Education Loan Funding in India – Education plays a crucial role in the development of individuals and nations and easily available bank education loans holistically complement this objective. Youthful demography of the Indian population presents a huge advantage, however access to quality education is critically essential to reap the advantages of demographic dividend. It is no secret that we need to invest heavily. Low interest education loans have a big role to play.
Increasing costs of education often make it unaffordable for many families. This is where bank loans for education become important. Student loans enable deserving students to pursue their academic ambition without stress. Education loans cover various expenditures incurred on tuition fee, accommodation, books, food, travel, examination fees etc In this article, we will explore the different education loan opportunities available to students. Let us consider the following banks to begin with:
- State Bank of India
- Punjab National Bank
- Canara Bank
- Bank of Baroda
- Bank of India
- Central Bank of India
- Bank of Maharashtra
- Indian Bank
- Punjab and Sind Bank
- UCO Bank
- Axis Bank
- Federal Bank
(Note:- It is important to remember that the specific details of bank loans are subject to periodical revision. Applicants are advised to visit the official websites or connect with branch officials of the concerned bank before applying for an education loan.)
Evolving Landscape of Education Loans in India: Trends and Insights
The education loan industry in India has evolved significantly over the recent years. This is largely attributed to the sudden rise in the demand for pursuing higher education both within the country and abroad. Education loans provide institutional funding required to harness and empower the human capital in India, given the financial constraints faced by families and individuals in meeting the rising cost of education.
Education loan portfolio forms only a small fraction of retail loan portfolio of all commercial banks in India (3.3 per cent) but it bears special significance in terms of skill formation required for enhancing productivity and efficiency in an economy. With a sound beginning in the year 2001, the number of educational loans offered has increased from 0.11 million in 2000-01 to 2.59 million in 2013-14. This reflects an average annual growth rate of 28.7% in loan accounts. According to data released by the Reserve Bank of India (RBI), the outstanding portfolio under education loans grew by 17% to ₹96,847 crore in 2022-23 from ₹82,723 crore in the previous year.
According to the UN data on human development, gross enrolment ratio in tertiary education during 2014-19 was 28% for India, which was lower than the average of 33% for developing countries and the world average of 39%. Given the fact that higher education helps in attaining sustainable livelihoods, it is important to bridge the resource gap for meritorious students with limited means, particularly in countries where the private market for education loans is underdeveloped.
Over the years, the education loan sector has evolved, with numerous public and private sector banks offering a variety of loan products tailored to different educational needs. The introduction of the Model Educational Loan Scheme by the Indian Banks’ Association (IBA) in 2004 further standardised and streamlined the process across banks. Public Sector Banks as revealed in the question answered in the Parliament that education loans disbursed in 2020-21, 2021-22, and 2022-23 (until December 31, 2022) were ₹11448 crore, ₹16193 crore, and ₹17668 crore, respectively. In these three years, education loans were disbursed to approximately 4.07 lakh, 4.56 lakh, and 4.97 lakh accounts, respectively. India’s education loan market is projected to grow ₹1.8 trillion by 2024.
Bank Loans for Education: Types
Domestic Bank Education Loans
Domestic education loans cater to students pursuing higher education within India. These loans typically cover tuition fees, examination fees, library fees, and other essential expenditures incurred on accommodation, books, and travel. Public sector banks like the State Bank of India (SBI), and Punjab National Bank (PNB), and private sector banks like ICICI Bank and HDFC Bank offer these loans with various terms and conditions.
Overseas Bank Education Loans
For students aspiring to study abroad, overseas education loans are designed to cover higher expenses associated with international education. These loans cover tuition fees, travel expenses, living costs, and insurance, among other costs. Given the higher financial outlay required, these loans usually involve larger amounts and may require more strict eligibility criteria, including collateral.
Bank Loans for Skill Development
Recognising the importance of skill development in enhancing employability, banks have introduced loans aimed towards vocational courses and skill development programs. These loans, often smaller in amount compared to traditional education loans, support short-term courses aimed at skill enhancement and vocational training.
Public Sector Bank Loans: Key Players
State Bank of India
The State Bank of India is a public sector bank that provides need-based loans to Indian-origin students and professionals who aspire to further their education. It offers low interest rates, a 0.50% concession rate for female applicants (for the Student loan, Global Ed-Vantage, and Shaurya education loan schemes) and up to two years deferment of EMI extension for students to complete their course.
| Loan Schemes | Effective Interest Rates |
| SBI Student Loan Scheme | 11.15% |
| SBI Scholar Loan Scheme | 8.15% – 9.65% |
| SBI Global Ed-Vantage Scheme | 11.15% |
| SBI Skill Loan Scheme | 10.65% |
| SBI Shaurya Education Loan | 11.15% – 11.75% |
Punjab National Bank
Punjab National Bank provides education loans to applicants for both domestic and overseas colleges, including co-borrowers and other funding possibilities with 0.50% concession rates for female applicants. PNB distinguishes its education loan products for meritorious students of Indian ancestry as well as students who are overseas citizens in India (OCI) or were born abroad but are pursuing higher education in India, which is unusual among lending institutions. The bank also offers loans up to ₹50 lakh to meritorious students faced with disabilities for pursuing their studies in both domestic and foreign colleges.
| Loan Schemes | Fixed Interest Rates |
| PNB Saraswati Scheme | 11.50% – 12.75% |
| PNB Pratibha Scheme | 9.20% – 11.90% |
| PNB Udaan | 10.25% – 12.75% |
| PNB Kaushal | 11.75% – 12.25% |
Canara Bank
Canara Bank offers education loans to students to pursue professional and technical courses, including graduate and post-graduate programmes with potential job opportunities. The repayment tenure is 10 to 15 years depending on the loan amount. This is the officially recognised nodal bank by government of India for providing subsidy on already availed education loans in terms of providing subsidies on interest. Besides, it not only provides education loans with low interest rates but also facilitates subsidies on the interest amount of education loans availed from the other banks.
| Loan Schemes | Effective Interest Rates |
| CB Vidya Sagar Scheme | 11.60% – 12% |
| CB Vidya Turant Scheme | 9.35% – 10.60% |
| CB Education Loan for Abroad Universities | 11.60% – 12.10% |
| CB Vidya Shakthi Scheme | 10% |
| CB Vidya Sahay Scheme | 12% |
Bank of Baroda
Bank of Baroda provides a wide range of education loans with a few distinguishing features. Borrowers, who are parents or guardians can also receive an education loan for promoting the studies of their children enrolled in nursery to Class XII, including those pursuing their studies overseas. Disbursal of loans come with debit cards, which are disbursed directly to educational institutions. Female applicants can get a concession of 0.50% on education loans.
| Loan Schemes | Effective Interest Rates |
| BOB Education Loan for Premier Institutions | 8.15% – 9.95% |
| BOB Vidya Scheme | 12.50% |
| BOB Gyan Scheme | 11.40% – 13.05% (fixed) |
| BOB Scholar Scheme | 11.40% – 13.70% |
| BOB Skill Loan Scheme | 10.65% |
Bank of India
Similar to Bank of Baroda, Borrowers, who are parents or guardians can also apply for an education loan for promoting the studies of their children enrolled in nursery to Class XII. For all those students enrolled in professional courses, concessions on ROI are additionally offered. Loans are made directly to the institution in phases based on requirements.
| Loan Schemes | Effective Interest Rates |
| BOI Star Education Loan (India and Abroad) | 1-year RBLR* + 1.70% – 2.50% |
| BOI Star Vidya Loan | 9.25% onwards |
*Repo-based lending rate (RBLR) – Repo rate is the interest rate at which the central bank of a country lends money to commercial banks. The central bank in India i.e. the Reserve Bank of India (RBI) uses repo rate to regulate liquidity i.e. money flow in the economy and this forms the basis of repo-based lending rate (RBLR) by the commercial banks in India.
Central Bank of India
The Central Bank of India provides education loans for several institutions listed under the AAA, AA, A, B, C, and D categories which are spread all over the country. For example, the AAA category includes IIMs, NITIE, XLRI, MDI, ISB etc. The list of institutions under different categories can be accessed on the official website with the following link – https://centralbankofindia.co.in/en/cent-education-loans
| Loan Schemes | Effective Interest Rates |
| CBI Cent Vidyarthi | 10.30% |
| CBI Education Loan for MBA/Engineering students | 8.20% – 10.60% |
Also Read: Affordable Study Abroad Education Funding Solutions for Indian Students!
Bank of Maharashtra
Bank of Maharashtra offers a set of private education loan products with a few unique features. It provides concessions to meritorious students and female applicants. Pre-approved loans are also made available.
| Loan Schemes | Effective Interest Rates |
| BOM Model Education Loan Scheme | 10.95% – 11.30% |
| BOM Maha Scholar Education Loan Scheme | 9.45% – 10.45% |
| BOM Maha Scholar Overseas Loan Scheme | 10.55% |
| BOM Skill Loan Scheme | 10.80% |
Indian Bank
The Indian Bank provides education loans based on individual eligibility and creditworthiness. There is no upper limit on the loan amount, no processing fee applicable for loans up to ₹10 lakhs, with no margin included on loans up to ₹4 lakh. Loans exceeding this amount can be availed with a 5% margin, which increases to 15% when availing loans for study abroad. Indian Bank provides a moratorium period of course duration plus one year with repayment periods up to 15 years. There is a 0.50% concession applicable for female students.
| Loan Schemes | Effective Interest Rates |
| IB Scholar Loan | 8.95% – 9.25% |
| IB Skill Loan | 9.55% |
| IB Student Loan | 10.05% |
| IB Global ED-Vantage | 10.05% |
| IB Take Over Education Loan | 10.05% |
Punjab and Sind Bank
The Punjab and Sind Bank offers education loans with repayment tenure of up to 15 years with no processing fee applicable. However students must make a deposit of ₹2,000 in the savings account which can be withdrawn later for some particular loan schemes.
| Loan Schemes | Effective Interest Rates |
| PSB Excellence Education Loan | 9.1% – 9.3% |
| PSB Modal Education Loan | 9.3% – 11.6% |
| PSB Education Loan | 9.10% |
| PSB Skill Education Loan | 11.60% |
UCO Bank
The UCO Bank provides education loans with minimum to no processing charges for pursuing higher studies. Longer tenures, paired with moratorium periods make repayment easier for students after getting employed. There are also specialist educational loan packages customised for medical and skill development courses.
| Loan Schemes | Effective Interest Rates |
| UCO Education Loan | 11.70% – 12.10% |
| UCO Premier Education Loan | 10.85% |
| UCO Super Premier Education Loan | 9.70% |
| UCO Aspire | 9.70% |
| UCO Skill Loan | 11.20% |
The Private Sector Bank Loans: Key Players
Axis Bank
Axis Bank provides education loans to students pursuing further studies both within and outside of India at low interest rates. Eligible students can obtain up to ₹74 lakh, with fast loan disbursement and flexible repayment options available for a pleasant loan experience. To be eligible for the loan, the borrower must have secured admission.
| Loan Amount | Effective Interest Rates |
| Up to ₹4 lakh | 15.20% |
| ₹4 to ₹7.5 lakh | 14.70% |
| More than ₹7.5 lakh | 13.70% |
Federal Bank
The Federal Bank provides loans for pursuing advanced education both within India and abroad, excluding skill development and vocational training courses. Students can avail up to ₹100 lakh with a moratorium period of up to 15 years.
| Loan Schemes | Effective Interest Rates |
| FB Fed Scholars Loan | 12.55% – 15.90% |
| FB Special Vidya Loan | |
| FB Federal Career Solutions |
Bank Education Loan: Repayment Options
The repayment of education loans usually begins after the completion of the course and a moratorium period, which includes the course duration plus an additional grace period of 6 to 12 months (or more). Repayment tenures can range anywhere from 5 to 15 years, depending on the loan amount and the policies of the respective banks.
- EMI Calculations: Equated Monthly Installments (EMIs) are calculated on the basis of loan amount, interest rate, and repayment tenure. Banks often provide EMI calculators on their websites to help borrowers plan their repayments.
- Prepayment: Most banks allow prepayment of education loans without imposing any penalty. This can help borrowers reduce the interest burden by paying off the loan ahead of schedule.
Bank Education Loans: Eligibility Criteria
The eligibility criteria for education loans in India vary depending on the type of loan and the institution offering it. However, some of the common criteria include the following:
- Academic Performance: Students must have a strong academic record. For higher education loans, admission to a recognised institution in India or abroad is mandatory.
- Age Limit: Typically, applicants should be between 16 to 35 years old. However, this can vary based on the bank and the type of course selected.
- Course Eligibility: Loans are generally available for professional, technical, and vocational courses recognised by UGC, AICTE, or other regulatory bodies. For overseas education, the course must be recognised by the respective country’s education board.
- Co-applicant: A parent or guardian is often required as a co-applicant, especially for higher loan amounts. The co-applicant’s creditworthiness and financial stability are crucial for loan approval.
- Collateral Security: For loans above a certain threshold limit, collateral security such as property, fixed deposits, or insurance policies may be required.
Bank Education Loans: Required Documentation
Banks require applicants to present/submit various documents to avail education loans. The respective documents vary, however, generally required documents are as under.
- Proof of income (Parents/Sibling/Guarantor)
- Identity Proof
- Address Proof
- Bank Statements of last six months in general
- Copy of admission letter of the institute along with fee structure
- A demand letter from a college or university
- Loan agreement/sanction letter/disbursement request form signed by applicant, and the co-applicants
- Documents for collateral security if applicable
- Form A2 signed by applicant or co-applicants for studies in overseas institute
- Mark sheets, or pass certificate
Bank Education Loans: Things to Consider!
- Subsidies on the interest rate levied on the loan amount are provided by central government schemes such as CGFSEL, CSIS, including Ambedkar Central Sector Scheme of Interest Subsidy (ACSIS).
- Section 80E allows for tax exemptions for borrowers.
- A few banks allow their current clients (with good credit) interest discounts.
- If the interest is fully paid during the study period, certain banks will grant a 1% ROI concession.
- Certain banks have the right to impose additional interest as a risk premium (up to 0.05%) in cases when the lender has not secured credit life insurance, which guarantees the settlement of obligations upon the death of the insurers.
Also Read: Education Funding Solutions in India: Govt. Initiatives at a Glance!
Conclusion
Education loans in India play a pivotal role in enabling millions of students to access quality education. While there have been significant strides in making these loans more accessible and affordable, challenges remain. Addressing these challenges through concerted efforts by banks, government bodies, and educational institutions can ensure that financial constraints do not hinder the educational aspirations of India’s youthful population. As our nation continues to prioritise education as a means of socio-economic development, education loans will remain a critical tool in bridging the gap between ambition and achievement. The education loan landscape in India in 2024 is diverse, with numerous banks offering a variety of options tailored to different needs. Students and parents should carefully consider factors such as interest rates, loan amounts, benefits, features, and eligibility criteria in the process of selecting the education loan on offer.
FAQs on Bank Loans for Education Funding in India!
How many types of education loans are available to Indian students?
Students in India can choose to avail education loans on offer under domestic, overseas or skill development loan schemes.
What are the benefits offered under the SBI education loan programme?
The benefits of State Bank of India (SBI) education loans are as under:
- Competitive interest rates
- Flexible repayment options
- A wide range of courses and institutions covered
What are the benefits available under the Punjab National Bank education loan programme?
Punjab National Bank education loans have the following benefits:
- It is also available for students in the OCI category
- Concession rate is applicable for female students
- Low interest rates
- Up to 15 years of repayment period
What are the benefits offered by the Central Bank of India education loan?
The benefits of Central Bank of India’s education loans include:
- 1% concession on RoI if interest is serviced during the moratorium period.
- Separate life insurance cover
- Nil documentation charges
Is it possible to apply for an education loan without a co-applicant?
Applicants who are applying for postgraduate education loans can avail the same without the requirement of a co-applicant, however, it is advised to have one as a cautionary measure.
How is the Equated Monthly Installment (EMI) calculated for an education loan?
Equated Monthly Installments (EMIs) are calculated on the basis of principal loan amount, applicable interest rate, and the repayment tenure. Banks often provide EMI calculators on their websites to help borrowers plan their repayments.
How are the institutions categorised for applicable education loans?
Answer – Several institutions are listed or categorised according to a ranking framework. These categories include AAA, AA, A, B, C, and D etc. For example, the AAA category includes IIMs, NITIE, XLRI, MDI, ISB etc. The list of institutions under different categories can be accessed on the official website of the banks offering education loans. It is also available on the following link – https://centralbankofindia.co.in/en/cent-education-loans
What is a repo-based lending rate (RBLR)?
Repo-based lending rate (RBLR) is dependent on the existing repo rate, which is the interest rate at which the central bank of a country lends money to commercial banks. The central bank in India i.e. the Reserve Bank of India (RBI) uses repo rate to regulate liquidity i.e. money flow in the economy and this forms the basis of repo-based lending rate (RBLR) applicable for all commercial banks in India.
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