What Student Loans Entail And How Do You Get One?

While school and college fees are relatively low, it is not the case with higher studies, especially when it is pursued abroad. Hence banks and financial institutions provide educational loans to fund studies.

These are special purpose loans that help the students cover the cost of pursuing a higher degree or some specialized courses. They are also referred to as Student loans.

How do you become eligible for Educational Loans?

Anyone seeking an educational loan from any bank of India has to have fulfilled the following three basic criteria:

• The person who is seeking the student loan has to be a citizen of India.
• The person should have got admission into a professional or technical course after giving an entrance test (or the selection process).
• He/she should have secured admission into a University in India or institution overseas.

Other qualifying criteria for Educational Loans

Anyone who does not fulfill these criteria but is between the age of 16 and 30 can still qualify for an educational loan from various banks in India.

But there are many factors that determine the amount of loan offered. Someone pursuing a professional course like management, engineering or medicine will qualify for higher loan amounts than someone who wants to do a B.A. or an M.A. this is mainly because of the higher chance of getting an employment and also the higher cost of education for the professional courses.

Also, if you are planning on doing a course abroad then you will get a higher loan amount than someone applying in Indian universities. Banks are willing to give around Rs 15 lakhs for those applying abroad while those applying in India get up to Rs 7.5 lakhs.

The other factor that determines the amount of the loan is the security that is given for the loan.

Every student loan of a huge denomination is a loan that is secured. So the student who is availing of the loan must provide some security, in most cases provided by a guarantor who might be a parent or a guardian of the student.

The Government of India after consultation with the Reserve Bank of India and the Indian Bankers Association came up with a comprehensive educational loan scheme. According to this scheme, a student can take a loan ranging to 7.5 lakhs in India and up to 15 lakhs for studies overseas.

This is not a stable amount for banks in India. State Bank of India is now offering loans up to Rs 20 lakhs while recently Indian Bank has increased their limit to Rs 15 lakhs for courses in India and up to Rs 25 lakhs for courses abroad.

The information listed above is subject to change with time and hence students are requested to check again from the banks for up-to-date information. The repayment of the loan is either one year after the course period or 6 months after getting a job, whichever is earlier.

Loan Amount	Canara Bank	SBI Bank	Axis Bank	Bank of Baroda	Union Bank
	Interest Rate p.a	Interest Rate p.a	Interest Rate p.a	Interest Rate p.a	Interest Rate p.a
For loans up to Rs.4L	12.50%	12.00%	15.75%	11.50%	13.25%
Above Rs.4L and up to Rs.7.50L	13.50%	13. 50%	16.75%	13.50%	13.75%
Above Rs.7.50L	11.50%	12.50%	14.75%	11.50%	13.00%

(*Concessions are given to girl students. It varies from bank to bank)

What are the documents required to avail an Educational loan?

The following documents need to be in place before applying for an educational loan:

• Mark sheets of the last qualifying examination for school and graduate studies in India.
• Proof of admission to the course for which the loan is being applied.
• Scheduling of expenses for the course.
• Copies of letter confirming the scholarship.
• If applicable, copies of foreign exchange permit needs to be attached as well.
• Two passport size photographs.
• Bank statement for the last six months of the borrower.
• Income tax assessment order. This should not be more than two years old.
• Brief statements of assets and liabilities of the borrower.
• If you do not have an account in the bank where you are applying for the loan, you will be required to establish your identity and give proof of residence.

What is the Interest rate charged for Student/education loan?

Interest rate for student loans varies from one bank to another. Each bank is competing with the other in order to reach to as many students as possible. There are several banks and financial companies that provide students with such loans at attractive rates.

Some of them include Bank of India, ICICI Bank, State Bank of India, Bank of Baroda etc. Standard interest rates for getting student loans in India are 12 to 14% p.a. Another provision that banks provide you with is a choice between fixed and floating interest rates. One such example is SBI.

Income Tax benefits for Educational Loans

The Government promotes student education by providing them various benefits. Under Section 80(e) of the Indian Income Tax Act, a person can claim the interest paid towards the education loan as tax deduction.

Few conditions apply for the same though. The tax deduction can only be availed by the individual on whose name the loan has been taken.

This benefit can be claimed up to 8 years after the repayment has started. And the last condition is that it can only be claimed if the loan is taken for a full-time graduation or post graduation course.