Exam season is at its feverish pitch. Like every year, lakhs of students in India are appearing in these exams to undertake higher education in their dream institution. While students are burning the mid-night oil, parents are struggling to find ways to fund their children’s higher education. The help is available in the form of lesser known education loans offered by many Public Sector Units (PSUs) banks.
How can you avail this loan which can give wings to your dreams?
First and foremost you have to be an Indian national in the age group of 16-26 age group, however the range may vary from bank to bank, besides a good academic record. Your parents/ guardian should have a regular source of income so that they are able to repay the loan if the need arises. The institute you have applied for must be a recognized one.
Mostly minors are not eligible for educational loans, as banks assess the individual's repaying capacity while disbursing the loan. But you can avail of the loan if your parents/ guardians satisfy the eligibility criteria.
You need to have a guarantor for the education loan to be sanctioned. If you fail or are incapable of repaying the student loan, the guarantor will have to clear the debt. Usually, most banks require the guarantor to have a net worth and/ or annual income equivalent or more than the education loan amount.
Only education loans above Rs. 4 lakh require tangible collateral, security for the full value of the loan or third-party guarantee, depending on the amount. However, the co-borrower -- the parent or guardian - is required to furnish his/her bank account statement, tax returns of the last two years, statement of assets and liabilities and proof of income. The usual security that banks accept are National Savings Certificates (NSCs), bonds, gold, vehicle, house and property etc.
For loan above Rs. 4 lakh and up to Rs 7.5 lakh, the collateral in the form of a suitable third-party guarantee is required. The bank may, at its discretion, waive third-party guarantee if satisfied with the net worth / means of the parent who is executing the document as a joint borrower.
Whereas loans above Rs 7.5 lakh require collateral security of a suitable value or a suitable third-party guarantee, along with the assignment of the student's future income for payment of installments.
There is a special provision for Economically Weaker Sections (having gross family income upto Rs. 4.50 lacs per annum) under Central Scheme of Subsidy granted by Ministry of HRD for providing interest on education loans during moratorium for technical and professional courses for studies in India. The subsidy is provided for the period of moratorium i.e. course period plus one year or six months after getting job whichever is earlier.
When the education loan amount is greater than Rs 1 lakh, banks usually prefer students who have life insurance policies equivalent to, or more than, the education loan amount. This is nothing more than a security feature and also forms part of your collateral. If something unfortunate happens to the borrower, the bank does not lose money and can recover the outstanding amount from the insurance policy.
Some banks have tied up with specific institutions to provide education loans to students for select courses.
What all expenses are covered by this loan?
• Fees payable to the college, school or hostel, including tuition fees.
• Examination, library and laboratory fees.
• Purchase of books, equipment, instruments and uniforms.
• Caution deposit, building fund, refundable deposit supported by the institution's bills or receipts.
• Travel expenses for studies abroad.
• Buying computers essential for completion of the course.
• Any other expenses needed to complete the course, like study tours, project work and theses.
• Interestingly, some banks also cover the cost of two-wheelers up to Rs. 50,000.
Here I would like to quote Harsh Roongta, Personal Finance expert on his pre-budget wishlist, “Education Guarantee Fund will be a step in the right direction for the education sector and the future well being of India. Also the Finance Minister had promised to set up an Education Re-finance Corporation from part of the “education cess” that all of us pay. That promise is languishing for the last 4 years. The promise needs some action now.”
The Government has announced “Mortagage Guarantee Fund” in this budget recognizing the importance of real estate sector, I feel that similar “Education Guarantee Fund” will also go a long way in serving the cause of education in India.
Author works of ApnaPaisa.com
Disclaimer: While we have made efforts to ensure the accuracy of our content (consisting of articles and information), neither this website nor the author shall be held responsible for any losses/ incidents suffered by people accessing, using or is supplied with the content.
on your mobile
On your phone browser type 