Is money stopping you from persuing higher studies?? How of education loan ??

Higher studies and specialization in certain fields call for additional financial support from time to time. There are years when students strived hard with the learning activities without any external support with financial issues. Today students can apply for loans from various sources which are obtained easily without much strain. Thus Student’s future education plans are supported with the availability of the educational loans that secures one’s life. The trend has further streamlined with the terms and conditions turned upside down. The Financial support is being offered for the most expensive professional courses (BE/BTech, MBBS, MBA, MS etc.) that require more initial payment to get started with Loans are being offered at lesser interest rates on various courses other than professional training. The expense coverage includes tuition fee, book fee, hostel charges, travel expenses, and many more based on the type of loan one opts for. Loans for education that are taken in abroad are also secure with medical supports and safety. On top of that Repayment of the loan is easier with flexible time duration after the course has got completed and even after getting placements.

Some of the types of educational loans offered are as follows

·         Undergraduate loans & Graduate/ professional students
 
This type of loan includes your Tuition, previous school fee, living expenses, books and other expenses like transportation costs.

• Career development educational loans Career education loans are basically available for students who are attending the undergraduate career oriented programs at nationwide colleges and technical and trading schools. This type of loan includes your Tuition, previous school fee, living expenses, books and other expenses like transportation costs.
• College parents loans  In case your child is currently studying and now working alongside, you can take up the loan by being a co signer. This type of loan can help you assist your child with any kind of undergraduate/graduate or career education plan in college. 
• K 12 Parents loans It is basically available to parents and other adult relatives for their children who are attending non-public, private, religious, military elementary and secondary schools countrywide. This type of K 12 Parents loans include your child’s tuition fee, uniforms, previous school fee, living expenses, books and other expenses like transportation costs.
• ** If not earning currently you may need a suitable cosigner, like a parent, friend or any relative or eligible adult.

Categories of loan

Most of the Banks and Financial Institutions in India have categorized Student Loans in two categories.

1. For Studies in India

Students can borrow up to Rs 4 lakh without providing any security or margin. A loan amount of Rs 4 lakhs to Rs 20 lakhs can be availed against a third-party guarantee. This loan comes with a five percent margin (what this means is that you will get five percent less the amount sanctioned as loan; you will have to put together the rest of the money). The maximum loan amount is 20 Lacs.

2. For Studies Abroad

Study Abroad - The maximum loan amount available is Rs 20 Lacs but with a margin amount of 15 percent (what this means, again, is that you will get 15 percent less the amount sanctioned as loan, you will have to put together the rest of the money).

** Only education loans above Rs 4 lakh require tangible collateral, security for the full value of the loan or third-party guarantee, depending on the amount.

** Some banks have tied up with specific institutions to provide education loans to students for select courses. In such cases, the banks may be willing to forgo collateral requirements.

Points of concerns

·         Loan should be taken from a bank located at your place of study so as to have a better access to funds than one located where you reside, unless it concerns overseas studies.

·         The repayment period starts only after six to twelve months after you begin your working life.

Eligibility criteria

·         The applicant should be an India National

·         The applicant must have secured admission to professional/ technical courses through Entrance Test/  Selection process

·         Secured admission to foreign university/ Institution

Documents needed

• Mark sheets of the last qualifying examination
• Proof of admission/ scholarship.
• Schedule of expenses for the specified course.
• Bank account statement for the last six months.
• An income tax assessment order for the previous two years.
• A brief statement of assets and liabilities of the co-borrower, which is usually the parent or guardian, and proof of income, if any.
• If you are not an existing bank customer, you will also need to give proof of identity and residence.  

Note: the specific list of documents varies from bank to bank.

Tax implications

You start repaying the principal portion of the education loan six months to a year after finishing the course, or when you get a job, whichever is earlier.

Repayment is done on an EMI (equated monthly installments) basis at the time of starting the repayment.

Some banks will also allow you a moratorium on payment of interest. This means that you can defer payments of even the interest during this period.( interest is compounded quarterly and added to the principal sum for repayment.)

Note:

• Banks offer lower interest rates if you start repayment during the moratorium period.
• Education loans do not attract prepayment penalty
• If you are unable to complete the course, you will have to start paying the EMIs immediately.
• If you have opted for a floating rate loan, you cannot switch to a fixed rate option mid-course.
• You can claim a deduction under section 80 E of the Income-Tax Act for the interest paid on an educational loan.
• You will get the tax benefit on an education loan only if the loan is in your name and is taken for the purpose of higher education of yourself, your spouse or your children.(siblings not included)
• You can get tax benefits only if the student loan is from a financial institution, bank or an approved charitable institution.
• The course has to be for full-time studies (no part-time courses covered) for any graduate or post graduate course in engineering, medicine, management, or for post graduate course in applied sciences or pure sciences including mathematics and statistics.
• Education loan interest rates are at 10.25% to 13%
• The loan tenure for education loans and varies from one to five years.