Types of Education Loans in India

The repayment of the loan can be done once the student has completed his/her education. Given the flexible terms and conditions associated with the repayment of an education loan, availing one is fairly simple and straightforward.

Different Types of Education Loans

There are a number of different education loans which are offered for different types of education programmes. Based on the type of the education that one wants to pursue, there are student loans for diploma and certificate courses, student loans for skill-based courses, student loans for studying abroad, and so on.

Whatever the course may be, there are two wide categories of the education loans on the basis of location.

• Domestic Education Loan – For educational courses within the geographical limits of the country.The borrowers have to meet various eligibility criteria and the lenders will approve the loan if the student has got a secured seat in an institute that meet the requirements of the lenders.
• Study Abroad Education Loan - For educational courses outside the geographical boundaries of the country.Like domestic education loan, the borrower should get a secured seat in a college or university among the list of the eligible educational institutions to approve the loan.

In addition to these, the education loans can be further divided on the basis of a few other categories. These include the following:

On the basis of course of education:

The financial institutions also provide loans on the basis of course type the borrower selects. The following are the types of course based education loans:

1. Graduate Student Loans: These education loans will be provided to the students who like to continue their education in the institutions within India. These loans are specifically for those students who plan to pursue postgraduate degrees. To avail this loan, the students should have completed their undergraduate program.
2. Undergraduate Education Loans: These loans provide financial support to the students to pursue their undergraduate degree programs. The course duration of an undergraduate program can be three to five years after completing which the students get ample job opportunities.
3. Professional Education Loans: Many banking institutions and NBFCs provided loans to the students who are willing to opt for career education.

On the basis of security of collaterals and/or guarantee:

The following are education loans provided based of security of collaterals or guarantee:

1. Loan against deposits: Education loan can be availed against recurring deposits or fixed deposits or gold deposits.
2. Loan against property: Banks and NBFCs also provide education loan against immovable assets such as residential land/agricultural land/ house/flat, etc.
3. Loan against securities: The borrower can avail education loans against debentures/bonds/equity shares.

What is a Study Abroad Education Loan?

As the name suggests, a study abroad education loan is a loan which can be availed for pursuing a course of education abroad. On the basis of the type of course, there are multiple options which are available under the study abroad education loans.

Types of Education Loans Available in India

1. Undergraduate Education Loan
2. Professional / Graduate Education Loan
3. Career Education Loan
4. Loans for Parents

Undergraduate Student Loans

Undergraduate student loans can be availed by individuals who have completed secondary education and wish to undertake a three or four years course to enhance their job opportunities.

Professional / Graduate Student Loans

Professional / graduate student loans can be availed by students who wish to pursue advanced degrees or higher education at colleges across the country. An undergraduate course must be completed in order for the student to apply for a graduate student loan.

Career Education Loan

Career education loans can be availed by students who wish to attend undergraduate career oriented programs at trading and technical schools and colleges across the country.

Loans for Parents

Parents of students can avail these loans, which are unsecured, to meet expenses related to their child’s education, such as tuition fees, living expenses, books, uniforms, and other expenses such as transportation costs.

The loan can be availed by not only parents, but also other adult relatives who wish to enrol their children in secondary schools, military elementary schools, religious, private or non-public schools across the country.

Features and Benefits

1. Loan Amount: Up to Rs. 1 crore for international students and up to Rs. 50 lakh for domestic students. 
2. 100% Financing: Available under certain conditions. 
3. Coverage: Includes expenses like student exchange travel and laptop costs. 
4. Preferential Forex Rates: May be available for international disbursements. 
5. Joint Borrowers: Parents must be joint borrowers for the education loan. 
6. Repayment Tenure: Up to 15 years. 
7. Moratorium Period: Up to 6 months to 1 year from course completion. 
8. Tax Benefits: Available for up to 8 years on loan interest payments. 

List of Expenses Covered under Education Loan

1. Fees owed to educational establishments.  
2. Exam, library, and lab costs.  
3. travel costs associated with studying elsewhere.  
4. If applicable, the insurance premium for borrowers who are students.  
5. Building funds, refundable deposits and caution deposits backed by invoices from the institution (total expense should not exceed 10% of the total loan).  
6. Acquisition of books, instruments, equipment, and uniforms (total cost not to exceed 20% of the entire loan).  
7. if acquiring a computer is necessary to finish the course, the entire cost shouldn't go over 20% of the loan.  
8. Other costs (total not to exceed 20% of the total loan) that are necessary to finish the course, such as study tours, project work, theses, etc.

List of Courses Covered under an Education Loan

1. Professional, technical, and diploma courses offered by universities or institutions recognised by UGC, IMC, AICTE, government, AIBMS, or CMR as well as post-graduate courses leading to graduation.  

1. Regular degree or diploma programmes offered by independent educational establishments like XLRI, NIFT, NID, ICWA, CA, CFA, IIM, IIT, and IISc.  
2. Regular degree or diploma programmes authorised by the Director General of Civil Aviation, Shipping, or another regulatory body, including pilot training, aeronautical, and more.  
3. Professional or technical courses focused on the workplace that are required for graduation, post-graduation, or certificate programmes like MBA, MCA, or MS. These courses are offered by the Certified Public Accountant (CPA) in the USA or the Chartered Institute of Management Accountants (CIMA) in London.  
4. Loans for the improvement of skills. 

Education Loan Eligibility

1. Approved undergraduate, graduate, and doctoral programs, as well as six-month or longer diploma programs, career-focused courses, and technical/professional courses, are all eligible to receive loans.  
2. The applicants ought to be enrolled in or receiving admission to internationally recognised colleges and universities, government institutions, professional institutions, and approved recognised institutions.  
3. For undergraduate programs, applicants must have finished their 10+2 (12th standard), and for postgraduate programs, they must have earned a degree. 

Documents Required

1. KYC documents. 
2. Mark sheets of 10th, 12th, graduation, and entrance exams. 
3. Letter of admission. 
4. Fee structure. 
5. Co-applicant KYC and proof of income in some cases. 
6. Additional documents may be asked for in some cases. 

Tax Benefits on Education Loan

The monthly interest you pay on your school loan can be deducted from your income tax under Section 80E once you begin repaying the loan. It is not possible to claim the deduction on the principal repayments.

The amount that you can deduct from your school loan interest repayment is unlimited. To prove it, you must get a certificate from the bank. This facility is accessible for eight years, beginning in the year that you begin loan repayment and ending until the interest is paid in full, whichever comes first. 

Education Loan EMI Calculator

The education loan EMI calculator is a handy tool that computes your monthly EMI payment to the lender. By adjusting a slider to input the principal amount (P), time duration (N), and rate of interest (R), you can determine your EMI and plan your finances ahead of time. 

How to Apply?

You can apply for an education loan online or offline. 

Online Application Process

1. Go to the bank's website and select an educational loan programme.  
2. Either click "Apply Now" or download the application.  
3. After completing the application and attaching the required paperwork, submit it.  
4. The bank will examine your collateral, assess your course of study, and verify your documentation.  
5. The bank will release the loan amount upon approval. 

Offline Application Process

1. Visit the branch of the bank where you wish to apply for a loan. 
2. Fill out the application form and submit it with the necessary documents. 
3. The bank will verify your application and process the loan. 

Study Loan Repayment System

After finishing school, some lenders offer a grace period of six months to a year during which you can obtain employment and begin repayment. Depending on the lender, this grace time may change. You can begin the repayment process in installments once you have employment.

Based on your monthly income, bank representatives will recommend an EMI. You can begin repaying the debt if you agree to do so; if not, you can work out a different sum. Typically, the maximum repayment period is eight years. 

Things to keep in mind before applying for an education loan

Some of the things you will need to keep in mind and also know before applying for an education loan are: 

1. An education loan is available exclusively for Indian nationals. 
2.  In some cases, the loan can cover the entire cost of your studies.  
3. Besides tuition fees, the loan can also be used for expenses such as books, uniforms, hostel fees, transportation, equipment like laptops, and student exchange travel costs. 
4. You can start repaying the loan 6 months after completing your course, known as the grace period or moratorium period, which may vary by lender.  

1. The loan tenure can extend up to 10 years.  
2. For loan approval, you must have completed the previous course and secured a spot in the college, university, or institution for which you are applying the loan. Additionally, you must meet all the criteria set by the lender. 
3. You can claim a tax rebate under Section 80E on the interest payments of the loan, but this rebate is not available for principal repayments. 

Conclusion

Education loans are designed for all aspiring students who aim to complete their studies and professional courses, as well as for parents who cannot afford to finance their children's education. Both secured and unsecured loans are available to fund your education. Whether studying domestically or abroad, education loans make pursuing academic goals more accessible. 

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