How to Get the Right Education Loan
With every passing year, college fees are increasing. Whether you want to study in India under any private college or want to pursue a course abroad, college fees are on the rise. But this should not demotivate you. Education loans are a very common feature for pursuing quality education both in India and abroad. An undergraduate engineering course fee in India could be anything between Rs 5-10 lakhs while a medical degree in a private college can be Rs 30lakhs to Rs 50 lakhs. The management fees for a good MBA degree can be anything Rs 10 lakhs to Rs 15lakhs. To cover your education costs, the best thing to do is to opt for the right education loan.
What will an Education Loan Cover
An education loan will cover the following things:
- Tuition Fees
- Hostel and boarding Fees
- Books and Supplies
- Examination and Library Fees
- Travel Expenses (if studying abroad)
- Living Expenses
- Health Insurance (if travelling abroad)
Eligibility for Education Loan
- Indians of the age between 16 to 35 years pursuing Bachelors/Masters/Doctorate degrees
- Confirmed admission letter from UGC recognized university
- Co-applicant is mandatory for all full time programs. Co-applicant can be parents, siblings or spouse
- For loans more than 7.5 lakhs third party guarantor is required.
The size of education loan depends upon the course and the college. If you have opted for post graduate courses in premier management institutes like the IIMs, banks offer loans up to 20 lakhs. However, the average loan is anything between Rs 2 lakh to Rs 20 lakhs.
Comparative Study of Interest Rates of Education Loans
Bank Of India
Upto Rs.7.50 lacs – 3% above Base Rate
Above Rs.7.50 lacs – 2.50% above Base Rate
Upto Rs 4 lakhs - 16.50% (per annum)
Loans greater than Rs. 4 lacs and upto Rs. 7.5 lac - 17.50%
Loans greater than 7.5 lacs 15.50%
Loan upto Rs 4 lac - Base Rate 2%
Loans above Rs 4 lac upto Rs 7.50 lac - Base Rate 3%
Loans above Rs 7.50 lac - Base Rate 2.50%
For loans upto Rs.4 lacs 3.90% above Base Rate, currently 13.20% p.a.
Above Rs.4 lacs and upto Rs.7.50 lacs 4.15% above Base Rate, currently 13.45% p.a.
Above Rs.7.50 lacs 2.15% above Base Rate, currently 11.45% p.a.
11% (4% below BPLR)(subject to change from time to time)
Quantum of loan Rate of Interest (floating) For male student
4.00 Lakh (Base Rate 3.00) % = 12.65%
Above 4.00 Lakh & up to ` 7.50 Lakh (Base Rate 2.75) % = 12.40%
Above 7.50 Lakh (Base Rate 2.00) % = 11.65%
All public sector banks offer a discount of 25 basis points to female students.
Documents for Education Loans
- Admission proof
- Break-up of the costs of the course
- Completed loan application form and photographs
- KYC (Know Your Customer) document
- All academic mark sheets and certificates
- PAN Card of the student and Parent/ Guardian
- AADHAR Card of the student and Parent/ Guardian
- Proof of identity (Driving Licence/Passport/Aadhar/ any photo identity)
- Proof of residence (Driving Licence/Passport/Electricity bill/Telephone bill)
- Student/Co-borrower/ guarantor's bank account statement for last 6 months
- IT return/ IT assessment order, of previous 2 years of Parent/ Guardian/ other co-borrower (if IT Payee)
- Brief statement of assets & liabilities of Parent/ Guardian/ other co-borrower
- Proof of income (i.e. salary slips/ Form 16) Parent/ Guardian/ other co-borrower
Repayment of Education Loans
After you have completed the course, you get a moratorium of 6 months to 1 year before you start repaying. No matter what, even if you have not secured a job, you need to start the repayment after a year and you can avail of the benefits under Section 80-E of the Income-Tax Act.
Important Points to Remember
- Providing margin money for education loans exceeding Rs 4 lakhs which is usually 15% of the loan amount is
- You have to provide some immovable property in your name for a loan amount of more than Rs 7.5 lakhs
- Your education loan amount for studying abroad will depend on the exchange rate at the time of disbursement.
- Your repayment will start after a moratorium period
- Completing your KYC or (Know Your Customer) is an essential part of the loan process