Access to Quality Education
One of the obvious advantages of ED loans or student loans lies in the facilitation of increased access to quality education. Education loans bridge the financial divide, allowing students hailing from lower economic strata to pursue higher education in top schools in India and overseas. This has led to educational democratisation promoting talent development and a more inclusive society. It leads to wider reach and allows students to attend top-tier institutions and schools that would otherwise be out of reach due to higher financial obligations. At the same time, ED loans available for pursuing undergraduate, postgraduate, professional, and vocational programmes lead to an access to a diverse range of academic portfolio.
Financial Flexibility
Education loans or ED loans provide significant room for financial flexibility, allowing families to manage their financial obligations without getting worried about their savings or liquidating their assets. The available financial assistance becomes important especially in the context of escalating tuition, housing, and other educational costs. Other aspects include the following:
- Comprehensive Coverage: Education loans cover costs incurred on pay tuition fee, examination and library fees, travel expenses, living cost including for purchase of books, laptop etc.
- Staggered Payments: Staggered payment generally implies payments of different amounts in different intervals over a specified period of time. Disbursal of ED loans in installments eases the immediate financial stress and prevents diversion of funds for other important purposes.
Also Read: Govt. Initiatives and Low Interest Education Funding Solutions in India!
Interest Rates and Subsidies on ED Loans
Of late education loans are being offered by banks, NBFCs with favourable interest rates, making them an affordable financing choice. Furthermore, different scholarship loans, subsidies on education loans are being offered to alleviate the financial burden on students and their families.
- Competitive Rates: Interest rates for school education loans typically range between 8 to 15%, with public sector banks frequently offering lower rates. Scholarship education loans offered by public and private bodies are offered at much lower interest rates.
- Subsidies: Schemes like the Central Sector Interest Subsidy (CSIS) provide full interest subsidy during the moratorium period for economically weaker sections (EWS).
- Concessions: Many banks provide interest rate discounts to female students, meritorious students, and those from specified socio-economic backgrounds.
Tax Benefits on ED Loans
- Interest Deduction: The interest paid on student loans can be deducted from taxable income for a period of up to 8 years, beginning with the year of repayment.
- No Upper Limit: There is no upper limit to the amount that can be deducted for interest payments.
Repayment Options for ED Loans
Education loans being offered in 2024 come with different repayment choices ensuring accommodation of challenging financial situations faced by the borrowers. This leaves room for flexibility while allowing the students to focus on their studies without worrying about immediate repayment demands.
- Moratorium Period: Repayment normally begins when the course is completed, with an additional 6 to 12-month grace period.
- Extended Tenure: Repayment terms can last up to 15 years, allowing for affordable equated monthly installments (EMIs).
- Prepayment Options: Most banks allow consumers to pay off their loans early and save money on interest.
Simplified Application Procedure of ED Loans
Digital platforms and government initiatives have made the application procedure for education loans more efficient and accessible. Public and private online platforms have become a one-stop shop for students looking for education loans, offering a simple application and tracking process.
- Online applications: Digital platforms make it easier to apply, lowering paperwork and processing times.
- Unified Portal: The Vidya Lakshmi Portal enables students to apply to numerous banks using a single application form, making the process easier.
Also Read: Educational Pathways: Central and State Scholarship Portals in India!
Empowering Skill Development through ED Loans
- Skill Loans: Loans for short-term vocational courses and skill development programmes enable students to learn industry-relevant skills.
- Employment Readiness: Education loans promote skill development, which leads to greater job possibilities and career progression.
Encouraging Female Participation through ED Loans
Many banks offer concessional rates and benefits to female students to encourage their participation in higher education. This emphasis on female education helps reduce gender disparity in education while promoting gender equality.
- Lower Interest Rates: Female students frequently receive interest rate discounts, which make education loans more affordable for them.
- Targeted Schemes: Loan schemes designed specifically for female students offer further assistance and encouragement.
Supporting International Education
Education loans cover a wide range of fees for students planning to study abroad, such as tuition, travel, living expenses, including health and travel insurance. This makes overseas education more affordable, giving students worldwide exposure and experience.
- Comprehensive Coverage: Education loans cover all major costs incurred on pursuing studies abroad.
- Higher Loan Amounts: Banks provide larger loan amounts meant for international studies covering increased cost of expenditures.
Also Read: Education Funding Solutions in India: Govt. Initiatives at a Glance!
Courses and Eligibility Criteria for an ED loan
General eligibility criteria applicable for an ED Loan include the following:
- Indian citizens in a specific age group, generally 16 to 35 years of age.
- Applicants should have a good academic record and they should have completed 10+2 or diploma.
- If the applicant is enrolled in a recognised institute in India or overseas, loans are sanctioned based on pre-admission, entrance exam scores, 12th/HSC results or confirmed admissions.
- Academic programmes generally include Graduate/Postgraduate/Diploma courses in professional education from recognised and accredited institutes in India and overseas.
Co-applicants for an ED loan
A co-applicant is the person who applies with the primary borrower for the ED loan and accepts to share the payment of Equated Monthly Instalments (EMIs) and other responsibilities.
Parents, brother, sister, spouse, father-in-law, mother-in-law, daughter-in-law, maternal and paternal uncle/aunt and grandparents can be your co-applicant in general.
Understanding the Key Aspects of Education Loan!
One of the most important aspects of an ED loan or education loan relates to opting for a loan with or without collateral. Both of the options have their own advantages and disadvantages, and therefore making an informed choice is vital.
Education Loans Offered with Collateral: A collateral education loan requires the borrower to pledge assets, such as property, investments or valuable belongings in the form of security against the borrowed amount. Some of important points to consider in this regard are as follows:
- Higher Loan Amounts: Lenders offer larger loan amounts when collateral is involved since they have an asset to fall back on in case of default. This can be advantageous for students attending expensive institutions or pursuing advanced degrees that require substantial funding.
- Lower Interest Rates: Collateral provides lenders a form of security. This reduces the risk associated with the loan. As a result, loans secured with collateral are offered with lower interest rates compared to unsecured loans. This translates to lower monthly payments and overall savings on the total loan amount.
- Longer Repayment Period: Collateralised loans often come with longer repayment periods. This can significantly reduce the financial burden on borrowers, especially fresh graduates who are yet to enter the job market and willing to work on entry-level salaries.
- Building Credit History: Successful repayment of education loans offered with collateral can help students build a positive credit history, which is beneficial for future financial transactions.
Education Loans Offered without Collateral: ED loans offered without collateral are called unsecured education loans. It does not require borrowers to pledge any assets in the form of security. Instead, the lender extends credit based solely on the borrower’s creditworthiness and income potential. And therefore it is vital to stay well informed about the offer.
- Wider Accessibility: Unsecured education loans are more accessible to a wider range of students since they do not require collateral and thus making it an attractive option for those who do not have valuable assets to pledge or are unwilling to risk their assets.
- Lower Loan Amounts: Without collateral, lenders may abstain from lending large loan amounts, particularly to borrowers with limited credit history or income. This may necessitate students to explore additional funding sources to cover their education expenses.
- Higher Interest Rates: Since unsecured loans pose a higher risk to lenders, they are offered with higher interest rates compared to loans offered with collateral. Therefore, borrowers may end up paying more interest over the repayment period of the education loan.
- Absence of Risk on Assets: Opting for an unsecured loan implies that the borrowers do not have to worry about risking their assets in case of repayments default.
Conclusion
Education loans in 2024 offer a host of benefits that make them an essential tool for students aiming to achieve their academic and professional goals. By providing financial support, enhancing accessibility, offering competitive interest rates, and ensuring flexible repayment options, education loans play a crucial role in fostering a more educated and skilled population. As the demand for quality education continues to grow, education loans will remain a key enabler, unlocking opportunities and empowering the next generation of learners.
Also Read: Eternal University Launches Fully-Funded BCA Program for Aspiring Young Women, Appy Now!
FAQs on Key Aspects of ED Loan!
What is the general eligibility criteria to apply for an Education Loan?
Indian citizens must be 16 to 35 years of age with a good academic record and should have completed 10+2 or diploma. If the applicant is enrolled in a recognised institute in India or overseas, loans are sanctioned based on pre-admission, entrance exam scores, 12th/HSC results or confirmed admissions.
What are the general courses for which one can avail an Education Loan?
Courses in general include Graduate/Postgraduate/Diploma studies in professional education from recognised and accredited institutes in India and overseas.
Who can be my co-applicant?
Co-applicants in general may include parents, brother, sister, spouse, father-in-law, mother-in-law, daughter-in-law, maternal and paternal uncle/aunt and grandparents etc.
What is the basic difference between education loans offered with and without collateral?
A collateral education loan requires the borrower to pledge assets, such as property, investments or valuable belongings in the form of security against the borrowed amount whereas ED loans offered without collateral are called unsecured education loans. It does not require borrowers to pledge any assets in the form of security.
How does education loan encourage female participation?
Answer: There are several banks that offer concessional rates and additional benefits to female students to encourage their participation in higher education. This reduces gender disparity in education and promotes gender equality.
What is a moratorium period ?
Moratorium period is the time before actual repayment begins when the course is completed. It is generally offered to students to seek employment in the form of an additional 6 to 12-month grace period.
What are the basic features of an unsecured loan?
The basic features of an unsecured loan are as under:
- Wider Accessibility to students
- Absence of Risk on Assets as it does not involve collateral or pledge.
- Lower Loan Amounts
- Higher Interest Rates