Education Loan: Everything You Need to Know

Education Loan is the one service which has helped for years to aid aspiring students in achieving their academic pursuits. Many-a-times students stop from pursuing higher education because of financial limitations. But its a curious and enlightening fact that many eminent personalities like Barack Obama and Ted Cruz have studied with education loans and achieved great feats. Students who have more information about education loan norms and are ambitious enough to attain good education are always able to pay back their education loan. All information about knowing the education loan phenomenon is listed below so that you can asses if you can avail an education loan in India to attain the kind of worthy education you deserve.

What is education loan?

Loans are termed as money or assets shared with any demandant/applicant with a promise of repayment in future by a certain timeline. Although the financial system has turned this simple definition to a more twisted technical concept, the core idea remains the same. Students in need of huge consolidated funds for pursuing their education generally take the education loan in India, from banking institutions. Applicants with aspirations to pursue courses with outcomes of employability or business generally are able to secure these loans for their higher education.

What are the types of education loan? What is Study Abroad Education Loan?

Study loans can be of as many types as the education programs they fund. There are skill based student loans, student loans for study abroad programs, student loans for diploma courses etc. In a broader category, they are put together as:

1. Domestic Education Loan
2. Study Abroad Education Loan

These study loans can be further categorized based on the educational level of the applicant as well. They are also categorized based on secured loans and non-secured loans depending upon the necessity and availability of collateral/guarantee from the applicant. There are other categories as well described below:-

• Based on Education course type
  1. Higher Education Loan: for degree/graduation
  2. Diploma Student Loan: for diploma/professional courses for skill-based learning
  3. Professional Study Loan: for post-graduation/doctoral/post-doctoral education
• Based on the security of collaterals/guarantee
  1. Secure Loans: covered by collaterals, tangible or non-tangible guarantee, third-party guarantee
  2. Non-Secured Loan: not covered by any guarantee or collateral and thus liable to risk or forfeit
• Based on loan collateral type
  1. Loan against property: agricultural and non-agricultural land/flat/house etc.
  2. Loan against deposits: fixed deposits/recurring-deposits/gold-deposits
  3. Loan against securities: equity shares/debentures/bonds etc.
  4. Loan against third-party guarantee: certificate of guarantee from the home bank (for study loan application to another bank), certificate of guarantee from employer (in some cases)

How does education loan work?

Education loans help students pay not only academic fees but also non-academic expenses during their studies. The provision of student loan, like any other loan, comes on the payment terms of an interest amount over the originally borrowed money. Commonly known as Study Loan EMIs, the monthly installments paid against the student loan allow applicants to repay the loan amount borrowed step-by-step.

Who can avail education loans?

Education loans in India are only limited to higher education, albeit scholastic education in India being equally expensive. Study loans are provided to students who’re at least pursuing a professional course approved by government bodies after completing their SSC (10^th class or equivalent) and HSC (12^th class or equivalent).

Who can provide education loans?

Banking institutions in India which are allowed to provide education loan have to be approved by Indian Banking Association (IBA). These banking institutions are obligated to follow the CSIS (Central Sector Interest Subsidy Scheme) and other regulatory norms to provide the services which are in the best interest of student loan applicants. The two common types of institutions which are allowed to provide study loans in India are:-

1. Registered banking institutions
2. Non-Banking Financial Institutions (NBFCs)

Education loan from registered banks (features/benefits/conditions)

• Accountability of transactions
• Study Loan insurance facility available
• Lower rate of interest for loan
• Higher education loan tenure
• Extra features like part-payment, health cover, etc.
• Interest Rate subsidies and tax rebates

Education loan from non-registered banks/NBFCs (features/benefits/conditions)

• Higher education loan amount availability
• Low processing time
• Low or no need of collateral (even for high student loan amount)
• Higher interest rates
• Tough repayment timeline
• Extra features like loan against movable property/bullion (gold/diamond deposit loans)
• Wider course and institution eligibility options for applicants
• Higher processing fees
• Lower moratorium period (holiday period when applicants can choose to not pay the EMIs)

It is strongly suggested that students should apply for study loan at a banking institution regulated by IBA and RBI. Only these institutions provide loans which are considered safe in terms of financial security and anti-theft norms.

Best banks providing study loans generally fall in the category of registered banks but there are other NBFCs too, which are becoming more popular with their quick service and easier norms. There is another method by which students can find the best possible blend of services provided by both NBFCs and registered banks. They can opt for Student Loan Experts or Student Financing Institutions. Education loan experts like Buddy4Study EduLoans provide the best of what NBFCs and ‘Registered Banks’ have to offer.

Features of student financing institutions like Buddy4Study EduLoans

• Provide customized education loan (high loan amount, low-interest rate and maximum expense coverage, etc.)
• Can help provide student loan from foreign banking institutions as well
• Can help get extra additional services which do not come packaged with standard loans
• Study loan for scholastic education available
• Relaxed eligibility norms of age, course, and economic background

What are the education loan features? What are the education loan benefits?

What are the expenses covered by the Education Loan?

Education loans cover all sorts of academic expenses of any student. Almost all banking institutions provide loans that cover not only tuition fees but other institutional expenses as well. Students should still check if the bank of their choice covers all expenses they are meant to incur. Higher education especially abroad includes following vivid academic expenses that student loans cover:-

Academic Expenses:

• Tuition Fees
• Capitation Fess
• Registration Fees
• Counselling Fees
• Examination Fees
• Study visits and educational tour fees
• Laboratory Fees
• Library Fees
• Hostel fees/transport fees
• Mess-Food expenses

Non-Academic Expenses

• Building Fees
• Fixed/Student welfare contribution
• Refundable caution money
• Transport and commute expenses
• Equipment and project expenses
• Laptop, 2-wheeler, transport-pass, wheelchair expenses (necessary)
• Student insurance
• In-flight expenses, outward remittances (study abroad)
• Entrance exam fees SAT Exams, LSATS, GRE, GMAT, TOEFL, MCAT, etc.

What are the qualities of a good education loan?

Education loans are mostly identified by their core terms and conditions, as these decide the extra amount that students have to pay while repaying the loan. These terms and conditions are laid out in the form of:

• Study loan interest rates
• Study loan eligibility criteria
• Collateral requirements
• Loan repayment conditions

A detailed account of what a study loan comprises is listed below:-

What is the Education Loan Eligibility Criteria?

A student loan is only provided to students who show a possible surety of repaying the loan back to the bank. To confirm this possibility, banks cite eligibility norms for applicants. These eligibility norms are not only meant for loan sanction but also the student loan tax benefits and subsidies, which are discussed in a later section.

General student loan eligibility criteria for Indian banks is:

1. Applicants must be a resident of India
2. Students pursuing full-time courses need to have a co-applicant who can be either parent/guardian or spouse/parent-in-law (in case of married candidates)

Eligibility conditions for education loans in India

Eligibility type	Details of loan eligibility
Age-based eligibility	Undergraduate loans: 18-27 years Post-graduate loans: 21-35 years Doctoral courses: 27-55 years Post-doctoral courses: 27-65 years
Course-based eligibility	Undergraduate degrees/diplomas and special courses Postgraduate degrees/diplomas and special courses PhDs and Doctoral Programmes Certificate courses (minimum duration 6 months and above) Other technical and job-oriented courses
Institution-based eligibility	Government Universities/Colleges/Institutions (Delhi University/BHU/etc.) Government aided/private reputed institutions (IIM/MDI/Xavier’s/IIT etc.) International Institutions (depending on bank’s individual approved college list) Professional institutions (ICAI/CFA/etc.)

Education Loan eligibility criteria of popular banks in India

Bank Name	Education Loan eligibility
State Bank of India	HSC/12th class or equivalent passed Confirmed admission in case of foreign university Courses approved by UGC/AICTE/IMC/etc. Applicants for higher education (degree/diploma/graduation/post-graduation
HDFC Bank	Indian resident Age limit: 16 to 35 Academic: HSC (10+2) or equivalent at least Enrolled for Graduation and above in recognized Indian University/College/Institution accredited by UGC/AICTE/IMC/ etc.
Canara Bank	Eligible courses: Graduation, post-Graduation and onwards Technical/Professional Courses Certified by UGC/AICTE/IMC/etc. Indian national
Axis Bank	Student loan applicant must be an Indian citizen Applicants must score at least 50% marks in HSC (10+2 or equivalent) or Graduation for respective loans Must have secured admission in India or Abroad

What are education loan interest rates? Why do education loan interest rates change? How do I find education loan interest rates?

‘Interest rates of education loan’ means the percentage amount that will be charged from the applicant for borrowed principal amount. The interest rates in India are floating and based on changes as regulated by IBA (Indian Banking Association) and RBI (Reserve Bank of India).

Most banks charge a standard percentage over the regulated MCLR (Marginal Cost of fund based Lending Rates) as the interest rate for student loans. Applicants who wish to apply for loans to pay for their education should always keep a tab on the changing MCLR of various banks. Standard rates of interest for study loan in India are mentioned below.

Loan Type	Loan interest rate and other details
Interest rate (Domestic study loan)	Min: 8.35% Max: 15.8%
Interest rate (Study abroad student loan)	Min: 9.7% Max: 16.2%
Education loan duration (domestic/foreign)	Min: 1 year Max: 20 years
Maximum loan amount for domestic education	Min: INR 20,000 Max: INR 45,00,000 (45 lakhs)
Maximum loan amount for foreign education	Min: INR 1,50,000 Max: 1,50,00,000 (1.5 crore)

Interest Rates of some popular Indian banks providing student loans to higher education aspirants are:

Bank providing loan	Interest Rate: Domestic Education (Average ROI)	Interest Rate: Foreign Education (Average ROI)
State Bank of India	10.14%	10.70%
HDFC Bank	10.25%	11.88%
ICICI Bank	11.00%	11.50%
Punjab National Bank	10.35%	11.10%

What is the education loan repayment process?

Student loans generally work like any other bank loan where applicants have to pay regular EMIs (Easy Monthly Installments) till the complete loan amount including interest is paid off. Each monthly installment includes some portion of the principal amount and some portion of interest. Students can choose the amount of their study loan EMI based on their affordability. The higher the EMI amount, the higher will be the principal component and the faster applicant will be able to pay back the loan. Some peculiar details of student loan repayment process are:-

• Moratorium period: Education loans in India provide the facility of starting EMI payment after the applicant has completed education or after attaining successful employment.
  • Time duration: Course duration + 1 year or First employment + 6 months
  • Interest on the loan is still applicable for this time duration
• Student loan EMI (Easy Monthly Installment): A fixed sum of repayment set by the applicant to be paid monthly in return of the study loan.
  • Student loan EMI = (annual interest on total disbursed loan amount/12) + principal amount adjustment
  • Applicants can choose to set any amount for EMI, so as to manage the amount of principal amount adjusted with every EMI
• Education loan part-payment: Students with available funds can submit the consolidated sum of repayment to decrease the burden of interest rates.
  • This is not at all related to the fixed EMI amount, students can repay higher than EMI up to any limit (As per bank conditions)
  • Most banks do not provide this service but applicants should check with their respective bank
  • Part payment can be used to adjust the loan tenure/duration and lower the EMI rates for subsequent payments
• Education loan pre-payment: Students who happen to arrange for the complete due amount of study loan can choose to repay the complete loan prior to its tenure, irrespective of the fixed monthly EMIs
  • Involves some processing charges (not compulsory for all banks)
  • Is not allowed during the moratorium period
  • Applicants might need to check the limits of pre-payment at their respective bank
• Education loan extension: Applicants can also choose to extend the loan tenure or lower the EMI based on their affordability. This helps students to manage the loan in a better way.
  • Extension of study loan can be done in two ways, (i) decrease in EMI value (ii) increase in loan tenure
  • A decrease in EMI value is adjusted to increase the number of total EMIs to be paid
  • An increase in the loan tenure is adjusted by the change in EMI value or by an increase in study loan principal amount
• Education loan refinancing: Addition of study loan amount can be done as per the requirement of an applicant based on their existing loan and credit record. Students wishing to continue their education or seek more funds can present their existing study loan as proof for refinancing. Above repayment options are all applicable for student loan refinancing.

How to apply for an education loan? Which method of education loan application is better, online or offline?

Education loan application process involves three major steps. Each of these steps can be followed via online or offline channels. Applicants have always preferred to use the offline loan application methods but online features with low turn-around-time and transparency of information are catching on among parents and students. The three major steps involved in study loan application are:-

1. Education Loan research
2. Loan application
3. Document verification and sanction

How to find the best education loan?

Applicants (students) or co-applicants (parents/guardians) can research by both offline channels and online channels. But visiting each bank and finding details of student loan services is a very exhausting and time-consuming method. Following are the steps that students can follow to find the best education loan:

• Find out the final amount of education loan that you have to apply for
  1. Check academic fees required (a)
  2. Confirm sources of funds that can be arranged without the loan (b)
  3. Identify the loan amount required (c): c = (a – b)
• Gather information about the study loan amount limits and interest rates from official websites of various banks
• Verify the number of EMIs to be paid, affordable loan amount, estimated loan tenure by visiting IBA education loan calculators (details below).
• Confirm the information on the website and your calculation from the respective bank (call customer care or visit the nearest branch)
• Finalize with your choice of the study loan based on the top factors for finding the best student loan as mentioned above.

Education loan calculators: affordable EMI amount, affordable loan amount and loan duration

Education loan calculators are available on various unofficial websites but students should only rely on authentic calculators to make estimates about their loan. Some banks have their own study loan calculators but to get standardized results it’s better to access IBA (Indian Banking Association) loan calculators. You can use these study loan tools at the website of IBA by following these steps:

1. Visit the official website of Indian Banking Association (iba.org.in)
2. Scroll to the ‘Others’ option from the menu bar of the home page
3. Select ‘Calculators’ option which will lead you to the education loan calculation tool page
4. Select the following options based on your requirement of information:-
   1. How much do I pay: Monthly EMI to be paid
   2. How much can I afford: Affordable loan amount
   3. How long will it take to repay: The total number of installments to be paid
5. Click on the respective option and fill the required details as gathered from study loan research

Where can I apply for an education loan? What is Vidyalakshmi Education Loan portal? Is there a difference between online/offline education loan applications?

Education loan applications can be filed via various channels. Applicants should always compare the best offers and benefits while choosing these channels.

• Study loan application offline (at bank branch/office)
• Online application of study loan (at bank official website)
• Online application of study loan (at government’s Vidyalakshmi portal)
• Application via education loan experts (like Buddy4Study EduLoans)

Education Loan Application Process – Offline

Education loan offline process includes application by visiting the respective bank branch and following these steps:-

• Gather the documents required for the loan after making your calculations
• Visit the official branch of the respective bank
• Confirm complete information gathered with a bank official/officer
• Confirm the documents required
• Fill the loan application form and submit required documents
• Ask for a formal student loan agreement after loan sanction

Education Loan Application process online via bank official website

Online application of education loan from bank’s official website is just re-routing of the loan request. You just provide them with personal and academic details so that bank can approach you and proceed with an offline application process. However, the online application process can work with the banks:

• Which provide doorstep student loan service
• Which have the loan application process routed through government student loan portal
• Or have an independent online application procedure

Students can visit any bank’s official website and look for the education loan section for the online application. Commonly banks have an online application form asking for applicant’s details and permission consent for call-back.

Vidyalakshmi Education Loan Online Application

Central Government of India has an online platform which combines the services of many banks to provide study loans. Students can find most banks on this platform and can apply directly for study loans here without the need to visit the bank branch. There are other benefits for study loan application from Vidyalakshmi Portal, you can read about it from Buddy4Study archives. Steps to apply for a student loan from Vidyalakshmi Portal are:

• Register on the Vidyalakshmi Portal with phone no. and email
• Login and fill the Common Education Loan application form (CELAF)
• Upload the required documents
• Search and apply for study loan based on applicant’s requirement (max: 3 applications)
• Check application status regularly
• Verify all personal, financial and academic details on confirmation call from Bank

The direct Loan amount will be transferred to your bank account if the process is verified by the bank.

Loan Application with Education Loan Experts like Buddy4Study EduLoans

Applicants looking for customized student loan services which help in covering extra expenses and provide easier loan terms can avail student loan expert services. Generally, banks have limits of loan amounts (both upper and lower) which keeps students from applying for study loan services. Students also face problems with loan repayment with conventional student loans. Student loan experts provide students with the financing options selected from a wide pool of loan providers. Thus, they are able to provide applicants with services which best suit their requirements.

The application process for EduLoan experts is:-

• Search for the best student loan expert service (Buddy4Study Eduloan, HDFC Credilla, Avanse etc.)
• Visit the official website of education loan expert
• Fill the study loan application form, providing applicant’s contact details only
• Experts will contact the applicant, where applicants will need to provide the required details
• Experts will revert with best loan service options

What is an education loan interest subsidy? What are the tax benefits of education loan?

The Indian government has laid provisions for applicants to avail interest subsidy on education loans. Many private and centralized banks also provide study loan subsidies to applicants. These subsidies are generally in the form of a reduction in interest rate charge or reimbursement of interest paid on the student loan. Various government schemes for study loan subsidy are mentioned below:-

Central Sector Interest Subsidy

Provided by: Ministry of Human Resource and Development, Govt. of India

Subsidy Eligibility: Indian Students pursuing professional/technical education are eligible for this subsidy scheme. Family income of the applicant from all sources should not be more than  INR 4.5 Lakhs per year.

Benefits:

• Collateral free education loan up to INR 7.5 Lakhs (750000)
• Total interest subsidy on study loan for the course duration/moratorium period

Dr. Ambedkar Central Scheme of Interest Subsidy on Education Loan for Overseas Studies

Provided by: Ministry of Social Justice and Empowerment, Government of India

Subsidy Eligibility: Overseas students of India, studying at recognized universities/colleges/institutions can avail this subsidy. Students need to be enrolled in Master’s programs at foreign institutions. Only students belonging to OBC (Other Backward Classes) or EBC (Economically Backward Class) can avail this subsidy. Maximum family income for OBC applicants is INR 6 Lakhs per year and maximum family income for EBC applicants is INR 2 Lakhs per year.

Benefits

• Complete interest subsidy for the duration of course
• Students would need to commit their salary post course completion towards the repayment of education loan installments

Padho Pardesh – Scheme of Interest Subsidy on Educational Loans for Overseas Studies

Provided by: Ministry of Minority Affairs, Government of India

Subsidy Eligibility: Students enrolled in Master’s programs or above in International Universities/Colleges/Institutions outside India are eligible for this subsidy. Only students from Minority Communities (like Parsi, Jain etc.) can avail this scheme. Maximum family income allowed for applicants is INR 6 Lakhs per year.

Benefits

• Complete interest subsidy for the duration of course
• Students would need to commit their salary post course completion towards the repayment of education loan installments

Students need to apply for all these subsidies by separately asking for the subsidy application form while applying for study loan offline. If applicants are taking online student loan application service then they don’t need to separately apply. Students need to present the following documents to avail these education loan subsidies:

• Proof of admission (especially foreign university/institution applicants)
• Minority or caste certificate as issued by competent authority (if required)
• Income certificate as issued by competent authority.

Education Loan: not the only option of student finance

Education loans are not the only means to manage one’s academic expenses. Students can avail the benefits of various scholarships, fellowships and grants available every year. The application process and eligibility of scholarships are more relaxed than the study loans. It is not compulsory for students to only look for a scholarship based on merit, as there are scholarships based on means as well which help financially weaker sections. Many banks also provide options to adjust student loan payments by using scholarship amount as well, so that loan repayment becomes easier.

Did you know: There are 19000 crores worth of scholarships released every year for students in India through various private and government schemes? More than 6000 such scholarships and fellowships are listed on Buddy4Study so that students can find suitable options to finance their education.

With all this information for the student loan, we hope that students will be able to find the best education loan service for themselves. For more information regarding loans for students, you can also visit the online archives of Buddy4Study and check out the education loan information regarding all popular banking institutions.