and living expenses with some private banks and NBFCs. Public sector banks typically expect the student to self-finance a portion of the cost, known as the loan margin, with the loan funding the remainder. Confirm the margin requirement with your lender before budgeting.
9.What is the moratorium period on an education loan for abroad studies?
The moratorium period on an education loan for abroad studies is the grace period during which the borrower is not required to make repayments. It typically covers the course duration and a short period after completion, though the exact length varies by lender. Interest may still accrue during this period unless a subsidy scheme applies.
10.What is loan margin in an education loan for abroad studies?
Loan margin in an education loan for abroad studies is the portion of the total cost the borrower must fund from their own resources, with the lender financing the rest. Public sector banks commonly set this margin for overseas study, while some private lenders and NBFCs offer full funding. Check the applicable margin with your chosen lender.
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