Education and academic excellence are considered to be very important in
India. An education loan is a loan that helps facilitate young minds to pursue their academics
further, either in India or aboard by providing them with a loan amount to fund their higher
education. This is very advantageous when the child does not have adequate funds to pursue
his/her higher education. An education loan can be availed for an undergraduate degree, a
postgraduate degree or a PhD.
The loan repayment is done only when the student completes
his/her course and finishes a grace period of 6 months or one year wherein he/she can join a job
and start making money.
Features and benefits of an Education Loan:
Good loan amount
Maximum loan amount of Rs. 50 Lakhs can be obtained as an education loan for domestic
institutes and up to Rs.1 crore for international institutes. So, the loan amount can be
availed based on the tuition fee for the institution. In some cases, living expenses are
also covered by the bank along with other needed expenses for the education such the cost
for books, a laptop and more.
Flexible tenures
Education loans have tenures that can extend up to 10 to 15 years. This reduces the EMI
burden on the student, and he/she can repay the loan amount with ease in time after the
moratorium period.
Good education
A major benefit of taking an education loan is that the student gets to afford a good
education that can help him/her in the long run by getting a good career and getting settled
for life. It helps one achieve academic excellence that adds to a resume to enable one to
get into a reputed company thereby giving one job security and job satisfaction for
life.
Tax benefits
The interest paid on the education loan can be claimed as a tax deduction as per section 80E
of the Income Tax Act that was passed in the year 1961. However, the income tax benefit can
only be claimed on the interest of the loan and not the principal amount as it does not
qualify for it.
Government subsidy
The Government of India has a scheme to help the weaker sections of society to enjoy
education and not deprive them of the same due to insufficient monetary funds. According to
this, the Government of India provides full interest subsidy during the moratorium period
which is during the entire course period plus an additional six months of one year after
getting a job, whichever is sooner.
Moratorium period
The repayment on the education loan does not begin right after he/she finishes his/her
course. The banks provide a holiday period of one year or six months after course completion
which is called the moratorium period. So, one does not need to repay the loan during this
one year, but the interest rate will be applicable for the year. This helps the student get
a job to help repay the loan and this lessens the burden on the student by a great deal.
Collateral free loans for premier
institutions
A very big advantage in an education loan is that if the student gets an admission into a
premier institute such as IIT or IIM, then the entire loan amount can be taken collateral
free. If the institute is not a premier institute, then only up to 4 lakhs can be taken
without collateral. Loan amounts that are higher than 4 lakhs require collateral in most
cases.
What is the eligibility for a Education loan?
These eligibility criteria can vary from lender to lender and so
it is best to check with the lender you are borrowing from as to what their eligibility
criteria are.
- Should be an Indian citizen
- Should be a minimum of 16 years old and a maximum of 35 years old
- Should have finished 10th std and 12th std
- Should have received an admission letter or invite for the course needed from the
University or Institution
- Parents are required as joint borrowers for the loan
- If the loan amount if high (generally above 7 lakhs or 10 lakhs) collateral might be
required.
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What are the documents required for an Education loan?
For the student:
- The Institution’s admission letter along with the fee break-up
- 10th and 12th graduation mark sheets
- Identity proof
- Age proof
- Address proof
- Signature proof
- Application form that is completely filled out
- Latest passport size photograph
Identity proof, age proof can be submitted with Aadhar card,
passport, driver’s licence or voter’s ID. Address proof can be submitted with Aadhar card,
ration card, passport, telephone bill, electricity bill or voter's ID card.
For the parent:
- Income proof
- For salaried individuals – Salary slips and bank statements for 6 months
- For self-employed individuals – Income Tax Returns, bank statements and proof of
turnover
- Age proof
- Address proof
- Signature proof
- Application form that is completely filled out
- Latest passport size photograph
Documents needed can vary from lender to lender and so it is
best to check with the lender you are borrowing from as to what are the documents
needed.
Apart from this there are some procedures like signing of the
loan agreement by the applicant and the parents, repayment instructions to be followed and
the copy of the payment receipt of given by the institute to be submitted.
How to apply for an Education loan?
You can apply online by filling in the application form and
turning in all the required documents. or You can apply in person by visiting the lender’s
branch with all the needed documents and filling out the application form for the same.
Frequently Asked Questions
Education loan amounts can go up to Rs.50 lakhs for domestic institutes
and up to Rs.1 crore for international institutes.
Education loans have tenures that can extend up to 10 to 15 years.
In most cases, the applicant should be a minimum of 16 years old and a
maximum of 35 years old.
Loan amounts that are higher than 4 lakhs require collateral in most
cases.