Education/ Student Loan is something that almost every family need to consider ones there kid moves out of his/her school life. Although now kids are very much vigilant towards there career which make them decide (early) what they want to become in there life. But this only help students & their parents to get the idea how much funds they may require to complete higher education but arranging funds for the same is another big question.
As higher education has become very expensive in India as well as abroad, students and there parents needs to plan for funds so that their kid wont miss the opportunity due to unavailability of funds on time. So if you are also looking for a best way to fund your higher education then can consider education/ student loan as one of the good options available to you.
Before understanding the know how of student loan here mentioning the recent changes made by IBA in the education loan scheme in India which will benefit students:-
Indian Banks Association (IBA) has now made some changes which will benefit lot of students who look to get admission into management quota. Earlier Education /Student loans were available to students on taking admission into courses offered by government institutions only. This was a big constraint for the students who wish to get into courses in management quota but don’t have fund to finance the same from there own pocket. So removing this constraint IBA has announced some changes in the existing education loan scheme:-
- Meritorious student who qualify for the seat under management quota can take the education loan.
- Students entered into course under management quota will get the loan amount for the fees approved by the government not the actual fees collected by the institution.
- Now students who wish to do nursing course can also apply for the education loans which was earlier not eligible for the education loan.
What Is Education/ Student Loan?
Education/ Student loan, also known as study loan is a type of loan which is especially designed to fund students higher education. Anyone going for higher studies either in India or in foreign countries can apply for student loan to fund his/her course expenses. By this student can complete his/her study without any interruption of funds as student loan covers all major expenses like tuition fee, hostel rent, cost of books etc.
But everyone applying for student loan wont get approval for the same as banks have some specified criteria which they follow while considering student loan application. Majorly bank give priority to students who have secured admission in graduate or post graduate degree or diploma course in management, engineering or medical field in top colleges.
How Much Education/ Student Loan One Can Avail For Higher Education?
Banks have some set criteria’s which they follow while offering student loan. Which includes:-
- For higher education in India :- Bank offers student loan for upto Rs 7.5 lakhs.
- For higher education abroad (outside India) :- Bank offers student loan for upto Rs 15 lakhs.
Terms and loan amount also varies depending on each case.
What Are The Terms Of Repayment Of A Education/ Student Loan In India?
Although ‘Terms of repayment of loan’ sounds very hard but as this loan has been designed for students the term of repayment of education loan are kept soft as compare to other loan types.
- The repayment of student loan starts one year after the completion of course or 6 months after getting employed – whichever is earlier.
- Repayment of student loan is done through Equated Monthly Installments (EMIs) which includes both principal repayment and interest payment.
- Most Indian banks provides a long term i.e 7 years to repay the education loan.
- Student loan attracts simple interest on the loan amount which starts from the date of loan disbursal till the actual EMIs starts. However, most banks also offers an option of moratorium on this interest payment.
- If one chooses moratorium on interest payment, then you do not need to pay interest while studying – the interest gets accumulated and you need to repay everything through EMIs one year after the completion of course or 6 months after you get employed – whichever is earlier.
What All Documents Are Required To Apply For An Education/ Student Loan In India?
Although every bank have there own set of requirements but here I have collated few documents which almost each bank would require for processing of study loan in India:-
- Copy of identity proof
- Copy of address proof
- Proof of admission
- Fee Structure
- Passport size photographs
- Copy of mark sheets
- Bank account statements of *guarantor
- Income tax returns or *guarantor
- **Collateral Documents
*Guarantor :- To secure the amount of loan issued to a student for his/her higher study, bank usually ask for a guarantor who will take a guarantee of the loan amount. Which means, if you will not be able to pay back the loan amount your guarantor will be liable to pay the same on your behalf.
**Collateral :- To secure the amount of loan issued to a student for his/her higher study, banks usually ask for a collateral which will act as security of the loan amount. Which means, if the amount of loan is more than 4 lakhs bank ask for some collateral equal to the value of loan. Collateral can be a National Saving Certificate (NSC), Gold, Fixed Deposit etc..
What Is The Prevailing Interest Rates For Education/ Student Loan In India?
The rate of interest on education/ student loans are quite reasonable as compare to other loan types. At some banks you also get an option to choose between fixed or floating interest rates. Currently floating interest rates is between 11% to 12% in most of the Indian banks.
But if you choose to opt for moratorium period on the interest payment, you may have to pay little higher interest rates.
What Is The Income Tax (IT) Benefit On Payment Of Interest On Education/ Student Loan?
One can take the tax benefit on interest payment made against education loan by getting deduction of the same amount from your taxable income. Which means the complete amount you pay as interest of education loan is deductible from your taxable income of that year as per section 80(E) of income tax act.
Is There Any Pre-Payment Penalty On Education/ Student Loan In India?
Most of the Indian banks do not levy a prepayment penalty on education loans. So one can make the loan payment faster without any penalty. But if you choose to transfer your pending loan amount from one bank to another then in that case your current bank may levy some penalty on the outstanding loan amount.