Nitty-gritty of Indian Education Loans for Studying Abroad

Posted on February 7, 2014 by Akshay Study Abroad in Applications, Study Abroad

Education_Loan

Education loans have made, are making and would make the dreams of many aspiring Indian students of studying abroad come true.

Student loans are offered under certain terms and conditions and definitely under a set scheme of interest. Indian banks offer student loans for studying abroad on a confirmed admission to a foreign university for full-time courses (that is, loans are not offered for correspondence courses.). Banks consider a student’s past academic record and offer the loan only if they find it satisfactory. All these conditions for financing education apply generally, but in the end, each bank follows its own scheme.

Generally if a student gets an admission offer from a top university, the loan may be sanctioned without the requirement of a co-signer based in the country where the University is established. In other situations, the financial institutions and banks require a home country based co-signer or a co-signer residing in the country where you intend to go.

IBA’s (Indian Banks’ Association) new guidelines

  • Eligible Expenses for education loan: Fees payable, accommodation charges, exam and library fees, reasonable expenses for books and equipment including computer, travelling expenses abroad and other reasonable expenses required to complete course.
  • Quantum of finance: Rs. 10 lakh for study in India and Rs. 20 lakh for study abroad. Banks may consider lending higher amount in special cases at their discretion.
  • Security : (a) up to Rs. 4 lakh- No security, parents to be joint borrower
    (b) between 4-7.5 lakhs- along with parents collateral security in form of third party guarantee
    (C) Above 7.5 lakhs- Parents to be joint borrowers+tangible collateral security of suitable value required.
  • Moratorium period for repayment: Course period + 1 year or 6 months after getting job, whichever is earlier
  • Margin money: Nil for loan up to Rs. 4 lakh. 5 percent and 15 percent respectively for study in India and abroad on loan above Rs. 4 lakhs.
  • Tenure of loan: 10 and 15 years for loan up to Rs 7.5 lakhs and above respectively
  • Interest paid by the students on educational loan in financial year is eligible for income-tax exemption u/s 80 E of IT Act for 8 years.

 Note: Sanctioning of loans to the students is at the discretion of banks. Banks can accept or refuse any case of education loan without giving reasons.