As education cost is galloping along with increasing inflations. There is need of student loan for keeping pace with increasing education cost.
Quality education is a must for a complete and successful life all together. For many, it is equivalent to graduating from a top institution in India or abroad.
Keeping this in mind, parents/guardians, who want to provide their children with the best possible education, invest their money in different asset classes viz. Mutual Funds (MFs), ULIPs, Fixed Deposits (FDs), Sovereign gold bonds, etc.
Despite all this, one may still encounter a shortage of funds. A student loan, therefore, plays a vital role in such a scenario by helping to bridge the gap between the shortfall and the required amount.
Education loan in India
HDFC Bank provides student loan up to ₹ 20 lakhs. There is no collateral for a loan of up to ₹ 7.5 lakh.
|Loan Amount (Rs.)||Repo Rate||Spread||Effective ROI|
(Linked to Repo Rate)
|Up to 4 Lakhs||4.00%||11.20%||15.20%|
|Loans greater than Rs. 4 Lakhs and up to Rs. 7.5 Lakhs||4.00%||10.70%||14.70%|
|Loans greater than 7.5 Lakhs||4.00%||9.70%||13.20%|
- The Bank is free to decide the spread over the Repo Rate. The spread may undergo a change during the tenure of the loan.
- Customers who have already availed disbursement or received a sanction prior to October 1, 2019 will continue to operate on MCLR. Existing customers can get in touch with our customer care, if they wish to switch to Repo Rate.
Increasing education Cost
According to studies, the cost of education is increasing at an average of 15% per annum. The tentative cost of an MBA is up from Rs 2.5 lakh to Rs 20 lakh in 15 years. So if a couple saves Rs 2,000 per month for 15 years, at an average rate of 12%, they will save approximately Rs 9.5 lakh.
Educational Loan: University grant commission
Vidya Lakshmi is a first of its kind portal for students seeking Education Loan. They have developed this portal under the guidance of Department of Financial Services, (Ministry of Finance), Department of Higher Education (Ministry of Human Resource Development) and Indian Banks Association (IBA). NSDL e-Governance Infrastructure Limited has developed and maintaining this portal.
Vidya Lakshmi education loan [student loans in India]
Honourable Union Finance Minister Arun Jaitley in his budget speech for FY 2015-16 said: India is one of the youngest nations in the world with over 54% of the total population below 25 years of age. Our young should develop in both field, education and employable for the jobs of the 21st century. The Prime Minister has explained how Skill India should coordinate with Make in India.
Yet, today less than 5% of our potential workforce gets formal skill training to be employable and stay employable. With a view to enable all poor and middle-class students to pursue higher education of their choice with no constraint of funds, I propose to set up a fully IT based Student Financial Aid Authority to administer and monitor Scholarship as well Educational Loan Schemes, through the Pradhan Mantri Vidya Lakshmi Karyakram. We ensure no student misses out on higher education for lack of funds. We expect the based mechanism under the Pradhan Mantri Vidya Lakshmi Karyakram to provide to students a single window electronic platform for Scholarships and Educational Loans.”
[loan for students in India]
Vidya Lakshmi is a first of its kind portal for students seeking Education Loan. We have developed this portal under the guidance of Department of Financial Services, (Ministry of Finance), Department of Higher Education (Ministry of Education) and Indian Banks Association (IBA). NSDL e-Governance Infrastructure Limited (NSDL) has developed and maintaining the same. Students can view, apply and track their education loan applications to banks anytime, anywhere by accessing the portal. The portal also provides linkages to National Scholarship Portal.
The Salient features of the scheme are as under:
- The scheme promises loans up to Rs.7.5 lakh for studies in India and up to Rs. 15 lakh for studies abroad.
- There is no collateral or margin for loans up to Rs. 4 lakh and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent.
- The Borrower should repay the loans in 5 to 7 years with provision of grace period of one year after completion of studies
Repayment of an education loan is deductible under section 80E of the Income Tax Act. The yearly limit for deduction is Rs. 40,000 (for both the principal and the interest). The deduction will be available for a maximum of eight years starting from the day you repay.
About NSDL e-Gov
NSDL e-Governance Infrastructure Limited (NSDL e-Gov) was originally setup as a Depository in 1995 and has over the years used its inherent strengths, project management capabilities & technology expertise to deliver state-of-the-art e-Governance solutions which has helped Governments to identify and clear bottlenecks, promote transparency, reduce service delivery costs and deliver public services efficiently. The solutions have efficiently made use of information and communication technologies as a tool for delivering public services and benefits to society at large. Some key e-Governance projects undertaken by NSDL e-Gov are:
- Tax Information Network (TIN)
- Central Record keeping Agency (CRA) for National Pension System
- Electronic Accounting System in Excise & Service Tax (EASIEST)
- GST Pilot Project
- Registrar for Aaadhar enrolment and eKYC/Authentication Services
- National Judicial Reference System
NSDL e-Gov works closely with various Government agencies for designing, managing and implementing e-Governance Projects. Over a period of time, NSDL e-Gov has gained varied experience and expertise in areas that help Governments overcome various challenges faced by them in fulfilling their core responsibilities of delivering public services to the society.
NSDL e-Gov has also established Service Centre network across the country which serve as access points for the public and Governments is using them efficiently to deliver quality services in a user friendly and transparent manner to the citizens.
What does a student loan cover?
It covers the basic course fee and other related expenses such as any hostel/ accommodation charges, library, project, exam and other miscellaneous.
Who can apply for the student loan in India?
A student is the main borrower. A parent, spouse or sibling can be the co-applicant in student loan in India.
Whom is the student loan offered to?
They offer it to students who want to study in India or pursue higher education overseas. The maximum amount offered for studies in India and overseas are different and varies from one bank to another.
Types of courses covered under the loan
You can take it for a full-time, part-time or vocational course and graduation or post graduation in the fields of engineering, management, medical, hotel management, architecture, etc.
Education loan eligibility in India
To apply for the loan, one must be an Indian citizen, having secured an admission into a college/university recognised by a competent authority in India or abroad. The applicant must have completed his higher secondary level schooling.
Some banks offer the loan even before one has secured admission into the university.
As per the Reserve Bank of India (RBI) guidelines, there are no restrictions on the upper age limit, but some banks may have it.
Documents required for education loan in India
The banks require additional documents such as admission letter of the institution, fee structure, Class X, XII and graduation (if applicable) mark sheets. Also required are the income documents such as salary slips or income-tax returns (ITR) of the co-applicant.
Loan financing, collateral requirement for education loan
The banks can finance up to 100% of the loan depending on the amount. Currently, for a loan up to Rs 4 lakh, there is no margin money required. For studies in India, Applicant needs to pay 5% of the required loan amount. For studies overseas, the required margin money increases to 15% a loan.
The banks also ask for collateral for loans above Rs 7.5 lakh. Presently, the banks do not ask for any collateral or third-party guarantee for loan up to Rs 4 lakh. For loans above Rs 4 lakh up to Rs 7.5 lakh, Bank/financier need a third-party guarantee. Lenders ask a collateral for a loan exceeding Rs 7.5 lakh.
Once the banks accept loan application, they disburse the amount directly to the college/university as per the fee structure.
Interest rate of student loan
The banks use the Marginal Cost of Funds based Lending Rate (MCLR), plus an additional spread to set an interest rate. Presently (in 2017), the additional spread is in the 1.35-3% range.
Repayment of student loan
The student does repayment of loan as soon as he/she get the employment. The repayment starts as and when the course completes. Some banks even provide a relaxation period of 6 months after securing a job or a year after the completion of studies for repayment.
The repayment period of education loan is between 5 and 7 years, but financier can grant an extension of loan beyond that as well.
During the course period, the bank charges simple interest rate on the loan. The payment of simple interest during the course period lessens the equated monthly instalment (EMI) burden on the student for future repayments.
Precautions while availing student loan
While applying for a loan, one should also look out for bank charges such as those related to processing, preclosure, late payment of EMIs,. Most lenders charge processing fee of around 0.15 percent of the education loan amount.
Benefits of education loan under Income-tax
Section 80E of the Income Tax Act allows for deduction on the interest paid on the repayment. They allow this deduction only for the individuals paying interest on the loan for himself, spouse or children or for the student to whom you’re a legal guardian.
You can deduct the entire interest amount paid from your taxable income. They allow this deduction for a maximum of 8 years. The principal amount does not qualify for any tax deduction.
Conclusion: education loans
Taking an education loan helps you in building a good credit score as this is the first loan in a person’s life. So It will create your credit score as soon as you enter your professional life.
If you repay your student loan on time with no defaults, then it also makes easier for you to get home loan, car loan, business loans, etc., in the future.
Get an easy personnel loan by following a discipline in your credit life.