What is Education Loan?: Students who are passionate about their education but economically backward can avail the support to study & fulfill their dreams with the help of education loans.
Wondering what an education loan is and how to choose the correct study loan for you, jump into this guide. Also, you’ve covered additional details on education loans like eligibility, features, tax benefits, types of loans, list of offered banks, interest rates, etc.
What Is Education Loan?
Education loan is an outstanding scheme that supports passionate students to complete their academic careers. Under this scheme, a student can borrow a sufficient amount of money from the vendor or bank to pay expenses for post-secondary education or higher education.
Applicants can get benefits like tuition fees, supplies, books cost, and accommodation expenses while studying their course with the help of an education loan. There are various types of education loans and different vendors to support financially backward students and orphan kids.
Explore how does study loan works, who can avail of it, and how to apply by referring to the following modules.
How Does Study Loan Works?
Education loan works based on the selected type of study loan from the government or private lenders. Availing student loans means getting financial help to pursue a degree at a reputed college or university.
Government-provided loans come in low-interest rates and a few subsidized interest. Private lenders provided loans come with a lot of lending processes with higher rates than government education loans.
You can even learn different study loan types based on several factors. Find more details on the same below.
Types of Education Loans Based On Location, Course & Collateral
Mainly education loan is divided into two types. They are federal education loans and private education loans. Federal education loan means a loan offered by the federal government and private study loans mean a loan offered by banks or other financial institutions.
The following are some other types of student loans that are provided on the basis of various factors:
Based On Location
Domestic Education Loan: This loan is specifically for those students who want to study their course in India. If the applicant is having the Indian admission form then only he/she is eligible to apply for the education loan under this type.
Overseas Education Loan or Study Abroad Education Loan: Students who want to pursue their desired course in a foreign institution, should apply for an education loan under this type. They can be offered airfare, accommodation, tuition fee, and other benefits to study abroad after fulfilling all the eligibility criteria.
Check the guide on which bank gives education loans without collateral for abroad and gain some knowledge.
Based On Collateral
Third-Party Guarantee: A bank employee or a home bank should provide the guarantee letter for sanctioning the education loan to the student.
Loan Against Property, Deposits, and Securities: To get a loan for pursuing your studies, you should provide a guarantee by agricultural land, residential land, flat, house, and others, fixed deposit certificates, recurring deposits, gold deposits, bonds, debentures, and equity shares.
Based On Course
Undergraduate (UG) Loans: Undergraduate Loans are another type of education loan where students get financial help to pursue their UG degrees.
Postgraduate (PG) Loans: Students who got finished their UG Courses and desired to pursue their postgraduate program in India can apply for a study under this type.
Career Development Loans: Applicants who are working hard in corporate jobs, desired to level up their skills, and reach the top in their career can take help from this loan. With this loan type, they can pause their job and continue to pick up professional courses and training for better employment opportunities.
List of Expenses Covered In Education Loan
There are various expenses that are covered in an education loan. Here is the list of expenditures covered by the study loan for domestic and abroad studies:
Academic Expenses
- Course fees or tuition fees
- Registration fees
- Counselling fees
- Capitation charges
- Exam fees
- Study visit & education tour fees
- Lab fees
- Library fees
Non-Academic Expenses
- Accommodation Charges
- Food expenses
- Travelling & Commute cost
- Student insurance
- Refundable caution money
- Project expenses
- Fixed/student welfare contribution
- Laptop, 2-wheeler, transport pass, wheelchair expenses (if required)
- Especially for aboard studies, In-flight expenses, outward remittances
- Fees for various entrance exams like SAT Exams, LSATS, GRE, GMAT, TOEFL, MCAT, etc.
Different Courses Cover Under Education Loans
Kids or Graduated students who want to pursue their dream courses worldwide must be aware of the courses covered under an education loan before applying. So, we have curated a list of courses here for your reference, simple have an eye on them:
- Nursery To Class 12 Classes are also included.
- UGC, IMC, AICTE, government, AICTE, AIBMS or CMR universities or colleges offered professional/technical/diploma graduation and post-graduation courses.
- Regular degree or diploma courses accepted by the Director General of Civil Aviation, Shipping, or other regulatory authority.
- IIM, IIT, IISc, XLRI, NIFT, NID, ICWA, CA, CFA, and other autonomous institutions conducted courses like regular degrees or diplomas.
- Skill development courses
- Employment courses for graduation, post-graduation, or diploma such as MBA/MCA/MS, studies conducted by the Chartered Institute of Management Accountants (CIMA) – London or Certified Public Accountant (CPA) – USA.
Courses for Abroad
- Job-oriented courses (professional/technical) for Graduation/Post Graduation/Diploma like MBA/MCA/MS, etc. delivered by reputed organizations.
- CIMA and CPA conducted courses.
Education Loan Eligibility Criteria
Knowing complete knowledge of what makes you eligible for an education loan is very important. So, here we have provided some information on the same for quick reference on what government vendors or banks, or other private vendors ask you to sanction the study loan:
- Applicants should be Indian Residents.
- Get an Admission application form from the university in India or Abroad, where you want to study your dream course.
- If you need a loan for the undergraduate program, you should complete a 10+2 education with a pass percentage.
- For postgraduate courses, one must finish an undergraduate course.
- Candidates’ age should fall between 18 to 35 years at that time.
- Those who want to pursue the full-time course must have a co-applicant and have a normal income source.
- Should hold all the below-mentioned required documents.
Required Documentation To Apply for Education Loans
Students who are applying for education loans should be aware of the mandatory documents needed to submit to the vendors or banks for processing the student loan successfully:
- Duly filled in education loan application form with signed and affixed photographs
- Recently completed education certificate or 10th/12th exam mark sheets copies
- Aadhaar Card and Pan Card of the student and Parent/ Guardian
- Two photographs
- Statement of Course expenses/cost of study
Identity proof:
- Aadhaar Card
- Copy of Voter ID
- Driving Licence
- Passport
Age proof:
- Passport
- Voter ID
- Copy of Aadhaar Card
- Driving Licence
Residence proof:
- Bank statement of 6 months of the student or co-borrower
- Copy of Ration card
- Rental agreement
- Guarantor
- Electricity Bill
- Gas Book
- Telcom Bill
How to Apply for an Education Loan Online & Offline?
Students can apply for a study loan in various ways. Want to learn how to apply for it then check below:
1st: Offline Application Process
- First choose the lender that you want to apply for a loan.
- If you choose a bank, get the types of education loan details from the nearest branch. Choose a suitable loan type and fill out the application form. Along with that, know the documents required for submission and complete the process in person.
- If you choose another lender, discuss the details by visiting their branch, or else call the lender and discuss the loan types, terms, and application process.
2nd: Online Application Process
- One of the most convenient methods to apply for an education loan is by applying online. You can apply to study loan online in two ways.
- Initially, the simple way is to download the application form online from valid sources or at the official website.
- Fill out the loam form and submit it by attaching the other required papers too.
- Second method is to apply by providing the requested information and then the lender will directly come to you for discussing the loan terms before applying it.
You can proceed with any of the application processes to get an education loan for studying in India or Abroad. For detailed information on How to Apply for Education Loan for Abroad Studies, check the link given here.
Comparison Table On Top Education Loan Interest Rates & Processing Fees
The table of information provided here will help you choose the best & suitable education loan and complete your studies without hassle. Are you excited to know Which Bank Has Lowest Interest Rate on Education Loan? Click this available link.
| Bank Names | Interest Rates (% p.a.) | Processing Fees |
| SBI | 8.20% onwards |
|
| Central Bank of India | 8.10% to 11.50% | Nil for studies in India |
| PNB (Punjab National Bank) | 9.25% onwards | Contact the bank |
| Canara Bank | 8.60% onwards | 0.50% of the loan amount up to Rs.10,000 (for collateral security coverage of 100% and above) |
| IDFC FIRST Bank | 9% onwards | Contact the bank |
| IDBI Bank | 8.50% onwards | 1% of the loan amount (Maximum: Rs.5,000) |
| Bank of Baroda | 9.15% onwards | No processing charges up to Rs.7.50 lakh 1% of the loan amount up to Rs.10,000 |
| Bank of India | 10.95% onwards | No processing fee for studies in India |
| ICICI Bank | 9.85% onwards | Up to 2% + GST |
| Bank of Maharashtra | 9.45% to 11.30% | Contact the bank |
| Axis Bank | 13.70% to 15.20% | 2.00% of the loan plus GST |
| HDFC Bank | Preferential rates as per the college or the university | As per the criteria of the bank |
| Kotak Mahindra Bank | Up to 16% | Nil |
| Federal Bank | 12.55% onwards | Contact the bank |
Remember: Above tabulated information on interest rates are functional as of March 2023 and can be altered according to the new rules and regulations of the respective bank.
Tax Benefits on Education Loans
The following points will help you know what tax benefits you can get by availing education loan for pursuing a full-time or part-time course at a recognized institute. Here’s the information on the same:
- The benefits provided by Section 80E of the Income Tax Act are tax deductions on the amount of interest paid toward education loans.
- All types of study loans are eligible under this section but make sure you avail of the loan from a bank or a registered financial institution.
- You won’t see any limitation on the deducted interest rate which is the best aspect of this tax benefit.
- By submitting Form 16B or Form 16C along with ITR, you can easily claim the IT benefit in which you have paid the principal amount and interest component.
- Applicants can avail of this benefit for 8 years from the start of loan repayment day or until the interest component is paid off, whichever arrives sooner.
Other Benefits & Features of Education Loans
Not only the above-mentioned tax benefits, students who have applied for education loans can also enjoy other benefits and study loan features. Look at them below:
You can get an education loan for studying in abroad and India.
- Avail upto Rs.1 crore as loan amount.
- Loan repayment period upto 15 years.
- Required documents can be collected easily by their at-doorstep service.
- Banks’ employee kids can relish preferential rates at various banks.
- Some loaners will provide loan disbursal before applying for a Visa.
- You can enjoy a moratorium tenure of up to 1 year after completing the course. Also, it helps to avoid paying the loan amount during this period.
- To female students, banks are provided concessionary interest rates.
FAQs On What Is Student Loan?
- What are the courses covered under an education loan?
The brief courses list that are accepted to cover under an education loan is as follows:
- Undergraduate degrees
- Undergraduate diplomas
- Postgraduate degrees
- Postgraduate diplomas
- Vocational training courses
- Doctoral courses
- Skill development courses
- What do the loaners aim to approve the study loan?
Loaners set some of the factors as per their rules and they consider to fulfill all those factors during the approval of the loan. They are listed below:
- Selected courses and institute
- The required amount to study the chosen course
- Your recent or past academic performance
- Family property
- Annual revenue
- Repayment ability of your family
- Are NRIs eligible for education loans from banks in India?
No, NRIs are not eligible for education loans from banks in India. Applicants who are residents of India and who have given collateral or other documents for security must be enforceable in India.
- Does Education Loans from NBFCs & FinTech Companies Qualify for Income Tax Deductions?
No, Education loans from NBFCs & FinTech Companies do not qualify for Income Tax Deductions.
- Who can avail and apply for an education loan?
Any kid or student in India is eligible to apply for an education loan as a main borrower. The co-applicants for study loans are the parent, sibling, spouse, or guardian.
- What is the moratorium period for education loans?
The period of your course duration plus 6-12 months is the answer to what is moratorium period in education loan. For a better understanding of the moratorium period click on this link.
- What are the four major types of educational loans?
The four major types of federal educational loans available are Direct Subsidized Loans, Direct Unsubsidized Loans, Direct Consolidation Loans, and Direct PLUS Loans.
Key Takeaways
Know you know complete information about what is education loan and How to get education loan from the government and banks. If you have other queries on the same like How to Get Education Loan After 12th, Is Cibil Score required for Education loan, etc. then visit our website learncbse.in and gather every single data about student loan/study loan/education loan.