All About Higher Education Loans

What is Higher Education Loan?

A higher education loan is the amount you borrow from a bank to finance your or your children’s educational expenses. Banks normally charge affordable rates of interest for higher education loans. Also, these loans do not require any collateral up to a particular amount. Higher education loan is normally provided to aspiring and deserving students and professionals who need funds to finance their education. Any deserving students or professionals can apply for higher education loan to pursue professional and technical education in India and across the world. Before applying for a higher education loan, an individual needs to first enroll himself/herself in career-oriented courses like medicine, management, and engineering at the graduate or postgraduate level.

In the USA, a higher education law was formed on November 8, 1965, in the USA to strengthen the educational resources in the colleges and universities of the USA and provide financial support to post-secondary students. As per the law, low-interest loans are provided to deserving applicants to fund their education. Similarly, the government of India has also launched a scheme to offer complete interest subsidy educational loans for students during the period of a course and more 1 year or 6 months after getting a job. Such higher education loans can be availed by economically weaker sections of our society for pursuing any approved courses in technical and professional domains from recognized institutions in India. In India, you can apply for higher education loans under the educational loan schemes offered by the Indian Banks’ Association (IBA) which is a representative body of the Indian banking system. The IBA primarily works for the development, coordination and strengthening of the Indian banking system by assisting the Indian banks in multiple ways.

Given that higher education has become a very costly affair, you need to do prior financial planning to fund your education. Rising education fees and expensive hostel accommodation demand a lot of cash on your part. So, to get a customized solution to all your educational expenses, you should opt for a higher education loan and complete your studies without facing any financial difficulty. Certain banking institutions provide education loans for non – AICTE approved courses as well. With a higher education loan, you can cover 100% of your course fee as well as other education-related expenses. You can take higher education loans from any financial institutions or government-approved charitable institutions.

Features and Benefits of Higher Education Loan

• Higher education loans can be availed to pursue higher studies both in India and abroad.
• Banks offer different amounts for studying abroad and India. For example, the State Bank of India offers Rs. 30 lakhs to pursue higher studies abroad and Rs.10 lakhs to study in India.
• Enjoy long term repayment tenures for higher education loans.
• Banks may ask for collaterals if you borrow a higher amount of money. For example, HDFC Bank asks for collaterals if you are borrowing more than Rs.7.5 lakhs.
• A co-applicant is mandatory for a full time course.
• Easy and hassle free documentation process.
• You can enjoy a wide range of collateral options including residential property, fixed deposits, national savings certificate, LIC policy etc. However, collaterals may differ from bank to bank.
• You can enjoy tax benefits by taking a higher education loan under section 80E of the Indian Income Tax Act 1981.
• Banks like HDFC also offer doorstep services.
• The loan gets directly disbursed to your educational institutions. It may be disbursed in full or parts as per the requirement of your course.
• Some banks offer savings account free with higher education loans.
• Get insurance protection.
• You can use the amount received as higher education loan for paying off your college fee, hostel expenses and travel expenses, and purchasing books and computers etc.
• No margin is applicable up to a particular amount.

Higher Education Loan Eligibility

You need to fulfill the below mentioned eligibility conditions to be qualified for a higher education loan in India:

• First of all, you need to be an Indian resident.
• Your age needs to be between 16 to 35 years. However, the maximum age limit may differ from bank to bank.
• If you are taking a higher amount of loan, bank may ask for collaterals.
• A co-applicant is mandatory for all full time programs. You can include your parent and guardian as co-applicant. A married person can include spouse and parent-in-law as co applicant.

Documents required for Higher Education Loan

Bank usually asks for the following documents from a student while accepting his/her higher education loan application:

• A copy of the letter of admission in a college/university.
• A complete loan application form with all required details included.
• A few recent passport size photographs.
• A statement containing the cost of study.
• Copies of PAN card (applicable for both - student and parent / legal guardian).
• Copies of AADHAR card – (applicable for both - student and parent / legal guardian).
• Proof of identity. You can submit any of the following documents - driving license/ passport/ /aadhar or any photo identity as proof of identity.
• You also need to submit your proof of residence. Documents like driving license/passport/electricity bill/telephone bill are accepted as proof of residence.
• Last 6 months’ bank statement of the student/ co-borrower/ guarantor are required.

A salaried employee needs to submit the following additional documents:

• Latest 2 months’ salary slips containing your date of joining.
• Last 6 months’ bank statement of salary account.

A self-employed individual needs to submit the following documents:

• Last 2 years income tax return certificates with computation of income.
• Latest 2 years audited balance sheet.
• Bank statement of the last 6 months.
• Proof of latest turnover.

A self-employed professional needs to submit the following documents:

• Income tax return certificate with computation of income of the previous two years.
• Audited balance sheet or profit and loss sheet of the preceding two years.
• Last 6 months’ bank statement.
• A proof of qualification.

Interest rates on Higher Education Loan

Normally, banks charge lower rates of interest on higher education loans. Higher education loans are designed in such way that students, salaried employees and self-employed individuals can afford these loans and fulfill their desire for higher studies. Low interest rates and less associated service charges make these loans highly affordable. Also, banks like the State Bank of India (SBI) offer 0.50% concession on interest rates for girl students. Likewise, Axis Bank charges base rate plus 6.50% for girl child for an amount of Rs. 4 lakh. For the same amount of loan, the bank charges base rate plus 7% from a male applicant.

Higher Education Loan process

It is very easy to apply for a higher education loan in India. Once, you decide your course and know the amount you required for pursuing that particular course, you can proceed to apply for your higher education loan. Either you can apply it online or you can visit your nearest branch to do the same. While applying online, you have to keep the following information - your personal details, contact information, co-borrower detail and course details ready with you. Else, you can contact your concerned branch after which the bank representative will follow up with you and help you get your loan.

FAQs on Higher Education Loan

1. Can I take a higher education loan to pursue study abroad?

Yes, you can apply for a higher education loan to pursue higher studies abroad.

2. What is the maximum amount offered for studying abroad?

The maximum amount offered as higher education loan differs from bank to bank. For example, the State Bank of India offers Rs.30 lakhs as maximum amount while HDFC Bank offers Rs.20 lakhs as the highest amount for higher education abroad.

3. Do I need a co-applicant for my higher education loan? If yes, whom can I include as co-applicants?

Yes, you need a co-applicant for a higher education loan taken for a full time course. You can include your parent or legal guardian as primary co-applicant, and spouse and parent-in-laws as secondary co-applicant, if you are married.

4. Will I be eligible for any discount if I am a girl?

Yes, definitely. Many banks in India including Axis Bank and SBI offer discounted rates of interest for girls.

5. Can I get a moratorium or repayment holiday while paying off my higher education loan?

Yes, many bank offers repayment holidays for select course.

6. Am I eligible to get a higher education loan, if I am a self-employed?

Yes, a self-employed person can also apply for a higher education loan.

7. What are the modes of payment I can use to pay off my higher education loan?

You can repay your higher education loan through equated monthly installments. Also, you can pay it off via standing instruction, post-dated cheques and ECS.

8. What are the courses for which banks normally offer higher education loan?

Banks normally offer higher education loans for the following courses – full time Management Courses, Graduation Courses, Post-graduation Courses, Medicine, Architecture, Engineering Courses ( both government and private ), Medicine, MCA ( Masters in Computer Application), Hotel and Hospitality Management , Agriculture and Pure Sciences.

9. Is it compulsory to be an Indian resident to apply for a higher education loan in India?

Yes, it is mandatory to be an Indian resident to apply for a higher education loan in India.

10. Do I need to submit ITR, if I am a self –employed and apply for a higher education loan?

Yes, you need to submit your income tax return (ITR) certificate if you are a self-employed.