careers know all about education loan · 2016-12-20 · 4 a career is a life know all about...

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EducAtion loAn

• How to take education loan • Eligibility Criteria • Application Checklist • Education Loan Interest Rate • Education Loans from Different Banks & more...

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A Career is a Life Know all about education loan

introduction 03

How much education loan should you take? 04

interest rate of education loan 05

default on education loan repayment 06

document checklist to apply for education loan 07

eligibility criteria to take education loan 09

steps to take education loan 10

education loan from state bank of india 11

education loan from Punjab national bank 13

education loan from canara bank 15

education loan from credila 17

other useful resources 19

Contents




An education loan can be a saving grace. However, high interest rates and the cumbersome process could come as a dampener. Read on to find out how to get

the best deal?

The first thing that comes to a student’s mind while arrang-ing funds for his education abroad are Scholarships and Financial aids. However, given the huge crowd and competi-tion in international education it is not always possible to secure such benefits.

As such, Education loans to study abroad become an easier way to secure funds. The following points helps you gain some insight into why exactly you should consider applying for an education loan for studying abroad:

1. Education loan is one of the priority sector under which banks are required to lend by the Reserve Bank of India.

2. Students applying for education loan for education abroad can avail tax benefits under section 80 (E) of Income Tax Act 1961. Some of the highlights of this Act are:

l Loan should be taken from approved financial insti-tution

l Loan should be for full-time studies for any graduate or postgraduate course

l Deduction is allowed for a continuous period of eight years

IntroduCtIon

Most banks are into lending of education loans. In fact, study loans are categorised as priority sector lending for public sector banks. But again, it does not mean that lending institutions are quick to disburse loans to all kinds for all pro-grammes and for all institutions. In this E-Book, we discuss about all that you need to know about taking an education loan to fund your studies.




This question may haunt you if you are don’t do cost benefit analysis. The maximum loan that lenders dis-burse for studies in India is Rs. 10 lakhs and for over-

seas, Rs. 20 lakhs. Credila provides loan above Rs 20 lakhs.The education loan you should take would depend on the course fees and your capacity of generating down payment (payment from own pocket) towards it. For a loan above Rs. 4 lakhs, one has to generate minimum down-payment of 5% for studies in India and 15% for studies abroad. For a loan

How muCH eduCatIon loan sHould you take?

below Rs. 4 lakhs, one can get the entire fees as loan, as the banks claim. But you can pay the down payment or the mar-gin money piecemeal. Allahabad Bank, for instance, takes the margin money on year-to-year basis and disbursements are made on a pro-rata basis. Though a student may be eligible for uppermost loan limit he should exercise prudence while filling the loan amount. If the course for which the loan is being taken enables better earnings then it may more than justify the loan.

Loan amount

Moratorium- period

Loan repayment period

Interest rate

Loan amount after moratorium

EMI Gross Salary

Net Salary

50% of Net Salary for servicing debt

Amount left in hand after paying EMI

500,000 3 7 11% 657,500 11,085.89 25,000 22,000 11,085.89 10914.11




Interest rate of education loan depends on whether you are studying in India or abroad, the course that you are applying for, your loan amount and the tenure. Students

getting admission to highly rated institutions are offered loans with a lower rate of interest. There have been talks that IBA will soon come up with comprehensive ratings of the institutes to guide banks in making right decisions while granting educational loans. From a student’s perspective, the irony of it is that they will have to shell out more for Equated Monthly instalments (EMI) due to high interest rates in case institutes have been rated on the downside. On the other hand it’s likely they would be placed at lower packages from such institutes! Special concessions on interest rates of 0.5 percent are available for women students.

Two types of interest ratesThese comprise fixed interest and floating interest rate. Usually, nationalised banks offer variable interest rates for student loans, while private and foreign banks offer fixed interest rates. Interest rates vary between 12 to 16 percent. Considering the present macro-economic environment it is advisable to go for floating interest rate loans. SBI is the lead-ing player with 25 percent share in education loan segment.

Simple vs. compound interestSimple interest is to be charged during the study period and up to commencement of repayment. There have been complaints that banks charge compound interest. Servicing of interest during the moratorium period is optional and students can avail one percent rebate on interest rate if they decide to pay.

Interest rate of eduCatIon loan

eduCatIon loan reCkoner

l education loan procurement is easy if the pro-gramme is recognised and the college/ university is government affiliated/ approved. education loan sanction is easy for job-oriented professional/tech-nical courses. students applying in private colleges which have good placement record are entertained.

l banks lend up to rs. 10 lakh for studies in india and rs. 20 lakh for education overseas.

l banks provide loans only between 75 to 90 per cent depending on the total cost of the course and the rest of the fund percentage you have to generate from your own sources. credila, however, provides loans above rs. 20 lakhs and without any margin money

l education loan interest rate varies from bank to bank, which could be anywhere between 11-14%

l banks may claim to offer loan up to rs 4 lakh without collateral, however, that’s usually on paper. banks ask for collateral.

l collateral includes assets like national security certificates, insurance policies, bonds and property papers.

l How much credit to take? check the placement re-cord of the institution and do a rough calculation on the expected monthly income you are likely to draw as fresh employee. don’t forget to take into account the running expenses.

l a few banks allow a moratorium on interest payment, but under this option, the interest is compounded quarterly and added to the principal sum for repay-ment. banks offer lower interest rates (usually one percent if you start repayment during the morato-rium period).




The education loan repayment period is between five and seven years and it starts from one year after the course completion or six months after securing a job,

whichever is earlier.

Considering that the default is unintentional, when a stu-dent foresees hiccups arising in loan servicing then he/she should request the lender to re-schedule the payoff before-hand. If the lender agrees - as they did in quite a few cases in early 2009 when the employment markets was adversely hit - then it is fine. Otherwise there is no real option. In case the student is not able to pay education loan, the default will be reflected in his credit information report. Default gets reported in the Credit Information Bureau Limited (CIBIL) as well, which can affect the credit history of the student. Legal proceedings take place in case of defaults. Also, the collateral can be confiscated in case of the default. If students are regular in servicing the loan then access to

default on eduCatIon loan repayment

future loans like auto Loans, housing loans can be negotiated at competitive rates, based on the good credit history. So, follow the golden rules and approach your dreams in good faith. Set off now.




l A completed and signed application form

l Two passport size photographs applicant

l Photo id of the applicant. The applicant can submit one of the following

a) Passport

b) Pan card

c) Voters ID card

d) Driving license

e) Employee ID (if working)

f ) Defence ID card

g) Aadhar Card

h) Photo ID issued by central or state government

i) Bank passbook with photograph of the account attested by the bank

l Residence proof of the applicant

a) Passport with address

b) Driving license with address

c) Bank statement with address

d) Ration card (except Maharashtra)

e) Aadhar card

doCument CHeCklIst to apply for eduCatIon loan

f ) Telephone/ electricity/ water bill not older than three months

g) Voters ID card

l Admission documents

a) Printed admission offer letter from the university/insti-tute. The letter must be on their letter head and must be signed by the authority

b) I-20 form for students going to the US for higher studies

c) Fee details of the institute/ university

l Academic documents

a) Mark sheets and certificates of Class 10 and Class 12

b) Mark sheets and certificates of graduation (if the candi-date is going for post graduate studies)




c) Documents of scholarships (if the candidate obtained one)

d) Documents of any entrance exam take- GRE, GMAT, IELTS, TOEFL

l Income proof of the applicant

a) In case of a salaried employee:

i. Salary certificate on employer’s letterhead or latest three month’s salary slip

ii. Last two years’ Form 16 from the employer

iii. Last two years’ Income Tax Returns

iv. Any other valid income proof

b) In case of self employed person

i. Last two years’ Income Tax Returns

ii. Last two years’ Certified Financial Statements or Provisional Financial Statements Duly Certified by CA

iii. Proof of office

iv. Any other valid income proof

l Income proof of the guarantor if the applicant is not employed. The same documents mentioned above is required for guarantor also

l Declaration/ affidavit confirming that the candidate has not obtained any other loan from other banks




l The candidate must be a citizen of India

l The candidate must have obtained a place to study in one of the recognised universities/ institutes abroad

l The candidate must be aged between 16 and 26 years old

l The candidate must have good academic record

l The candidate must submit all the required documents for education loan

l The co-applicant/ guarantor must be either primary (parents, spouse, siblings) or secondary (father-in-law, mother-in-law, brother-in-law, paternal/maternal uncles/aunts)

elIgIbIlIty CrIterIa to take eduCatIon loan




Step 1: Fill in the application formThe candidates can either collect the application form from the banks or apply online by visiting the bank’s official web page. The candidate must have in hand his/her admission offer letter from the University along with the details of the study expenditure. The candidate must also provide the required documents for education loan such as:

l Passport size photograph

l Resident proof of the applicant

l Photo identity proof

l Academic documents

l Income proof of the guarantor

Step 2: Verification of the details and documentsOnce the candidate submits the application form along with the supporting documents for student loan, the bank will verify the details. The process of verification differs from bank to bank. Some banks prefer a personal conversation with the candidate where they enquire about the academic qualification and excellence. In case the bank requires more details, it will inform the candidate.

Step 3: Sanction/ rejection of education loanIf the bank is satisfied with the documents provided by the candidate, it sanctions the educational loan. Once the loan is sanctioned, the bank will issue a Loan Offer Letter mention-ing the amount to be given to the candidate. The candidate can use this letter for admission process to state the source of income to support his/her studies. The bank also sends an Education Loan Agreement to the student, which states the

steps to take eduCatIon loan

terms and conditions of the student loan, interest rate and repayment strategies. Once the loan is granted, the student needs to sign a promissory note.

Step 4: Disbursement of education loanOnce all the formalities are completed, the bank will disburse the education loan. The education loan amount is given to the candidate through:

• Demand Draft

• Cheque

• Electronic transfer to the University




The State Bank of India is one of the top education loan providers in India. Every year the bank grants loans to the students who secured admissions in

various recognized universities in India and abroad with no processing fee. Here are the details of obtaining a student loan from SBI.

Eligibility to get education loan from SBIThe candidate must be a citizen of India

l The candidate must have obtained admission in any of the recognised universities in the world

eduCatIon loan from state bank of IndIa

l The candidate must have obtained admission to one of the following courses:a) Job oriented professional degree coursesb) Job oriented professional diploma coursesc) Job oriented technical degree coursesd) Courses conducted by CPA (Certified Public Account-

ant) in USA and CIMA (Chartered Institute of Man-agement Accountants) – London

Education loan amount given by SBISBI provides education loan for upto Rs. 30 lakhs for stu-dents who wish to go abroad for higher studies. The expenses covered in the student loan are:




l Tuition fee payable to the university/ college

l Examination/ library fee

l Caution deposit/ refundable deposit

l Travel expenses

Documents required to take education loan from SBI

l Completed application form

l Two passport size photographs

l Letter of admission from the University

l Documents on the cost of studies

l PAN card of the candidate

l Proof of identity (any one)a) Passportb) Driving licensec) Voters ID cardd) Aadhar card

l Proof of residencea) Passportb) Driving licensec) Voters ID cardd) Electricity bille) Telephone bill

l Student/ co-borrower/ guarantor’s bank account state-ment for the last six months

l Statement of assets and liabilities of student/ co-borrow-er/ guarantor

l Student/ co-borrower/ guarantor’s proof of income

Security needed to take education loan from SBIIf the candidate is taking a student loan up to four lakhs, the only security needed is the parent or guardian as the co-borrower. If the loan amount is between 4 lakhs and 7.5 lakhs, the candidate must provide parent or guardian as the co-borrower and collateral security in the form of the details of the Gross Annual Income of the parent or guardian. If the candidate is applying for an education loan above 7.5 lakhs, the parent or guardian must be the co-borrower and the can-didate must show tangible collateral security.Repayment of education loan from SBI

The candidates who take educational loan upto 4 lakhs or between 4 lakhs and 7.5 lakhs will get 10 years to repay the amount. The repayment period for the loan amount above 7.5 lakhs is 20 years.

The rate of interest of education loan is given below:

Loan amount

Above Base Rate

Current Rate

Upto Rs. 4 lakhs 3.50% 13.50%

4-7.5 lakhs 3.75% 13.75%

Above 7.5 lakhs 1.75% 11.75%

* Girls will have 0.50% concession




The Punjab National Bank provides various schemes to issue education loan for the students who want to go abroad for higher studies. The educational loan

to study abroad by the PNB is called PNB Saraswati. The bank provides education loan for upto Rs. 20 lakh for stud-ies abroad.

Courses covered for PNB education loanThe Punjab National Bank provides student loan for the below given courses:

l Job oriented professional courses offered by reputed uni-versities

eduCatIon loan from punjab natIonal bank

l Job oriented technical courses offered by reputed univer-sities

l Post graduation courses such as MBA, MCA and MS

l Courses conducted by CIMA- London and CPA in USA

l Diploma and degree courses such as pilot training, ship-ping, aeronautical etc. Provided by recognised regulatory bodies abroad. The diploma courses other than these will not get an education loan from PNB




Eligibility to take education loan from PNBThe eligibility criteria for education loan from PNB are:

l The candidate must be an Indian citizen

l The candidate must have obtained admission in a reputed university/ institute abroad

Application checklist for education loan from PNB



l Proof of addressa) Passportb) Driving licensec) Voters ID cardd) Electricity bille) Telephone bill

l Proof of age

l Academic transcripts and certificates of the latest degree

l Prospectus of the university/college the applicant is going to join which explains the tuition fee, examination fee and hostel fee

l Information about the assets and liabilities of the parents or guarantor

l Copy of passport and visa

Expenses considered for the education loan from PNB

l Fee payable to the university/ college

l Examination fee

l Travel expenses from the home country to the host country

l Caution deposit

l Purchase of books etc.

Security needed to take education loan from SBIThere is no security needed to take education loan for upto Rs. 4 lakh. However, the guardian or parent must be the co-borrower. The candidates taking loan between Rs. 4 lakh and Rs. 7.5 lakh must provide collateral security in the form of suitable third party guarantee. For the loans above 7.5 lakh, the candidate must provide tangible collateral security suitable value acceptable to bank along with the assignment of future income of the student for payment of installments.

Interest rate for education loan by PNB

Amount of Loan Repayable in less than 3 yrs

Repayable in 3 yrs & above

Upto Rs 4 lakh BR+3.00% (13.25%)

BR+2.50%+ TP (13.25%)

Between Rs 4 lakh and Rs 7.50 lakh

BR+4% (14.25%) BR+3.50%+ TP (14.25%)

Above Rs 7.50 lakh

BR+2.00% (12.25%)

BR+2.00%* (12.25%)

Loan repayment The students who are taking the loan upto Rs. 7.5 lakh will get 10 years repayment period. The repayment period of the education loan above that is 15 years. The moratorium period to start repaying the loan is six month to one year after completing the course or getting a job (whichever is first).




Canara Bank offers various educational loan schemes for the students doing higher studies in India and abroad. The bank provides upto Rs. 20 lakh loan to

the students who go abroad for higher studies.

Eligibility to apply for education loan from Canara Bank

l The candidate must be a citizen of India

l The candidate must have obtained admission in a reputed university/ institute abroad

l The candidates must be going abroad to study:a) Job oriented professional courses b) Job oriented technical courses c) Post graduation courses such as MBA and MCAd) Courses conducted by CIMA- London and CPA in

USA

eduCatIon loan from

Canara bank

e) Diploma and degree courses such as pilot training, shipping, aeronautical etc.

The processing charge for the loans to study abroad is 1% of the loan amount. In case the sanctioned loan amount is taken by the candidate, the amount will be reimbursed.

The education loan amount will be directly disbursed to the university/ institute. There is no margin for the candidates who take education loan for upto Rs. 4 lakh. The margin for the candidates who take loan for above Rs. 4 lakh is 15%.

Documents checklist for education loan from Canara Bank


l Mark sheets of all qualifying exams




l Letter from the University confirming the admission

l Expenses for studies including tuition fee and living expenses

l Proof of age

l Proof of residence


l Last six months bank statement of the candidate

Documents to be submitted by the co-applicants

l Proof of residence of the co-applicant- passport, voter’s ID card, Aadhar card, telephone or electricity bill

l ID proof- passport, voter’s ID card, Aadhar card, pan card

l Last six months bank statement

Security for education loan from Canara Bank There is no security needed to take education loan up to Rs. 4 lakh. For the loan amount between Rs. 4 lakh and Rs. 7.5 lakh, a satisfactory third party security is needed. For the loans above Rs. 7.5 lakh, 100% collateral security equal to the loan amount must be given.

Repayment of education loan from Canara BankThe candidates must repay the education loan amount one year after completing the course or six months after getting the job, whichever happens first. The repayment period for the education loan up to Rs. 7.5 lakh is ten years and above Rs. 7.5 lakh is 15 years.




Cedilla is a HDFC Limited Company that provides education loan for students. Credila provides loans in Indian rupees that can be converted to the currency

of the country the student goes for higher education. The repayment of the loan will be in Indian rupee. Credila loans start from Rs. One lakh upto Rs. 20 lakh.

Eligibility to get education loan from Credila

l The candidate must be an Indian citizen

l The candidate must be above the age of 18 years

l The co-borrower must have a bank account in one of the Indian banks with cheque writing facilities

l The candidate must have obtained admission in a recog-nised university abroad

Co-borrower’s eligibility

l The co-borrower must be an Indian citizen

l The co-borrower must be a relative of the applicant such as father/ mother/ brother/ sister/ spouse (for married candidates)

l Co-borrowers’ has co-extensive liability with the candi-date

l The co-borrower must provide valid proof to establish the relationship with the candidate

l In case the collateral security cannot be provided by the relatives mentioned above, the candidate can also bring father-in-law/ mother-in-law/ sister-in-law/ brother-in-law/ maternal or paternal uncle/ aunt/ grandparents/ first cousins

eduCatIon loan from CredIla




The types of collaterals accepted as:a) Residential house/ flatb) Fixed depositc) Non- agricultural land

Costs covered in education loan by Credila

l The entire tuition fee

l Examination fee

l Library and laboratory fees

l Purchasing of books

l Hostel fees and living expenses

l Travel fare (economy ticket from India to the destination country)

Education loan disbursement by Credila Credila disburses the education loan in Indian rupees. The tuition fee will be directly disbursed to the educational institution through an authorised servicer or directly. The amount for living expenses and other expenses will be disbursed in instalments from time to time as per Credila’s underwriting norms.

Interest rate for taking education loan from Credila

l It will be floating rate of interest linked to Credila’s Bench-mark Lending Rate (CBLR)

l The interest is calculated using Simple Interest Rate

l Floating rate of interest to be (Credila’s CBLR + Spread)% per annum

l The current CBLR is 12.35% per annum

Education loan repayment policy of Credila

l The interest payment of the loan starts soon after the dis-bursement of the first instalment of the loan

l Tenure of the loan is the Duration of Study + Grace Period after the Study + Repayment Period

l The maximum tenure for the repayment of the loan is 10 years

l The major factors determining the tenure is the repaying capacity of the candidate, age of the co-applicant and the future prospects of the course

l The monthly payment of the loan will be deducted from the bank account of the borrower/ co-borrower using Electronic Clearing System (ECS)




Education Loan: The Myths

Study abroad Education loan: How it works to your advantage

Education loan FAQ

otHer useful resourCes


http://www.studyabroad.careers360.com/education-loan-myths

http://www.studyabroad.careers360.com/study-abroad-education-loan-how-it-works-your-advantage

http://www.studyabroad.careers360.com/education-loan-faq

http://www.studyabroad.careers360.com/education-loan-myths

http://www.studyabroad.careers360.com/study-abroad-education-loan-how-it-works-your-advantage

http://www.studyabroad.careers360.com/education-loan-faq