30-35 years back, my uncle got selected in IIM Ahmadabad but unfortunately due to financial constraint he was not able to join. Then he dropped plan of higher studies & joined some PSU at junior level. Few years back his son got selected in good US University but he was not in a position to fund that through his savings.
But things have changed
Many people want to study further but are unable to do so because of the fees. Higher education and professional degrees are becoming very expensive. Many banks and financial institutions therefore provide education loans for this purpose. The best aspect about education loans is that most institutions allow you to start the repayment instalments after you complete the course for which you have taken the loan or start working.
My uncle funded his son’s education through loan – now my cousin is working & comfortably repaying the loan.
Compare Education Loan
You need to compare the loans available in the market on many factors before you decide the best one for you. Let us compare some popular education loans –
| Features | Credila (HDFC Bank) | IDBI Bank | Punjab National Bank | State Bank of India |
| Details | – The borrower will get an Indian rupee denominated loan deposited in any bank account in India.
– It covers tuition money, living expenses, purchase of equipment for studies and fare equivalent to one economy class return ticket if it is a different country of study |
– There are different loans available depending on whether it is a vocational/non-vocational or whether the applicant falls under the financial inclusion program or is physically challenged.
– Loans for Executive programs are also available. It covers tuition expenses, purchase of equipment and books for studies, travel expenses if education is to be had abroad and insurance premium if insurance is mandatory. |
– Loans are available for graduation, post graduation courses, vocational courses and part-time job oriented courses for Indian nationals.
– It covers fees, purchase of equipment and books, travel expenses, study tour costs and project expenses.
– Margin money is required for loan amount greater than Rs. 4,00,000 up to the extent of 5% for studies in India and 15% for studies abroad. |
– Different types of loans are available depending graduation and post graduation courses, diploma courses and vocational training.
– It covers fees, purchase of equipment and books, travel expenses, study tour costs, project expenses and the cost of a two-wheeler up to Rs. 50,0000
– Margin money is required for loan amount greater than Rs. 4,00,000 up to the extent of 5% for studies in India and 15% for studies abroad.
– There is a 1% discount on the loan if interest is paid regularly starting from the moratorium period (the period when you are exempt from repayment.)
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| Rate of Interest | A floating rate of 14.25% | A rate from 11.25%-13.75% depending on type of loan. | A rate from 11%-14.25% depending on loan amount. | A rate from 11.75%-13.75% depending on loan amount. |
| Collateral | House, Flat, Agricultural land or fixed deposit can be used as collateral | – Collateral is not required for a loan amount < Rs. 4,00,000.Â
– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.
– Above that, collateral in the way of land, Bonds, bank deposit etc. is required. |
– Collateral is not required for a loan amount < Rs. 4,00,000.
– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.
– Above that, collateral in the way of land, Bonds, bank deposit etc. is required. |
– Collateral is not required for a loan amount < Rs. 4,00,000.
– Third party guarantee is required for loan amount from Rs. 4,00,000 to Rs. 7,50,000.
– Above that, collateral in the way of land, Bonds, bank deposit etc. is required. |
| Loan Repayment | Repayment instalments will begin as soon as disbursement of loan has begun. | Borrower needs to pay during the tenure of the course and post that up to 1 year or 6 months after getting a job whichever is earlier. | Borrower needs to pay during the tenure of the course and post that up to 1 year or 6 months after getting a job whichever is earlier. | Repayment will have to begin one year after completion of course or 6 months after getting a job, whichever is earlier. |
| Processing Fees | Rs. 5618 (For a Loan of Rs. 5,00,000) | No processing fees. | There are some charges levied as upfront fees for study abroad which is refundable and documentation charges are levied. | There is no processing fees or upfront charges. A refundable deposit of Rs.5000 will be charged for loans for education abroad. |
| Minimum and Maximum Amount | Rs, 1,00,000 to any amount deemed suitable by Credila. | – For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 20,00,000.
– Students availing loan for education in premier institutions can get higher amounts. |
For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 20,00,000 | For studies in India, the maximum loan disbursed is Rs. 10,00,000 and for studies in abroad, the maximum loan amount is Rs. 30,00,000 |
There are certain aspects that you need to remember while taking an education loan –
- A co-applicant is compulsory. It can be parents, siblings or spouse and parents-in-law.
- Default in payment will affect the credit score of the student on whose behalf the loan is taken and the co-applicant.
- Most colleges/universities abroad ask for insurance. Therefore you should check if the loan covers that.
- You can avail of tax benefits under section 80-E of Income Tax Act.
- Public sector banks give a discount of 0.25% for female students.
- The loan may not cover the entire expense of education abroad and so the student has to look at other avenues like savings, scholarship or part time job
- If the student remains abroad even after the course is over, the bank will expect the co-applicant to repay the loan amount.
- You should be ready with a backup plan in case the student does not get regular income even 1 year after the course.
There are more banks and financial institutions (apart from the ones mentioned here) that provide education loans that help people pursue their dreams of more education and higher education. Many have similar features to the ones mentioned above. You should compare the loans of the various criteria mentioned above and select the most appropriate one. Have you taken an education loan? Let us know your experience in using loans for education.
The Kalupur Commercial Cooperative bank is giving loan at 10% PA.
Max Amount: 20Lacs
Interest payment starts immediately after disbursement, Principle repayment after studies gets finished.Needs to be repaid in 5 years after studies.
Thanks for the information. Its very useful to students
Nice Article. Though most loan providers give an option of not servicing the loan at all till the student completes his or her studies, it is always better to keep servicing the interest, else the interest burden keeps mounting and when one starts repaying, they realise that most of the EMI goes in the interest repayment and only a marginal amount of principal gets repaid every month ! And since the loan also earns income tax rebate u/s 80 E, it makes sense for the parent to take his loan, if he or she is salaried.
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