All the guys facing hurdle in taking education load or paying it back should take look at this article and read all the details regarding repayment and how to get it if bank is denying.
What is Educational Loan: An Introduction
Education loan scheme is to provide financial support to student going for higher education in India or abroad. To make education accessible for everyone in country there are few policies being framed on National and State level so that this basic need of the education is met through appropriate public and private sector initiatives. With a gradual reduction in government subsidies higher education is getting more and more costly and hence the need for institutional funding in this area is essential so by keeping this point in concern and based on recommendations made by a Study Group, IBA had prepared a Educational Loan Scheme which was advised to banks for implementation by RBI dated April 28, 2001.
This announcement was made by the Hon’ble Finance Minister in his Budget Speech for the Year 2004-05. So here this article will clarify every doubt of yours regarding the education loan and its procedure. I have been observing during my college where students were hopeless to get education loan if they are in some private college or university because bank prefer more of the government college in compare to private which become a major hurdle for the students.
This article will help you to get education loan and queries regarding how to apply for education loan but still if there is some problem you are facing you can comment your concern straight to us we will assist and make it happen for you.Let’s have a look on what is education loan briefly.
Main Objective behind Education Loan
The Educational Loan Scheme aims at providing financial support from the Indian bank to the deserving and meritorious students for pursuing higher education in India or abroad. The main motto is that every meritorious student should get an opportunity to pursue education with the financial support from the bank with affordable terms and conditions. If a deserving student is left from an opportunity to pursue higher education then country is no more on the track of development so clearly keeping the motto in place Education Loan Scheme is launched.
Eligibility Criteria For Education Loan For India and Abroad
Eligible Criteria to apply for Education loan:
Study In India
- Student Should be an Indian National
- Must have Secured admission to professional/ technical courses in India or Abroad through Entrance Test/ Merit Based Selection process.
- Graduation Course that are Eligible for education loan: BA, B.Com., B.Sc., etc.
- Professional Course that are Eligible for education loan: Engineering, Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc.
- Post-Graduation Course that are Eligible for education loan: Masters & Phd
- All Computer certificate courses of reputed institutes accredited to Dept. of Electronics or institutes affiliated to university.
- Courses like ICWA, CA, CFA etc.
- All Courses conducted by IIM, IIT, IISc, XLRI. NIFT etc.
- Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India. In case the course is pursued abroad, the Institute should be recognized by the competent local aviation/shipping authority.
- All Courses offered in India by reputed foreign universities.
- Evening courses of approved institutes.
- All other courses for diploma/ degree etc. offered by colleges/ universities approved by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
- Courses, which are not covered under the criteria mentioned above, individual banks may take a look to consider your request.
Education Loan Eligibility Criteria for Study in abroad
- Graduation : For job oriented professional/ technical courses
- Courses offered by reputed universities.
- Post-graduation: MCA, MBA, MS, etc.
- Courses conducted by CIMA- London, CPA in USA etc.
What are the expenses considered for education loan?
- Fee payable to college/ school/ hostel will be considered for education loan.
- Examination/ Library/ Laboratory fee will be considered for education loan.
- Purchase of books/ equipments/ instruments/ uniforms will be considered for education loan.
- Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts, subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course will be considered for education loan.
- Travel expenses/ passage money for studies abroad will be considered for education loan.
- Purchase of computers – essential for completion of the course will be considered for education loan.
- Insurance premium for student borrower will be considered for education loan.
- Any other expense required to complete the course – like study tours, project work, thesis, etc. will be considered for education loan.
How much is the finance limit in education loan?
- Studies in India – Maximum of Rs.10.00 lacs can be taken as education loan.
- Studies abroad – Maximum of Rs.20 lacs can be taken as education loan.
Margin in education loan?
|Upto Rs 4 lacs||NIL|
|Above Rs 4 lacs : study in india :||5 %|
|Studies abroad :||15%|
- Scholarship/ assistantship to be included in margin.
- Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis.
Who can give security in education (Does security require for education loan) ?
|Upto Rs 4 lacs||Co-obligation of parents no security required by bank|
|Loan above Rs.4 lacs and upto Rs7.5 lakhs||Co-obligation of parents together with collateral security in the form of suitable third party guarantee. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as “joint borrower”.|
|Above Rs.7.5 lakhs||Co-obligation of parents together with tangible collateral security of suitable value, along with the assignment of future income of the student for payment of instalments|
Please Note that:
- The loan documents should be filled by both the student and the parent/ guardian as joint-borrower any happening will lead to parents responsibility.
- The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, shares/mutual fund units/debentures, bank deposit in the name of student/ parent/ guardian or any other third party with suitable margin.
- Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount.
- In case the loan is given for purchase of computer, the computer has to be hypothecated to the Bank
What is the Interest rate for education Loan:
|Upto Rs 4 lacs||BPLR (Benchmark Prime Lending Rate)|
|Above Rs. 4 lacs||BPLR + 1%
- Simple interest to be charged during the Repayment holiday/ Moratorium period.
- Penal interest to be charged as applicable to individual banks.
What is the repayment methods and interest for education loan?
- One can start repaying his/her education loan after course period +1 year or 6 months after getting job, whichever is earlier.
- Govt of India is giving subsidy on interest before repayment period it means you don’t have to pay the interest for course period + 1 year or 6 months after getting job
- The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course.
- The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed.
- 1% interest concession may be provided for loaners if the interest is serviced during the study period when repayment holiday is specified for interest/ repayment under the scheme.
Insurance policy will availed by one insurance company
Banks may arrange for life insurance policy on the students availing Educational Loan it gives some security to bank in case something goes wrong with student.
How does bank follow or track the student progress:
- Banks will contact college/ university authorities to send the regular progress report (semester wise) to the bank in respect of students who have availed loans.
- In case of studies abroad, bank may obtain the Unique Identification Number (UIN)/Identity Card and note the same in the bank’s records for tracking the record.
What Is the processing charges for Education loan:
No processing/ upfront charges may be collected on educational loans for studies in India so please stay knowledgeable in this case.
Banks can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtained from applicant, if required.
What are the other conditions for education loan?
- Meritorious Students: Banks which wish to support highly and exceptionally meritorious/ deserving students without security may delegate such powers to a fairly higher level authority.
- Multiple Loans : In case of receipt of application for more than one loan for student borrower from a family, the ‘family’ as a unit has to be taken into account for considering the loan and security taken in relation to the total quantum of finance disbursed, subject to margin and repaying capacity of the parent/student.
- Minimum Age: There is no specific restriction with regard to the age of the student to be eligible for education loan.
- In case Change of Address: In cases of student staying with parents and where such parents have transferable jobs or there is change in address, the bank may provide in the system of noting the ‘address for correspondence’ for tracking purpose.
- Co-obligator: The co-obligator should be parent(s)/guardian of the student borrower. In case of married person, co-obligator can be either spouse or the parent(s)/parents-in-law.
- No Due Certificate: No due certificate need not be insisted upon as a pre-condition for considering educational loan. However, banks may obtain a declaration/ an affidavit confirming that no loans are availed from other banks.
- Flexibility in terms: In order to bring flexibility in terms like eligibility, margin, security norms, banks may consider relaxation in the norms on a case-to-case basis delegating the powers to a fairly higher level authority.
Thanks for reading Education Loan article.