Education Loan Interest Rates, Types, Process, Features, and Eligibility

Quality education is vital for achieving career aspirations, but rising educational costs often require financial aid. Education loans are crucial for managing academic expenses. Banks and NBFCs in India provide competitive rates to aid future leaders and innovators.

Top Education Loan Interest Rates 2023

Here are the education loan interest rates from leading Indian banks as of March 2023:

• Bank of Baroda: 9.15% onwards
• Punjab National Bank: 9.25% onwards
• Canara Bank: 9.25% onwards
• Union Bank of India: 11.30% onwards
• State Bank of India: 8.55% onwards
• Central Bank of India: 8.55% onwards
• IDBI Bank: 9.01% onwards
• Indian Overseas Bank: 11.05% onwards
• HDFC Bank: Offers preferential rates based on college or university
• Axis Bank: 13.70% onwards
• Federal Bank: 12.55% onwards
• ICICI Bank: 9.95% onwards
• Kotak Mahindra Bank: Up to 16%
• Karnataka Bank: 10.44% onwards

These rates may change according to bank policies.

Types of Education Loans

Education loans are categorized by the location of the institution, course type, and collateral requirements.

Based on Location:

• Domestic Education Loan: For students pursuing education in India. Requires admission to an Indian institution and other lender criteria.
• Overseas Education Loan: For students who aim to study abroad, covering expenses like airfare and tuition, subject to eligibility.

Based on Course:

• Undergraduate Loans: For students in 3 to 4-year undergraduate programs, enhancing career prospects.
• Postgraduate Loans: For 2-year postgraduate courses, providing advanced knowledge.
• Career Development Loans: For professionals re-skilling through courses in business and technical schools.

Based on Collateral:

• Loan Against Property, Deposits, and Securities: Requires pledging property, deposits, or securities.
• Third-Party Guarantee: A guarantee letter from a bank employee can help secure a loan.

Features and Benefits

• Loans up to Rs. 1 crore for international and up to Rs. 50 lakh for domestic students.
• 100% financing under certain conditions available.
• Cover additional costs like travel and laptop purchase.
• Preferential forex rates for international payments might be offered.
• Parents must be joint borrowers.
• Repayment tenure extends up to 15 years.
• A moratorium period up to 1 year post-completion.
• Tax benefits on interest payments for up to 8 years available.

List of Expenses Covered Under Education Loan

Education loans cover various costs:

• Institution fees
• Examination, library, and lab fees
• Travel expenses for overseas study
• Insurance premiums
• Caution deposits, building funds, and refundable deposits (up to 10% of the loan)
• Books, equipment, uniforms (up to 20% of the loan)
• Computer purchase (if required, up to 20% of the total loan)
• Other expenses necessary for course completion, such as study tours and thesis (up to 20% of the loan)

The required loan amount calculation considers available scholarships and financial aids.

Courses Covered Under Educational Loan

Loans cover a wide array of courses:

• Graduation and post-graduation courses by universities recognized by UGC, IMC, AICTE, or government bodies
• Courses by autonomous institutes like IIM, IIT, IISc, XLRI, NIFT
• Pilot training, aeronautical, shipping courses approved by regulatory authorities
• Job-oriented courses such as MBA, MCA, MS, and ones conducted by CIMA or CPA programs

Education Loan Eligibility

Eligible applicants include students applying for approved undergraduate, postgraduate, Ph.D. programs, diploma courses (minimum 6-month tenure), job-oriented, technical, and professional courses.

Applicants must have gained admission in recognized institutions or universities, completed 10+2 for undergraduate, and hold degrees for postgraduate courses.

Documents Required

Typically required documents for loan application include:

• KYC documents (identity and address proof)
• Mark sheets from 10th, 12th, and graduation exams and entrance exams
• Admission letter from the educational institution
• Course fee structure
• Co-applicant’s KYC and income proof

Lenders may request additional documents.

Tax Benefits on Education Loans

Under Section 80E of the Income Tax Act, interest paid on education loans is tax-deductible. Principal repayments are not eligible for deduction, and there's no cap on claimed interest repayment. Tax benefits last for eight years from repayment start or until interest is fully paid, whichever comes first.

Education Loan EMI Calculator

An EMI calculator aids borrowers by estimating monthly installments based on principal, tenure, and interest rate, facilitating financial planning.

How to Apply for an Education Loan

Apply for education loans online or offline:

Online Application:

1. Visit the bank's website, choose a loan scheme.
2. Download application or click ‘Apply Now’.
3. Fill the form, attach necessary documents, submit.
4. Bank verifies documents, evaluates the course, assesses collateral.
5. Upon approval, funds are disbursed.

Offline Application:

1. Visit desired bank branch, submit filled application and documents.
2. Bank processes and verifies the application.

Study Loan Repayment System

Post-completion, students get a grace period (6 months to 1 year) to secure jobs and start repaying. Once employed, repayment starts through EMIs, which students may negotiate based on income. The maximum repayment term is usually eight years.

Final Thoughts

Tapping into education loans is pivotal to achieving educational and career goals. It's crucial to select loans suiting your requirements. Understanding interest rates, loan types, eligibility, and repayment options informs decisions and aids financial management, letting you focus on studies for a prosperous future.