Education Loan

Frequently Asked Questions

1

What is education loan?

2

Who is eligible for the education loan?

3

What is the age limit for Education Loan?

4

What do they consider to approve the loan?

5

What are the courses are eligible for Education Loan?

6

How much loan I can get?

7

Can I get a loan for Correspondence/distance/part-time education?

8

How and when should you start paying the loan?

9

If I discontinue my study or do not complete my course or do not find my job within the grace period what will happen to the loan repayment?

10

Is the interest amount applied during the course of study?

11

How much is the interest rate and how will I get tax-benefit?

12

Do I have to give any property or collateral documents in order to get the loan?

13

I am from a middle class family and my father is not working and we do not have anything to show as regular income and we dont have any propertydocument or financial document to show as security. What is the possibility of getting my education loan?

14

What kind of security/guarantor you need for your loan? Have you arranged?

15

Since the education loan interest rate is high, I want to pay the loan completely as soon I find my job. Is there any pre-payment penalty applied?

16

After taking my education loan, I get less interest rate from some other bank; can I move my education loan to the second bank?

17

Both of my parents are working and we have enough money to pay for my course but my friend says that it will be good to take the loan. Is that true?

18

I am from a remote village and I dont have any bank in my village. How and where to apply for my education loan?

19

My education loan was not approved. Is there any way I can find out why my education loan request was denied?

20

Getting scholarship or taking a loan which one is better?

21

My friend suggested me that since we get the loan we can study in USA/UK? What is your advice?

22

Will the loan amount cover the 100% of my education expenses?

23

Do I have to pay any processing fees for my education loan?

24

How long do I have to repay the loan?

25

What are the documents required to apply for a loan?

26

Will the Banks have any preferred Institutions?

27

Is there any other benefit that comes with the Education Loan?

28

Is there any limitation like how many people should take the education loan from the same family? Or my sister got a education loan, Will I be eligible for my education loan?

29

Is there any insurance policy that covers my guarantor?

30

Can I get the education loan as cash? How the loan amount is given to me?

QUESTIONS AND ANSWERS:

What is education loan? Back

Central Government facilitates education loan through 27 nationalized banks to help students for their education.Indias National asset is the young population and their brain power. The student loans are offered by financial institutions based on the guidance issued by Government. Each bank has its own eligibility criteria, interest rates and repayment options.The education loan can be used for any level of education including school, graduation, post graduation and doctorate. Loans are given for study in India and in foreign universities.The students, who have good academic record and dont have any option to study further due to financial condition of the family, can go for loan option. Once the loan is approved, the financial institution will guarantee your education but you should be ready to study hard and work hard to repay the loan.

Who is eligible for the education loan?Back

  1. You must be a citizen of India
  2. Secured admission to the course through selection process or entrance exam in India or Abroad
  3. You may be expected to have certain percentage of marks. For example 50% for SC/ST Students and 60% for others
  4. Some banks may have some age criteria. For example, age should be between 16 and 28
  5. Some banks offers loan for only full-time and certain specified courses like computer courses

What is the age limit for Education Loan?Back

30 Years

What do they consider to approve the loan?Back

  1. The course you choose
  2. The Institution you choose
  3. The amount you require
  4. Your education performance
  5. Repayment capacity of you and your family based on the discussion with you
  6. Annual income of the family
  7. Familys assets, etc

What are the courses are eligible for Education Loan?Back
Education in India:

  • School education including plus 2
  • Graduation Courses: B.A., B. Com. B. Sc., etc.
  • Post Graduation Courses: Master degree and Ph.D.
  • Professional Courses: Engineering, Agriculture, Medical, Veterinary, Law, Dental, Management, Computer, etc.
  • Computer certificate courses of reputed institutes accredited to Department of Electronics or institutes affiliated to university
  • Courses like CA ,ICWA, CFA, etc. or courses conducted by IIT, IIM, XLRI, IISc, etc
  • Courses offered by National Institutes and any other reputed private institutions
  • Courses offered in India by reputed foreign universities
  • Evening courses of approved institutes
  • Other courses leading to diploma / degree etc. conducted by colleges / universities approved by UGC / Govt. / AICTE / AIBMS / ICMR etc.

Education Abroad:

  1. Courses conducted by CIMA - London, CPA in USA etc.
  2. Graduation: For job oriented professional / technical courses offered by recognized universities
  3. Post Graduation: MCA, MBA, MS, etc.

How much loan I can get?Back

Generally upto Rs. 15 lakhs for studies in India and upto Rs. 25 lakhs for studies abroad.

Can I get a loan for Correspondence/distance/part-time education?Back

Some Banks provide loan to certain professional course if your college and course is approved one. You can check with your local banks once you finalized the course that you are going to study. But most of the Banks dont offer loan for part-time/distance education course.

How and when should you start paying the loan?Back

You dont have to pay the loan until you complete the course. After your course, you will get grace period to find a job which may be between 6 to 12 months. After that the actual repayment of the loan begins.

If I discontinue my study or do not complete my course or do not find my job within the grace period what will happen to the loan repayment?Back

You should start your loan payment immediately.Some institution will allow you to complete your course but it is a rare case.

Is the interest amount for the loan applied during the course of study? Back

Simple Interest is charged and kept in a separate account till the course is completed. The student has the option to repay or not to repay the interest till the course is completed. After the grace period is over, the interest is transferred and credited to the Principal loan amount and from that time the interest becomes compounded interest.

How much is the interest rate and how will I get tax-benefit? Back

Interest Rate: The interest rate for the education loan is between 10% and 15% depends on the bank and the course you choose.

Tax Benefit:

Income tax Act provides two types of deduction for education. These are

  1. Tuition fee paid for children under section 80C subject to maximum Rs 1, 00,000.
  2. Interest on education loan for studies of self or spouse of children without any limit under section 80E

Loans taken for education are not eligible for tax benefit.

Based on the new rule, the interest paid against the education loan will be deducted from taxable income. There is no maximum limit for the interest payment. Your principal amount will not go against tax deduction If you take a loan for long term, it is better to pay off within eight years. After that the tax benefit will not apply to your interest payment.You will not be eligible for tax deduction if you get the loan from your employer, family or friends.

Tax benefits will be available even for loan that was taken against securities. But the securities to be taken by banks and the loan should be used for higher education of self, spouse or your children.Not for brother or sister.

Do I have to give any property or collateral documents in order to get the loan?Back

For loans up to 4 Lakhs security is not required. Documents have to be signed both by student and parent/ guardian. For loans of above Rs. 4 lakhs but below Rs. 7.50 laksh, in addition to the documents, third party guarantee has to be signed. But loans above Rs. 7.50 Lakhs require you to provide security documents to the Bank. The security documents can be National Savings Certificates (NSC), insurance policies (surrender value), Kisan Vikas Patra, bonds, bank deposits, government securities, shares (if the bank accepts it), vehicle, house, land, property, gold etc.
The security should be some form of investment you surrender to the bank. If you dont repay the loan the bank can sell the security and recover the loan amount. For loans more than 4 Lakhs, the bank may ask either third party guarantor or security or both. If you dont pay, the bank has the right to recover the loan amount from the guarantor or else they can take the legal action against guarantor.

I am from a middle class family and my father is not working and we dont have anything to show as regular income and we dont have any property document or financial document to show as security. What is the possibility of getting my education loan?Back

You are eligible for education loan. The education loan is given based on your educational performance. You should make sure that the loan is paid on time without any issue. The educational loan scheme aims at providing financial assistance on reasonable terms to:

  • Poor and needy to undertake basic education.
  • To the meritorious students to pursue higher/ professional/ technical education.

The main emphasis is that no deserving student is denied an opportunity to pursue higher education for want of financial support.

What are the expenses covered by education loan? After getting my education loan, should I have more money to take care of the other expenses?Back

The education loan not only covers your tuition fee. It includes other expenses related to your study.You have to check with your bank to verify what are the expenses covered by their loan. It depends on the Bank. The other expenses mostly covered are:

  • College/school/hostel fees which includes tuition fees.
  • Exam fees, library and laboratory fees.
  • Non-Refundable deposit, refundable deposit, building fund, supported by the institutions receipts or bills.
  • Purchase of books, uniforms, equipment, instruments and buying computers
  • Expenses related to education tours, project work and thesis work.
  • Some banks cover the cost of the computer if the same is required for your education.
  • Travel expenses for overseas study.

Check up with your institutions for the expense details and confirm with your bank as what are the expenses covered by them.

Since the education loan interest rate is high, I want to pay the loan completely as soon as I find my job. Is there any pre-payment penalty applied?Back

Unlike other loans, most of the banks dont charge any pre-payment penalty when you want to repay the loan in full. It is better to check with your bank to make sure you will not face any penalty in the future. Some Banks will allow you to repay after 6 or 12 months after the course completion or after finding your job.

After taking my education loan, I get less interest rate from some other bank; can I move my education loan to the second bank?Back

Yes, you can do so. But, your current bank may have some refinance charge for your outstanding amount (example 1%). If the second bank gives 1% less than your current bank, you dont gain anything. So, carefully calculate the benefit when you transfer your loan.

Both of my parents are working and we have enough money to pay for my course but my friend says that it will be good to take the loan. Is that true?Back

No. If you can pay from your pocket, it is better to do so. Taking a loan involves some maintenance work; you can avoid them if you can. If you are really in need of the loan, you can apply for this.

I am from a remote village and I dont have any bank in my village. How and where to apply for my education loan?Back

You can contact the bank in your nearest town/city and ask for loan.

My education loan was not approved. Is there any way I can find out why my education loan request was denied?Back

Yes, you can. When the bank denies your application, they will give a reason for why your application was not approved. If they dont give any valid reason, you can file a RTI (Right to Information Act) petition to ask for the reason. If you need any help in filing RTI petition you can send an e-mail to info@studyguideindia.com

Getting scholarship or taking a loan which one is better?Back

You can try for both. Refer to our scholarship section for various details<LINK>. If you get scholarship for your entire study it is well and good. Sometimes the scholarship amount will be one time payment which may be small amount that will not be enough to cover your complete course expenses. So, you can still get them and use it for your study. Today many institutions, charities, foundations, trust, NGOs, State/Central government are offering scholarship to the students. There is no condition that you can only apply for one scholarship. You can apply for whatever you are eligible and get them.

My friend suggested me that since we get the loan we can study in USA/UK? What is your advice? Back

Think twice before taking the loan. Taking a loan is not a simple think and it is not free. When the bank gives you the loan, they will make sure that they recover their money from you. If you dont pay the amount and there is no genuine reason, the bank will not leave you. So, ask yourself whether you have interest or passion to do that course and you want to get settled with the field related to your study. You should have confidence on yourself on completing the course, getting the job related to your study and repaying the loan. If you are not sure, dont go for the loan. It will be a burden for you as well as to your family and your property.

Will the loan amount cover the 100% of my education expenses?Back

Not always. The bank charge a margin of 5% for studies in India and 15% for studies abroad for loans above Rs. 4 lakhs, i.e., they offer to give a loan of 95% or 85% of your total expenses only. The balance has to be met by you. If the loan amount is less than Rs. 4 lakhs, the bank covers the entire amount.

Do I have to pay any processing fees for my education loan?Back

Generally banks do not charge processing fee for educational loans.

How long do I have to repay the loan?Back

Mostly, the loan amount should be paid within 5 to 7 years. But a large amount may take a long time; a small amount will take less time. Tax deduction can be used for education loan for up to 8 years. If you are taking loan for more than 8 years, after 8th year whatever interest you pay will not get any tax benefit.

What are the documents required to apply for a loan?Back

This again depends on the Bank. The bank will give you the document checklist when you get your application form. The commonly asked documents are:

  1. Proof of your course admission / scholarship details
  2. Schedule of the fees and expenses
  3. The certificate and mark sheet of your last qualifying examination.
  4. Photographs
  5. Last 6-12 months bank statement/ Income tax statement of past years
  6. Document related to proof of income, asset and liabilities etc.
  7. If you dont have bank account you should give the identity proof.

Will the Banks have any preferred Institutions?Back

Some banks have a list of institutions. If you join them you will get the loan easily or some institutions will have tie-up with banks. Please check with your institution and bank for the details.

Is there any other benefit that comes with the Education Loan?Back

  1. Some banks offer some benefits like .5% to 1% less for girl student
  2. Some banks offer personal accident insurance
  3. Some banks offer group life Insurance

Is there any limitation like how many people should take the education loan from the same family? Or my sister got an education loan, Will I be eligible for my education loan?Back

Yes. There are no restrictions. But your familys viability to repay the loan will be verified. Suppose if you sister has taken more than 4 Lakhs by pledging a property document, you can also claim the same property to get the loan provided the property value is high and the bank accepts it.

Is there any insurance policy that covers my guarantor?Back

Yes. Some banks will ask you to take one time payable insurance policy to cover your loan amount. If the bank is not able to recover the money from you or your family, the insurance will pay the loan amount.

Can I get the education loan as cash? How the loan amount is given to me?Back

The college fees are paid directly to the college/institution. For each year students should submit a form with expense details, based on that the amount will be sent to college/institution. For foreign institutions the fees will be paid in respective currencies and remittance charge is mostly paid by students.

You can use the following simple checklist while applying for education loan. This will cover most of the details that you should ask before taking the loan.

Education Loan Checklist

Yes/No/Detail

1

Do you really need education Loan?

 

2

Are you a citizen of India?

 

3

Have you secured admission from the college?

 

4

Is the Course an approved one?

 

5

Is the course full-time/Part-time/Distance Education?

 

6

Have you obtained the course Expense statement from your college?

 

7

Does my institution have any tie-up with any bank where I can get the loan easily?

 

8

Do I have all the required document for the Loan?

 

9

What is the Interest Rate the Bank offers?

 

10

Is there any service charge or processing fee for loan processing?

 

11

How much of the total expenses will be covered by Education Loan? Can you manage the remaining expenses?

 

12

Will there be any pre-payment penalty if you repay in one payment earlier than the actual duration of the loan? If so, how much?

 

13

If you want to move your loan from one bank to another bank, what are the Penalties/charges involved?

 

14

What kind of security/guarantor you need for your loan? Have you arranged?

 

15

How long is the grace period after completing the course to start the loan payment?

 

16

What is the tax benefit you will get when you complete your course? Will this course be eligible for tax benefit?

 

17

What is the Loan duration? Is it more than 8 Years?

 

18

Who will take the insurance for the Loan?

 

19

Do I have any other benefit like life insurance, interest rate reduction etc?

 

20

Is there any dispatch fee for the overseas payment? Who will pay for that?

 

Download Checklist

The following list has some banks that offer education loan. We take maximum care to bring the accuracy in the information but due to frequent update of the interest rate and other bank policies, we may have some inaccuracy data. Please refer the bank website or contact the banks directly to get the current information.

S.No.

Bank Name

Maximum Amount for India

Maximum Amount Overseas

Interest Rate

Contact Details

Website

1

Andhra Bank

Rs. 7.50 Lacs

Rs. 15.00 Lacs

13.5%

Delhi Tel: 3350248
Bangalore Tel: 2242932
Chennai Tel: 4991868, 4994294
Hyderabad Tel: 4756023-25
Kolkata Tel: 2471359
Mumbai Tel: 2046160, 2047620

Check Website

2

HDFC

Rs. 10 Lacs

Rs. 20 Lacs

13%-14%

Delhi Tel: 6103146, 6185944
Bangalore Tel: 2274600, 2219473
Chennai Tel: 8553838
Hyderabad Tel: 3233875
Kolkata Tel: 2478256
Mumbai Tel: 2820282

Check Website

3

State Bank of Mysore

Rs. 10 Lacs

Rs. 10 Lacs

12.75%

Delhi Tel: 5728842, 5729585
Bangalore Tel: 6631958
Chennai Tel: 5340902
Hyderabad Tel: 3203451
Kolkata Tel: 2200991
Mumbai Tel: 2856289, 2856391

Check Website

4

Allahabad Bank

Rs. 10 Lacs

Rs. 20 Lacs

12%

Delhi Tel: 3341152
Bangalore Tel: 2261599
Chennai Tel: 8282206, 8230267
Hyderabad Tel: 7637738
Kolkata Tel: 2401529
Mumbai Tel: 4923246

Check Website

5

Indian Overseas Bank

7.50 Lacs

Rs. 15.00 Lacs

12%

Delhi Tel: 3362003
Bangalore Tel: 2266207
Chennai Tel: 8524142
Hyderabad Tel: 4755324
Kolkata Tel: 2299700
Mumbai Tel: 2182226

Check Website

6

Syndicate Bank

7.50 Lacs

Rs. 15.00 Lacs

12%-12.5%

Bangalore:2226 7545 / 2226 7548

Check Website

7

Bank of Baroda

Rs.7.50 Lacs

Rs.15 Lacs

13.50%

Delhi Tel: 3321562,3325147
Bangalore Tel: 5586137, 5595347
Chennai Tel: 8283652
Hyderabad Tel: 3237760, 3230450, 3230368
Kolkata Tel: 4754047
Mumbai Tel: 2656727

Check Website

8

Indian Bank

Rs. 15 Lacs

Rs. 25 Lacs

13%

Chennai Tel: 25341561
Mumbai Tel: 22664633
New Delhi Tel: 23366488
Kolkatta Tel: 22482597

Check Website

9

Bank of Maharashtra

Rs.7.50 Lacs

Rs.15 Lacs

12.75%

Delhi Tel: 3321754
Bangalore Tel: 2264997
Chennai Tel: 4364410
Hyderabad Tel: 7843238
Kolkata Tel: 2203996, 2207122
Mumbai Tel: 2661295, 2652595

Check Website

10

IDBI Bank

Rs.7.50 Lacs

Rs.15 Lacs

12.75- 13.75%

---

Check Website

11

State Bank Of Saurashtra

Rs. 10 Lacs

Rs. 20 Lacs

11.75%-13.25%

Delhi Tel: 6236549
Bangalore Tel: 2221878
Chennai Tel: 5341780
Hyderabad Tel: 3201990, 3203036
Kolkata Tel: 2101092
Mumbai Tel: 2613976

Check Website

12

Bank of India

Rs. 10 Lacs

Rs. 20 Lacs

11%-12%

Delhi Tel: 3312654, 3311557
Bangalore Tel: 2212485, 2271130
Chennai Tel: 8270041, 8276143
Hyderabad Tel: 3315263, 3324487
Kolkata Tel: 2481973, 2485703
Mumbai Tel: 2023020

Check Website

13

Karnataka Bank

Rs. 10 Lacs

Rs. 20 Lacs

13.50%

Delhi Tel: 3341426, 3360872
Bangalore Tel: 3350525
Chennai Tel: 5342459, 5342092
Hyderabad Tel: 3202102, 3201029
Kolkata Tel: 2472181, 2475737
Mumbai Tel: 2663725, 2663256

Check Website

14

United Bank Of India

Rs. 10 Lacs

Rs. 20 Lacs

12.25%-12.75%

Delhi Tel: 3360661, 3363416
Bangalore Tel: 5582179
Chennai Tel: 4941834
Hyderabad Tel: 4756994
Kolkata Tel: 2487470-72
Mumbai Tel: 2871261-62

Check Website

15

Bank of Rajasthan

Rs. 10 Lacs

Rs. 20 Lacs

11%

Delhi Tel: 5712934, 5729817
Bangalore Tel: 2265436, 2260540
Chennai Tel: 5383416
Hyderabad Tel: 4705920, 4743684
Kolkata Tel: 2201892, 2207912
Mumbai Tel: 2870307

Check Website

16

UCO Bank

Rs.7.50 Lacs

Rs.15 Lacs

13%

---

Check Website

17

Canara Bank

Rs. 10 Lacs

Rs. 20 Lacs

11.25% - 13.50%

Delhi Tel: 6286087
Bangalore Tel: 5589502
Chennai Tel: 8524790
Hyderabad Tel: 3225324,3220607
Kolkata Tel: 2474881
Mumbai 2185241

Check Website

18

Oriental Bank of Commerce

Rs. 10 Lacs

Rs. 20 Lacs

11.25% - 12%

Delhi Tel: 3316777
Bangalore Tel: 2219762, 2219767
Chennai Tel: 8522940, 8550068
Hyderabad Tel: 3201803, 3201298
Kolkata Tel: 2821514, 2294823
Mumbai Tel: 2189286

Check Website

19

Central Bank of India

Rs.7.50 Lacs

Rs.15 Lacs

12.50%

---

Check Website

20

Punjab & Sind Bank

Rs.7.50 Lacs

Rs.15 Lacs

 

Delhi Tel: 5720849
Bangalore Tel: 2267476
Chennai Tel: 8522888
Hyderaba Tel: 4650771, 4650773
Kolkata Tel: 2484309
Mumbai Tel: 2651039

Check Website

21

Vijaya Bank

Rs. 10 Lacs

Rs. 20 Lacs

11.50%

 

Check Website

22

Catholic Syrian Bank Ltd

Rs.7.50 Lacs

Rs.15 Lacs

12%-12.5%

Delhi Tel: 3715951, 3328747
Bangalore Tel: 8462878
Chennai Tel: 8526397, 8520125
Hyderabad Tel: 3203112, 3202985
Kolkata Tel: 2381455, 2482713
Mumbai Tel: 2660239, 2665641

Check Website

23

Punjab National Bank

Rs.7.50 Lacs

Rs.15 Lacs

13.50%

---

Check Website

24

State Bank of Hyderabad

Rs.7.50 Lacs

Rs.15 Lacs

11.5% - 13%

---

Check Website

25

Dena Bank

Rs.7.50 Lacs

Rs.15 Lacs

13.50%

Delhi Tel: 5724837, 5730400
Bangalore Tel: 6345563
Chennai Tel: 4310542, 4330438
Hyderabad Tel: 5505081
Kolkata Tel: 2472278, 2473860
Mumbai Tel: 2181231, 2189155

Check Website

 


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