It is time for the higher secondary students to plan for their professional degrees. The results are out for the higher secondary students and if you are a student passing out from the secondary school, mind full of tension about the course to choose, lot of suggestions from the relatives and friends. If you are hailed from a wealthy family then financial requirement won’t be major issue in your case. But, if your financial status decides your future of education, then you must be worried even though you have scored very decent in the exam results. If you are loosing your life time ambition just because of the current situation of your family finance, then it should be the life time mistake you have done.
Education loan comes to your help for funding your spending for the education. In India, govt. has informed all the banks to offer education loans to all the students. However there are few restrictions on the course, college, etc. that prevents banks to reject the loan applications. But, in most of the cases students will fall in to the category of eligible courses.
If you have any doubts related to the education loans, please post it in the comments section. I will reply to all your queries and resolve your doubts. Thank you for reading my blog. Stay tuned to get more updates!!
How to get education Loans?
If you are in India, you can apply for education loans in all the nationalized and private banks. As per the govt. circular to all the banks in India, every bank must approve the education loans application from the students. If you are a student who have completed the higher secondary education, you can get the education loan from any of the nearest bank branch in your city.
It is always good idea to start inquiring about the education loan to the banks. Each bank may have different eligibility criteria, it is better to be early than the late. If you have savings bank account with any of the bank, start your inquiry with the same bank. Your job could be easier because they are already known to you.
The following are the steps to apply for the education loan:
- Find the details of the procedure to apply for the education loan
- Fill up the education loan application form to the bank
- Get the bona fide certificate from the college which you are joining with the receipt of joining fees and fees structure of the institution
- Submit the mark sheet of the higher secondary education
- Submit the address proof
- Other documents requested by the banks
Who can get education loans?
There are certain restrictions to approve the education loans. When banks are offering the loans, they have to consider the repayment capability of the applicant. The student’s family may not be in the good financial status, but his course must be competent in the country to get him good job to repay his loan. Otherwise banks would hesitate to approve the loans. Let’s look into the few points which is important for you to get the education loans:
- You must be get into the approved education institutions in the country. The loans can not be applied for the un-approved institutions.
- Job prospect for the chosen course. If you are studying the course which has very less probability to get the job and you don’t have any other assets, then very likely you will fail in repaying the loan.
- You have check the list of courses in the education loan document. Most of the courses would be covered in the list.
- You must be an Indian citizen
- If you are in the category of SC/ST, then aggregate mark percentage should be 50% else 60% required.
The above points are only the guideline for you to get an idea about the eligibility enforced by most of the leading banks in India.
What is your education loan eligibility?
- If you are studying in India, maximum eligibility is Rs. 10,00,000 (10 lacs)
- If you are studying in abroad, maximum eligibility is Rs. 20,00,000 (20 lacs)
If you need more loans, it depends on other eligibility criteria like marks, college, family income, etc.
Security for education loans
If you are applying for education loans below Rs. 4,00,000, there is no security with the loan. If you need loan amount more than Rs. 4 lacs, then you have to provide the loan guarantee.
- If the loan amount between Rs. 4 lacs to Rs. 7.5 lacs, student’s parents or relatives has to provide the individual guarantee.
- If the loan amount is more than Rs. 7.5 lacs, student has to provide security in the form of assets in his name or parents name.
But, in the most of the cases the total expenses of the courses would fall into 4 lacs. Note that the loans can not be taken for the donation given to the colleges. The loan can be only used for the college fees and hostel fees. The following are the expenses allowed to claim in the education loan:
- College semester fees
- Exam fees, books and lab fees
- Student’s education expenses (dress, research related materials)
- Expenses incurred for completing the project work
How to repay the education loans?
There is no need for the students to repay the loans at the time of studying. After completing the course, within one year or after getting the job within six months he has to start the loan repayment. Normally five years to given to repay the entire loan amount. The Equated Monthly Installement (EMI) is differ for the each bank. If your family’s total income is less than 4.5 lacs per annum, you need not pay the interest on the education loans at the time of doing the course. That expenses will be paid by the govt. Please read our previous article about interest free education loans.
Under Section 80E, interest paid on the education loans are fully exempt from the Income tax. The loan can be taken for himself or the relative. Relative means the in relation to an individual, means the spouse and children of that individual the student for whom the individual is the legal guardian. There is no condition that the course should be in India. The total claim for the interest payment is unlimited.
Interest Rates for the Education Loans
I have summarized the list of banks with interest rates. I have listed only the leading nationalized banks in India.
Update 1 (26-June-2012):
Here is the good news for those who are interested in doing the vocational or skill development courses like polytechnic, mechanical or professional certification for the specialized skills required for the job. These areas have not been covered by the existing loan scheme. In the existing loans, banks approve only the formal degrees from the recognized institutions. The change in the guidelines for education loans by Indian Banks Association (IBA) has made it clear that banks can offer loans for the vocational courses. It is not very clear that when banks will start implement this scheme for the students. If you have approached the banks and got any valuable information, please share it here.
Update 2 (30-June-2012):
In the recent survey conducted by the Indian Banks Association (IBA) with over 150 educational institutes across the countries, banks are not following the standard guidelines issued by IBA for issuing the loans. There are high number rejection on the education loans, sadly most affected part is the rural areas. Even for the loans less than Rs. 4 lacs, banks tend to ask for the collateral. Also they charge the compound interest rate on the loans which is not acceptable. I have learn from the comments in our post about interest free educational loans, many of the students have complained on these issues. We hope that our govt. or any body would take this issue seriously and find a remedy. Educational loans are very important for the economically weak students.
I have come up with the maximum details to help the students to search for their education loans. If you have any friends who are looking for the education loans, please share this details which will be more useful for them. If you are student, the progress report of your studies needs to be submitted to the bank every six months. So, you have to be careful on clearing all the subjects. Banks has the rights to stop your education loan at any point of time if your performance is not good in college.
If you like this article, subscribe here to get more updates on this news.