The cost of getting a quality education has gone through the roof in the last few years. Today, we live in a world where parents have to shell out a couple of lakhs just to admit their children in pre-schools. One can only imagine how expensive it would be to seek a bachelor’s or master’s degree in such a scenario. Due to this ever-rising cost of higher education most parents struggle to fund their children’s higher education. Thankfully, you can fulfil your aspirations for higher studies by taking out education loans. Here are some basic facts about education loans that you need to know.
From where can I get an education loan?
Education loans are offered by both, nationalized as well as private sector banks. The loan is offered to students seeking higher education in India and abroad. However, the applicant needs to prove to the bank that he/she has received a confirmed offer from a recognized institute to pursue higher education. Furthermore, the bank also considers your academic track record when you apply for the education loan.
What is the maximum loan amount offered by banks?
Banks decide the maximum loan amount depending upon the place from where you choose to pursue your higher education. If you are applying for an education loan to study at an Indian University, you could get a maximum loan amount of ₹7.5 lakhs whereas if you are considering going abroad for your higher education, you could get a loan of approximately ₹20 lakhs. A few banks also offer higher amount loans, however you need to be able to provide them with collateral in the form of bank fixed deposits, property, LIC etc.
What does the loan cover?
Student loans are all-round loans. This means that the loan covers various kinds of fees and charges along with related expenses. These include:
- Tuition fees
- Examination charges
- Registration fees
- Lodging and boarding
- Cost of books, uniforms and equipment
- Travel expenses (for students travelling abroad for higher education)
What is the interest rate charged on the loan?
The education loan interest rate varies from lender to lender and depends upon the loan amount secured by you. Typically you can expect to pay an interest rate of 11.25% to 12.5% on the loan.
What is the tenure of the loan and what are the repayment conditions?
Most banks provide a maximum tenure of 15 years to repay the student loan. However, there are certain conditions that one needs to keep in mind when it comes to repaying the loan. This means that almost every bank provides you with a moratorium period (a period during which one may cease repaying the loan; typically provided right after one has completed their degree and is looking for employment) of 6-12 months. You are not required to start repaying the loan during this period. However, once the moratorium period ends, you must start paying off instalments on the loan.