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: 

• Approved undergraduate programs, postgraduate programs, PhD programs, diploma programs lasting six months or more, job-oriented courses, and technical/professional courses are all eligible for loans 

• Candidates should be enrolled in or pursuing admission to internationally recognized colleges and universities as well as government, professional, and accredited institutions 

• For an undergraduate program, candidates must have finished the 10+2 (12th standard), and for a postgraduate program, they must have earned a degree. 

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: 

• KYC documents (identity and address verification) 

• Mark sheets for entrance examinations, graduation, and grades 10 and 12 

• The educational institution's letter of admission 

• Fee schedule and any other costs incurred by the school 

• Co-applicant KYC, six months' worth of bank statements, and evidence of income.

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: 

Considering Location 

1. Loan for Domestic Education 

This kind of loan is available to those who want to study in India. Only if the applicant is accepted into an Indian school and satisfies all other lender requirements will the loan be authorized. 

2. Loan for International Education 

These loans enable students to fulfill their ambition of enrolling in the program of their choice at a foreign university. For students who want to study abroad, the loan only pays for their tuition, lodging, and airfare if they meet the requirements. 

Depending on the Course 

1. Loans for Undergraduates 

Students who need financial assistance to finish their undergraduate degrees can apply for this kind of education loan. Typically, an undergraduate degree program lasts three to four years with a variety of specializations. An undergraduate degree makes it easier for people to start making money and get a good career. 

2. Graduate Loans 

Many undergraduates want to pursue postgraduate studies, which typically last two years in India. To gain deeper understanding in the field of interest, an advanced degree is preferred. 

3. Loans for Career Development 

To boost their employment prospects, many professionals who work for a few years in corporate roles would rather take a break from their careers and enroll in professional courses and training. These people would work hard to gain admission to reputable technical and business schools to hone their abilities and advance in their careers. 

Considering Collateral 

1. Loan Secured by Securities, Deposits, and Real Estate 

To obtain the funds required to pursue education, you can pledge fixed deposit certificates, recurring deposits, gold deposits, bonds, debentures, equity shares, and real estate, including residential and agricultural land, apartments, houses, and more.

2. Third-Party Assurance 

The student may be able to obtain an education loan with the assistance of a guaranteed letter from a home bank or bank employee. 

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: 

• For overseas students, the maximum loan amount is Rs. 1 crore, while for domestic students, it is Rs. 50 lakhs 

• 100% funding is possible under some circumstances 

• Other costs, such the cost of a laptop and student exchange travel, are covered by finance 

• For overseas disbursements, preferential exchange rates might be offered 

• The education debt should be borrowed jointly by the parents 

• The maximum loan repayment period is fifteen years 

• A loan moratorium might last anywhere from six months to a year after the course is over 

• Tax advantages on loan interest payments for a maximum of eight years. 

Expenses Covered in Education Loans 

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

• Fees that educational institutions must pay 

• Examination, lab, and library fees 

• Passage funds and travel costs for studying overseas 

• Student borrowers' insurance premiums, if any 

• Caution deposit, building fund, or refundable deposit backed by bills or receipts from the institution (total expense should not exceed 10% of total loan) 

• Purchasing books, equipment, instruments, and uniforms (the total cost shouldn't go beyond 20% of the loan amount) 

• If a computer purchase is necessary to finish the course, it should be reasonably priced (total expense should not exceed 20% of total loan) 

• Any additional costs necessary to finish the course, such as project work, study tours, theses, etc., should not be more than 20% of the overall loan amount 

• When calculating the necessary loan, take into account any scholarships, fee waivers, etc. that the student borrower may be eligible for. 

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

• Go to your preferred bank website and select an educational loan program 

• Click the Apply Now button or download the application from the bank's website 

• Complete the application, attach the required files, and send it in 

• The bank will start the process by checking your documentation, assessing the course of study you want to take out the loan for, and determining what collateral you can offer 

• The bank will disburse the loan amount after it is approved. 

Offline Process 

• Go to the bank branch where you want to submit a loan application 

• Complete the application 

• Submit the form along with the required documents 

• The bank will process the loan after verifying your application. 

List of Courses Covered by Educational Loan

Here is the list of courses covered by educational loan as follows: 

• Professional, technical, and diploma courses offered by accredited universities or institutions under UGC, IMC, AICTE, government, AICTE, AIBMS, or CMR 

• Autonomous institutes like IIM, IIT, IISc, XLRI, NIFT, NID, ICWA, CA, CFA, and others offer regular degree or diploma programs 

• Regular degree or diploma programs certified by the Director General of Civil Aviation, Shipping, or other regulatory bodies include pilot training, aviation, shipping, and more 

• Professional and technical job-oriented courses for graduation, post-graduation, or diplomas, such as MBA, MCA, or MS programs offered by the Chartered Institute of Management Accountants (CIMA) in London or the Certified Public Accountant (CPA) in the United States 

• Loans for improving the skills. 

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 

After finishing the course, some lenders offer a grace period of six months to a year to find a suitable job and begin the repayment procedure. Depending on the lender, this grace period may change. You can begin the repayment process in the form of EMIs as soon as you find employment during this time. 

You can speak with bank representatives who will recommend an EMI based on your monthly income. You can begin making the monthly repayments if you accept our recommendation. If not, you can haggle over the sum. In any event, eight years is generally the maximum repayment period permitted. 

Be Money-Smart with our App

A good credit score can help you secure lower interest rates on loans and credit cards.

Get Free Credit Score