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Student Loan | Educational Loan in India

Student loan

Student Loan

 

Student loan is a term loan offered by several banks for pursuing higher education in India or abroad where admission has been secured. A term loan is a loan scheme which have a specified repayment schedule and a fixed or variable interest rate. There is no processing fee or upfront charges for student loan.

 

Leading Banks offering

Education Loan in India

There are several banks who offer Educational loan in India. Among them, I personally prefer SBI for it’s low interest rate. You can choose any bank. Here, I have shared a list of leading banks.

  • State Bank of India
  • ICICI Bank
  • IDBI Bank
  • HDFC Bank
  • Axis Bank
  • Canara Bank
  • SBBJ
  • Union Bank
  • United Bank
  • Central Bank
  • Bank of Maharashtra
  • Dena Bank
  • UCO Bank
  • Bank of Baroda
  • Syndicate Bank
  • Canara Bank
  • Indian Overseas Bank
  • Punjab National Bank
  • Avanse Financial Services
  • Credilla

 

Eligibility for Educational Loan in India

Any resident of India who is pursuing higher education in India or abroad can apply for an Educational loan in India. But there is a limited type of courses for which Student loan is granted. A student loan is offered for the following courses.

For Study in  India :

  • Graduation, Post-graduation including regular technical and professional Degree/Diploma courses conducted by colleges/universities approved by UGC/ AICTE/IMC/Govt. etc
  • Regular Degree/ Diploma Courses conducted by autonomous institutions like IIT, IIM etc
  • Regular Degree/Diploma Courses like Aeronautical, pilot training, shipping etc. approved by Director General of Civil Aviation/Shipping/ concerned regulatory authority
  • Teacher training/ Nursing courses approved by Central government or the State Government

For Study Abroad :

  • Job oriented professional/ technical Graduation Degree courses/ Post Graduation Degree and Diploma courses like MCA, MBA, MS, etc offered by reputed universities
  • Courses conducted by CIMA (Chartered Institute of Management Accountants) – London, CPA (Certified Public Accountant) in USA etc.

 

Expenses covered in Student Loan

The expenses covered in student loan i.e. the money offered by bank as loan for the categories are as follows.

  • Fees payable to college/school/hostel : Admission fee, Registration fee, Mess fee that you have to pay to your college or school is granted for loan
  • Examination/Library/Laboratory fees : Other fees i.e. Library fee, Laboratory fee, Examination fee etc. are also covered in Educational loan.
  • Purchase of Books/Equipment/Instruments/Uniforms : If you purchase computer, book, some instruments which are essential for completion of the course (maximum 20% of the total tuition fees payable for completion of the course)
  • Caution Deposit/Building Fund/Refundable Deposit : If you have to deposit any caution money, building fund or any refundable deposit up to maximum 10% of tuition fees for the entire course is sanctioned to your loan amount.
  • Travel Expenses/Passage money for studies abroad
  • Cost of a Two-wheeler up to Rs. 50,000/- (If you really need it)
  • Any other expenses required to complete the course like study tours, project work etc.

Your total loan amount is calculated on the above described fees. When you fill up the application for Educational loan, you have to fill your fee details along with total fee structure (that you have to collect from your college or school). The officer who will sanction your loan, decides the final maximum loan amount according to their guidelines.

You can get maximum 10 lacs loan for studies in India and 20 lacs for studies in Abroad. However, higher loan limit for studies in India or studies in Abroad  are considered on case-to-case basis.

 

Collateral Security Requirements

Collateral is a property or other assets that a borrower(you) offers a lender(bank) to secure a loan. For Educational loan up to 7.5 lacs, no collateral security is needed. Only your parent/guardian have to take the responsibility, i.e. your parent/guardian will be co-borrower. For loan above 7.5 lacs, tangible collateral security is required. In this case also your parent/guardian can be co-borrower.

If you are a married person, then either your spouse or parent(s)/parents-in-law can be co-borrower.

 

Margin Amount or Margin

Margin is the amount of money deposited by the borrower as a security for a transaction that bank make for you. For student loan up to 4 lacs, the margin amount is nil. That means, you have to deposit nothing. You bank will give full of your college/school fees. For student loan above 4 lacs, the margin is 5% for studies in India and 15% for studies abroad.

 

Repayment of loan

You have to repay your student loan after the moratorium period. A moratorium period is a time during the loan term when the borrower is not required to make any repayment. Generally the course duration plus one year after the course completion is considered as the moratorium period for student loan. After the moratorium period, you have to start to repay your loan amount with interest. Loan to be repaid in 15 years after the commencement of repayment. In case second loan is availed for higher studies later, then you have to repay the combined loan amount in 15 years after completion of your second course.

The accrued interest during the moratorium period and course period is added to the principle and repayment is fixed in Equated Monthly Installments (EMI). You can claim for interest subsidy if your family income is less than 4.5 lacs per year. In that case the interest for moratorium period will be paid by Government. If full interest is serviced before the commencement of repayment, EMI is fixed based on principle amount only.

 

Interest Rate for Educational Loan in India

Interest rates for student loan varies from bank to bank. Here I am sharing Educational loan interest rates for State Bank of India.

State Bank of India Educational loan rate of interest (w.e.f. 01.06.18)

State Bank of India Educational loan rate of interest

 

 

Required documents

The documents which are required to submit along with your loan application are listed below. All documents should be self attested.

I) Student-applicant :

  • Proof of Identity (Any one): PAN/ Passport/ Driver’s License/ Voter ID card
  • Proof of Residence/ Address (Any one): Recent copy of Telephone Bill/ Electricity Bill/Water Bill/ Piped Gas Bill or copy of Passport/ Driving License/ Aadhaar Card
  • Passport to be mandatorily submitted in case of Studies Abroad
  • Academic Records:
    10th Result
    12th Result
    Graduation Result- Semester-wise (if applicable)
    Entrance Exam Result through which admission is being taken (e.g. CAT, CMAT, JEE, NEET, CET, GMAT, GRE, TOEFL, etc.)
  • Proof of admission: Offer Letter or Admission Letter from the Institution. Conditional admission letter may be considered in case of studies abroad.
  • Statement of cost of study/ Schedule of expenses
  • 2 passport-size photographs
  • If any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year

II) Co-borrower :

  • Proof of Identity (Any one): PAN/ Passport/ Driver’s License/ Voter ID card
  • Proof of Residence/ Address (Any one): Recent copy of Telephone Bill/ Electricity Bill/Water Bill/ Piped Gas Bill or copy of Passport/ Driving License/ Aadhaar Card
  • 2 passport-size photographs
  • If any previous loan from other Banks/Lenders, then Loan A/C statement for last 1 year

III) Income Proof for Salaried Co-borrower/ Guarantor :

  • Salary Slip or Salary Certificate of last 3 months
  • Copy of Form 16 for last 2 years or copy of IT Returns for last 2 financial years, acknowledged by IT Dept.
  • Bank account statement for last 6 months (of Salary Account)

IV) Income Proof for Self-employed Co-borrower/ Guarantor :

  • Business address proof (If applicable)
  • IT returns for last 2 years (if IT payee)
  • TDS Certificate (Form 16A, if applicable)
  • Certificate of qualification (for C.A./ Doctor and other professionals)
  • Bank account statement for last 6 months

 

How to apply for Education loan in India

You can apply for Educational loan online or offline. For online application visit www.vidyalakshmi.co.in and Sign Up for a new account and then apply for educational loan in any bank account listed within the Vidyalakshmi portal. After few days of submission of online application, visit the branch in which you have applied for loan and ask if any manual submission of application is required or not. You can request for sanctioning fast your loan. Usually, they take lot of time to sanction your loan. For offline application, you can meet branch manager and ask for an application form. Fill it and submit it with all the documents as stated before.

 

My personal suggestion :

Generally, banks take lot of time to sanction your Educational loan. Although, your application have to pass through several stages before sanctioning your loan, your bank can sanction your loan in 7 days if they want. But they don’t do that. According to my personal experience, I have seen to be left my application form in their desk without working on it. If once upon a day they can remember your application, then started working on it. That’s why I suggest you to meet your bank manager frequently and ask for your emergency. If you personally know any bank manager, then there is a probability for your loan to be sanctioned fast. You can visit zonal office if you find your bank taking lot of time. They are always happy to help you.

If it take more than 6 months for your loan to be sanctioned, then your bank will not reimburse the amount which you have paid already. Bank only reimburse the amount that was paid within last 6 months from the date of sanction of your student loan.

 

 

 

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