Education Loan Schemes are financial programs offered by banks and financial institutions to help students pursue higher education. These loans cover various expenses such as tuition fees, accommodation, books, and other related costs.
Education Loan
Prominent financial institutions in India provide educational loans to assist students in accomplishing their academic aspirations. These loans, explicitly designed for educational purposes, feature a repayment period of up to 20 years, with an annual interest rate starting at 7.00%. Such loans cater to domestic and international students pursuing higher education within and outside the country.
The lending institution assesses eligibility criteria for education loans, which determines the courses that qualify for such financial support. These loans can be obtained for educational programs from the Nursery level onwards. Furthermore, individuals can acquire loans for full-time or part-time courses, including loans specifically tailored for working professionals pursuing higher education.
Compare Top Education Loan Offers 2023
Name of Bank | Interest Rate (p.a.) | Processing Fees |
PNB | 8.55% onwards | ₹ 250 plus GST |
SBI | 8.50% onwards |
Up to ₹10,000 No charged required for loan amount below ₹20 lakh Loan amount above ₹20 lakh: ₹10,000 (plus taxes) |
Axis Bank | 13.70% to 15.20% | 2.00% of the loan plus GST |
Bank of Baroda | 11.05% to 11.15% | No processing charges up to ₹7.50 lakh1% of loan amount up to ₹10,000 |
HDFC Bank | Preferential rates as per the college or the university | As per the criteria of the bank |
Kotak Mahindra Bank | Up to 16% | Nil |
Federal Bank | Contact the bank | Contact the bank |
Punjab National Bank Education Loan
- The maximum loan amount is determined based on the individual’s needs.
- The loan tenure can be up to 15 years.
- No collateral is required for loans up to ₹7.5 lakhs.
- There is no margin requirement for loans up to ₹4 lakhs.
- The loans are available to Indian residents as well as Overseas Citizens of India (OCIs), Persons of Indian Origin (PIOs), and students born abroad to Indian parents who wish to study in India.
- No security or collateral is needed for loans up to ₹7.5 lakh.
- The moratorium period, during which no repayment is required, includes the course period and an additional year.
SBI Education Loan
- Loans up to ₹7.5 lakhs do not require collateral or a third-party guarantee.
- Repayment begins one year after completing the course.
- The repayment period can extend up to 15 years after course completion, plus an additional 12 months.
- Loans up to ₹20 lakhs have zero processing fees.
- Students can apply for a second loan to fund further higher studies
Axis Bank Education Loan
- The minimum loan amount available is ₹50,000.
- The maximum loan tenure is 20 years.
- There is no requirement for a margin (down payment) for loans up to ₹4 lakhs.
- Based on your profile, you can secure a loan even before admission.
- Once the bank receives your complete application, the loan amount will be disbursed within 15 business days.
- Working professionals can avail of unsecured loans of up to ₹20 lakhs
Bank of Baroda Education Loan
- The maximum loan amount available is ₹150 lakhs.
- Loans up to ₹.7.5 lakhs do not require any security.
- Loans up to ₹4 lakhs do not require any margin.
- There are no processing fees for obtaining the loan.
- There are no charges for documentation.
HDFC Bank Education Loan
- Maximum loan amount: Up to ₹1.5 crore.
- Loan repayment tenure: Up to 15 years.
- Easy documentation process.
- No collateral is required for loans up to ₹ 7.5 lakh.
- Tax benefits are available on education loans.
- The loan amount is directly disbursed to the institution based on its fee structure.
Tata Capital Education Loan
- Maximum loan amount: Up to ₹30 lakhs.
- Collateral: Not required for loans up to ₹4 lakhs.
- The interest rate starts at 10.99%.
- Processing fee: 2.75% of the loan amount.
- Choose from 3 EMI plans for convenience.
- Minimal documentation and quick loan approval
Education Loan Eligibility
Nationality
- Indian citizens
- Non-Indian Residents (NRIs)
- Overseas Citizens of India (OCI)
- Persons of Indian Origin (PIOs)
- Students born to Indian parents abroad and wish to study in India
Courses
- Undergraduate programs
- Postgraduate programs
- Doctoral courses and PhDs
- Certificate courses of 6 months or longer duration
- Job-oriented courses
- Technical/diploma/professional courses
Credit Score
Lenders may consider the credit score of the applicant.
Institutes:
- Recognised institutions and government colleges
- Private institutes aided by the government
- Professional institutions
- International colleges and universities
Collateral
- Collateral-free loans up to ₹ 7.5 lakhs available from leading lenders.
- Collateral-free loans up to ₹ 40 lakhs are available for select courses/institutions from select lenders.
- Acceptable collateral includes residential or commercial property or plots, fixed deposits, and insurance.
Loan Amount
The maximum loan amount can go up to ₹1 crore.
Education Loan EMI Calculator
Estimate Monthly Payments: Use the calculator to find out how much you need to pay each month for your education loan. Simply enter the loan amount, tenure, interest rate, and processing costs.
Total Loan Cost Breakdown: The calculator also provides a detailed breakdown of the total interest payable and a complete amortisation table. This table shows how your monthly payments are divided into principal and interest amounts on a monthly and yearly basis.
Partial Prepayment Option: Some lenders allow partial prepayments on your loan once a year. The calculator helps you determine the potential interest savings and the time it will take to fully repay your debt if you choose to make such payments.
List of Expenses Covered in Education Loan
Education loans typically cover a wide range of expenses to ensure that the student does not face any financial hurdles in pursuing higher education. These include:
- Tuition Fees: This is the primary expense; the course fee is paid to the educational institution.
- Hostel or Rent Charges: Accommodation expenses such as hostel fees or rent for an apartment.
- Exam Fees: Costs associated with examination fees throughout the course.
- Library/Laboratory Fees: This covers fees paid for utilizing library or laboratory facilities.
- Books and Equipment: Purchases related to textbooks, laptops, etc.
- Travel Expenses: Travel costs, especially in the case of studying abroad.
- Caution Deposit/Refundable Deposit: Some colleges charge a refundable deposit.
Miscellaneous Expenses: This includes uniforms, educational trips, etc.
Features & Benefits of Study Loan
- Competitive Interest Rates: Education loans usually have lower interest rates compared to personal loans.
- Tax Benefits: Under Section 80E of the Income Tax Act, the interest paid on the education loan can be claimed as a deduction.
- Flexible Repayment Options: The repayment schedule can often be customised.
- Moratorium Period: This is a relaxation time given after the course completion, during which the borrower is not required to repay.
- Wide Coverage of Courses: Loans are available for a diverse range of courses.
- Loan amount: High loan amounts are available depending on the course and institution.
Tax Benefits on Education Loan
Under Section 80E of the Income Tax Act, the interest paid on education loans is deductible from your taxable income. This deduction is available for a maximum of 8 years, starting from the year in which you start repaying the loan.
Courses Covered Under an Educational Loan
- Undergraduate degrees
- Postgraduate degrees
- Undergraduate diplomas
- Postgraduate diplomas
- Vocational training courses
- Skill development courses
- Doctoral programmes
List of Documents Required for Education Loan
- Admission letter from the educational institution
- Mark sheets (previous education – school/college)
- Age proof
- ID proof
- Address proof
- Signature proof
- Salary slips
- Recent bank account statements
- ITR with income computation
- Audited balance sheet
- Recent bank statements
- Proof of turnover (service tax return/sales receipt)
- Completed application form with signature
- Latest passport size photographs
- Appropriate Visa for studying abroad
How to Apply for an Education Loan?
Apply Online:
- Visit the lender’s website.
- Fill the education loan application form.
- Upload the necessary documents.
- Submit the application.
- The lender will review the application and may schedule an interview.
Apply Offline:
- Visit the nearest branch of the lender.
- Fill out the education loan application form.
- Provide hard copies of necessary documents.
- Attend the in-person interview, if required.
Virtual Assistant
Some banks and financial institutions have virtual assistants on their websites to help guide you through the application process online.
Education Loan Repayment Process
1. The loan repayment period typically begins 12 months after course completion or 6 months after securing employment, whichever comes first. Different lenders offer varying moratorium periods for loan repayment.
2. Repayment of the loan is required through Equated Monthly Instalments (EMIs).
3. Repayment options usually available include:
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- Internet Banking: Pay online through the lender’s website or mobile app.
- Cheque: Submit a cheque at any branch of the lender.
- Direct Debit: Set up recurring payments for EMIs to be directly debited from your bank account on the due date.
- Demand Draft: Make payment through a DD.
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4. The preferred repayment method may differ among lenders, so it is advisable to inquire with your specific lender while obtaining the loan.
5. Important details regarding the education loan repayment process:
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- Moratorium Period: Borrowers can start repaying the loan after completing the educational course or securing employment.
- Part-Payment: Borrowers are allowed to make partial payments towards the loan by paying a lump sum amount.
- Prepayment: Borrowers who have the funds can choose to prepay the loan, but this may involve a processing fee.
6. If financial constraints hinder your professional aspirations, consider availing an education or student loan to help you achieve your goals. These loans are typically collateral-free, meaning you won’t need to provide any security, and repayment does not commence immediately after graduation.
What do the Lenders Consider to Approve the Loan?
- Credit History: A good credit score and clean credit history.
- Course and Institute Reputation: Loans are more likely to be approved for reputed institutions.
- Income of Parents/Guardians: A stable income source is necessary.
- Collateral: In case of high loan amounts, collateral might be required.
- Academic Background: Strong academic records can be favourable.
Expenses Covered by Education Loans
- Hostel fees
- Exam fees, laboratory and library fees
- Cost of books, uniforms, projects, etc.
- Travel expenses for overseas education
- Deposits required by the educational institute
FAQs
1. Is the RBI moratorium on loans due to the Covid-19 pandemic applicable for education loans too?
Yes, the RBI moratorium due to the Covid-19 pandemic was applicable to education loans as well.
2. Do banks offer education loans without interest?
No, banks typically do not offer education loans without interest.
3. Will I get the same amount of money on my education loan for the same level course in India and abroad?
No, you generally get a higher loan amount for studying abroad compared to the same level course in India.
4. Is it possible to get an education loan without offering collateral?
Yes, it's possible to get an education loan without collateral, but usually for a lower amount. CGFEL schemes provide collateral-free education loans up to ₹.7.5 lakhs under the Model Education Loan Scheme, requiring no security, while amounts exceeding ₹7.5 lakhs necessitate collateral.
5. For courses abroad, is the loan offered in the currency of that particular country?
Yes, it is typically paid as the currency of that country.
6. Will the moratorium on education loans get extended if I choose to take a sabbatical from my course?
Education loan moratorium periods vary by lender, usually until the borrower finds employment or for up to 1 year after course completion. Discussing an extension during a sabbatical depends on the bank's discretion.
7. Are NRIs eligible for education loans from banks in India?
Eligibility for education loans in India requires the individual to be an Indian national.
8. What happens if I discontinue the course and get employment within the grace period?
If you discontinue the course and gain employment, the repayment may begin immediately after you start earning.
9. Can I port my education loan to another bank with lower interest rates?
Yes, you can transfer your education loan to another bank if you find lower interest rates, but there may be charges involved.
10. Do all education loans cover 100% of the education expenses?
Not necessarily, the percentage of expenses covered by education loans can vary based on the bank's policy and the course.
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