Finance

Education Loan for Study Abroad

Student Loan or education loan is meant to be provided to those students who want to pursue a program or a degree abroad. Here, in this kind of loan, the student is the borrower and the immediate relation can act as the co-applicant. The loan takes into account the basic course fees and also some auxiliary costs like accommodation, exam fees etc. Student loans can be divided into two ways: Secured Loans: The secured loan means the lender is providing money against the pledged collateral properties like land or fixed deposits by the borrower. The ROI charges can be 9-11% p.a. Unsecured: The unsecured loans mean the lender is providing money without any security/guarantee. These will be provided based on the credential value of the borrower. For this a good credit history of the student and the co-applicant. The rate of interest is around 11-14%.

Expenses Covered in Education Loan

The loaning amount usually covers these:

• Tuition fees
• Hostel fees
• Travel expenses (tours, commute, inflight)
• Student insurance
• Cost of books/equipment/instruments/uniform
• Exam fees/lab expenses/library fees
• Laptop/PC that will be needed for the course/program completion
• Individual deposit
• Other expenses (like study tours/thesis/project work)
• Mandatory deposits (student welfare etc.)

Salient Features and Profits of Student Loan

• Loan Probability up to Rs.1 crore.
• Loan duration up to 20 years.
• Wards of bank employees can avail attractive interest rates.
• Meritorious female scholars get interest cuts by certain banks.
• Have the benefit of a moratorium period (in this the lender allows the student to take sufficient time to segregate their financial affairs and arrange for loan repayment accordingly) of up to 1 year after course completion. Banks also charge some interest for this period, which is later added to the principal amount.
• Tax benefits for the paid interests up to 8 years.

Tax Benefits on Education Loan

As per the law, under the section 80E of Income Tax Act 1961, the ROI on the student loan can be deducted. This is valid for those individuals who are seeking higher education. This reduction or interest cut is applicable for all domains of study including academic and vocational courses/programs.

However, this tax cut is only provided on the interest of the EMI, and not on the principal amount. The borrower can claim this benefit as many times as they wish for. The borrower will need a certificate from their bank/institution that will chart the principal and interest part of the EMIs to obtain this benefit. This provision lasts only for 8 years initiating from the day of repayment or until the ROI is paid (whatever appears first).

Documents Required for Education Loan

Most of the banks/financial institutions ask for these documents:-

• Mark-sheets (previous education - school/college)
• Mark-sheets (previous education - school/college)
• Age proof
• ID proof
• Address proof
• Signature proof
• Salary slips/transcripts/form-16 of the co-applicant
• Recent bank account statements
• ITR with income computation
• Audited balance sheet
• Service tax return/sales receipt
• Completed application form with signature
• Passport size photographs
• Visa
• Statement of course expenses/cost of study
• Documents stating the assets and liabilities of the co-applicant

Student Loan Approval Process

Banks/Financial Institutions takes into account the following criteria while approving a loan:

• The course and institute chosen
• The amount that one need
• Academic performance
• Repayment capacity
• Family assets
• Annual income

How to Apply for a Student Loan?

There are several ways to apply for a student loan:

Step 1: The most convenient way is to fill an application online, filling the needed documents and then submitting that.

Step 2: In this way, the applicant provides the needed details and then the bank/financial institution reverts you to for a conversation on the loan before filing the application.

Offline Application:

Step 1:Visit any Branch of the bank: One can apply for an education loan by going to the nearest branch of their preferred bank with all the important documents, discussing the terms and then applying for it.

Step 2: Call the lender. One can either call the bank or request a revert call by expressing their interest.

Virtual Assistant:-

Banks deploy a virtual assistant to solve the doubts of applicants and also to assist in the loan application process.

Student Loan Repayment Process

This phase will start only after a year of completion of the studies or 6 months post-employment (whichever is applicable immediately). Students will be given different moratorium periods by different banks/institutions when it comes to repaying the loans. Students need to repay their loan in EMIs.

The different options of loan repayment are:

• Internet Banking: Pay online via the bank/institute website or mobile app.
• Cheque: A cheque is useful for payment in any branch of the bank.
• Direct Debit: Set up a monthly basis payment option to pay your EMIs on time.
• DD: A demand draft is a good option.

Eligibility Criteria of a Student Loan

• The candidate has to be an Indian national.
• The student should have a confirmed admission in any course of a recognized college/university.
• The university/college should be affiliated with UGC/AICTE/govt., etc.
• The age should be between 18 and 35 years during loan application.
• He/she must sustain a graduate/postgraduate degree/diploma.
• Students pursuing full-time courses should have a co-applicant who can be either parent/guardian/spouse/parent-in-law.
• The co-applicant should have a stable source of income.
• A strong academic record which will help in a speedy loan approval.
• The minimum interest rate charged by the lender is 8.40% per annum.

What are the ways to Improve the Eligibility of a Student Loan?

Banks examine the eligibility meticulously to ensure that the student receives financial aid. Students’ all academic records, education streams, and the current admission status is verified by the bank for approval of loan. The potential applicant can increase their chances by:

• Maintain high marks in required exams
• Showcasing good academic records
• Admission in a top-ranked college/university
• Adequate funds from the co-applicant
• Prove that you have potential in earning

Student Loan Providers in India

The opted and enrolled courses of the students and the institution/university they apply should be outstanding while investing the fund for study abroad. Some banks that provide student loans are: