Education Loan

Education loans are offered by banks to students to enable them to pay for higher studies such as graduation and post graduation courses, both in India and overseas. Apart from the tuition fees, other aspects of expenses such as hostel charges, equipment purchases and other course related expenses may also be covered by the education loan. In case of overseas studies, many education loan providers include the price of a return ticket into the education loan corpus.

As most students have no previous credit history, the parent or guardian has to co-sign for an education loan as a guarantor. Moreover, education loans also require key lender approved collateral such as property documents, fixed deposits, etc. Though there is an interest free (moratorium period) for an education loan, if you service the interest accrued on an education loan during the period, you may receive a further discount on the education loan.

Who is eligible for an education loan?

Every bank has its own eligibility criteria for dispensing education loans, but a few common parameters are:

• Applicant should be an Indian national.
• Applicant should have confirmed admission in a college/educational institution at the time the loan application is made.
• Applicant should be in the age bracket 16–35 years.
• The Applicant should have a co-borrower such as a parent who acts as guarantor for the loan.
• Collateral in the form of a fixed deposit etc. is required for loan amounts higher than Rs. 4 lakhs.

What documents does the lending bank ask for?

Documents that are to be submitted with the education loan application include:

• Admission confirmation letters and papers validating any scholarships the applicant has qualified for.
• Schedule of expenses for the course including tuition fees and other expenses.
• Score sheet of qualifying test(s).
• Copies of foreign exchange permit/student visa for overseas studies.
• Bank account statements for last 6 months. (Can be a joint account with parent/guardian).
• Statement of assets and liabilities of borrower.
• Proof of age.
• Proof of residence.
• 2 passport size photographs.
• Documents related to collateral required for education loans exceeding Rs. 4 lakhs.

What are the expenses covered by education loans?

Education loans can be used for paying:

• Tuition fees and hostel expenses.
• Exam, library, and lab fees if applicable.
• Any refundable caution deposits paid to the educational institute.
• Cost of books, uniforms, and other essentials for completion of course.
• Travel expenses (return fare for international flights.