Education loans or student loans have emerged as one of the most prominent loan categories. Students who could not earlier go for higher studies due to fund crunch can now avail an education loan and realize their dreams. Education fees in India has been on the rise for the past several years especially for professional courses like engineering and medical. Fees is also higher for private institutes as compared to government colleges. Student loans have made it possible for people from all strata of economic background to study further without worrying about the associated fees.
These student loans can be repaid by borrowers later when they are able to find a suitable job after completion of their educational course. Almost all major banks in India, public as well as private offer education loans to students. The size of these loans depends upon the college and the course. Not only are education loans offered by banks for study in India but loans for studying overseas are also offered for courses like engineering, architecture, management etc. These education loans cover tuition fees, accommodation fees, examination fees, library and laboratory charges, money for purchasing books, laptop, uniform and instruments as well as for project work during college. The fees and expenses covered are however dependent upon the lending bank and the institute in which admission is sought by the loan applicant.
To avail an education loan from a lending entity, there are certain eligibility criteria that need to be fulfilled by the loan applicant. Listed below are some generic criteria that apply to almost all banks.
There is a specific set of documents required by banks for sanction of education loans. This list of documents is similar for all lending entities. Following are the papers that need to be furnished by an education loan applicant.
Interest rates on education loans are slightly higher than loans for housing. These rates are dependent on the lending bank and are generally in the range of 11.75 per cent per annum and 14.75 per cent per annum. Rates are relaxed for students who secure admission at premiere institutes like IITs and IIMs. Interest rates are also reduced by public sector banks for female applicants.
Student loans are a great boon for people who want to study but struggle due to financial constraints. The concept of banks paying for your education while you study and then getting repaid when you start earning is a great boost for banks as well as for your own educational growth. Here are some of the most significant features and advantages of student loans in India.
Banks offer education loans not only to students who study in India but also to students who wish to study abroad. Generally, studying abroad is far more expensive than studying in India and hence students who wish to study abroad have to manage enough cash to get admitted to an educational institution.
For example, a post graduate course in the U.S. can cost up to Rs.30 lakhs per annum. This is a huge amount for any student and so education loans for overseas offer considerable loan amounts. Also, education loans have a set limit to the loan amount offered and as such students might be required to take up part time jobs to manage their expenses. Insurance is a compulsory cost associated with education loans for overseas study. The sum assured in this case will depend upon the course as well as the country where the applicant is going to study.
Public sector banks as well as private banks offer education loans to students who wish to study in India. These loans can be taken for any professional course like MBA, engineering, medical etc. Sometimes, rates on education loans are slashed in case the college an applicant has got admission too is a premier institute like an IIT, IIM or an NIT.
The stark professional shift in education, the increasing competition and globalization have led to more people aspiring for higher studies. Courses that were expensive for people have now become easily attainable due to the increased penetration of student loans.
Any student who wishes to study further is eligible for an education loan provided he/she is a resident of India.
Is there an age criteria that is applicable to education loans?Yes. Generally, age of the applicant needs to be between 16-35 years of age. This is subject to the lending bank’s discretion.
What expenses are covered as part of student loan?The following expenses are covered as part of education loan.
Nil. 100% loan is available for select courses and is dependent upon bank’s policy.
What is the loan tenure for student loan?Loan tenure can be a period up to 7 years. This includes the moratorium period.
What is a moratorium period?Moratorium period is a payment holiday offered on repayment of education loan until the applicant finds a job and starts repaying the loan.
Is a co-applicant mandatory?Yes. A co-applicant is almost always required by banks to sanction your education loan.
What is the loan amount offered to students?Loan amount depends upon the requirement of the applicant. Greater amounts are offered to applicants who wish to study abroad than those who apply for study in India.
Does education loan offer any tax benefit?Yes. Education loans can get tax exemption for interest paid on the loan. This is in line with section 80E of the Income Tax Act.
Can I pre-pay my education loan?Yes. Pre-closure of student loan is possible, however some banks levy a prepayment fee on pre-closure of loan.
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Due to a rise in non-performing assets, several public sector banks have decided to go slow on student loans. As per the latest data compiled by the Finance Ministry banks have achieved around 50% of the disbursal target, up to September 30, of the year 2015-16. However, a few banks haven’t been able to achieve their proportionate targets. Banks were supposed to achieve 15% growth in accounts and 20% growth in disbursement for the current financial year. Banks were given a target of 20 per cent growth in disbursement and 15 per cent growth in accounts for the current financial year.
The Reserve Bank of India has raised a concern over the rise in non-performing assets in education loans. According to the RBI governor, education loans should be devised in a flexible manner with options like automatic moratorium, in case borrowers were unemployed. He also wanted the know-your-customer (KYC) guidelines to be made simpler.
26 November 2015
