Everything you need to know about education loans

Reading the admission letter from your dream university is a sweet little feeling but that feeling is soon replaced by a grim sadness once you start thinking about how you’d manage to meet the tuition expenses for your degree abroad. The finances are one of the biggest reasons that many students don’t dare to think about pursuing a graduate degree. The fortunate ones get into fully funded programs or get some help with the wallet through scholarships or grants. For everyone else, there are loans!

Let’s face it… Bank loans are scary for the lower and middle-class people. We’ve all heard stories of people whose biggest mistake of their lives was to take up a loan only to realize later that they couldn’t pay off and are now in serious debts. It’s perfectly natural to get second thoughts about your decision to study abroad when the amount of money involved is of the order of something you’ve only seen on reality shows (Kaun Banega Crorepati anyone?). However, the loans don’t have to be that scary. It’s getting easier to get approved for a loan and you can be in and out of the bank in no time.

What are education loans?

Education loans are designed to help students with their expensive degrees and often come with a grace period where they don’t start accruing interest until after 6 months to 1 year of graduation. This grace period is added to give the students some time to find a job after graduating. Apart from the tuition fees, the education loans also cover costs for other kinds of fees, costs for purchasing books or equipments, living expenses and sometimes even the airfare for you to go to the university.

Eligibility for education loan in India

While the actual eligibility may vary for each loan, in general, to be eligible for an education loan, you need to:

• be an Indian citizen
• be over 18 years old
• have an admit from a recognized university
• have a co-borrower who meets the bank’s requirements

Some important terms:

• Collateral: An asset that you can use as a guarantee that you’ll repay the loan. This can be a house, some non-agricultural land or even FDs, etc. The lender can seize the collateral in case of failure to repay the loan.
• Cosigner/Co-applicant: Someone in your family who can take guarantee for your loans. The cosigner’s salary is often a consideration in deciding the loan amount. Some banks waive off the restriction that the cosigner should be a part of your direct family.
• Interest: The amount of money the bank charges you on top of the borrowed amount for lending you the money. The interest rates are
• Moratorium Period: This is the period where you don’t have to make any payments and don’t accrue any interest
• Margin: Margin is the percentage of the total cost that you’re expected to pay on your own. Some loans come with a 0% margin, which means you can expense all the costs from the loan.
• Processing Fee: Some lenders also charge a processing fee for lending you the money. This is in addition to the interest payments.

Top education loan providers in India

• SBI Global Ed-vantage: Specially designed for students taking full-time courses from abroad. The loan amounts are higher than the standard education loans. Students can take a loan up to 1.5 Crores which can be paid in 15 years.
• HDFC education loan: HDFC offers loans up to 20 lakhs which can be used to cover 100% of your expenses i.e no margin. The co-applicants can be any of your relatives. The HDFC loan can be approved even before you have an admission letter.
• Axis bank education loan: Axis bank offers loans up to 75 lakhs to students planning to pursue courses from abroad. They offer very competitive interest rates on their education loans.
• Bank of Baroda Scholar loan: Maximum amounts for education loans from Bank of Baroda for foreign studies can be up to 80 lakhs for some recognized universities and 60 lakhs for others. A special feature is that they don’t have any processing charges for their loans.

Taking out a huge loan for a graduate course in a country that is working day and night to stiffen its immigration laws is surely a frightening deed. However, this may give you some satisfaction to know that most students are able to repay their loans within two years of graduation. This is of course from the perspective of a CS and related course. We wrote an article on Is an MS worth the costs to show the worst-case financial analysis of getting an MS degree from the US. Check that out to see if it assuages any fears you might have about taking out an education loan.

Share your loan stories with us in the comments below. Also if you have any questions just ask!