Because the rate of inflation in education is much higher than the overall consumer price inflation, with each each year, higher education becomes more costly. In such a situation, it is very hard for parents to finance their children’s education. So, many of them thus seek education loan.
Education loan can be taken either by the parents or the student to pay for higher education in India or abroad. It covers the expense of studies and other related costs. The amount of loan and other terms vary from lender to lender.
What are the advantages of taking study loan?
Study loan not only facilitates you to fund your higher education but also provides various other benefits. Read further to know how you can benefit taking a loan.
- The person on whose name the education loan in India is taken can claim deduction for the entire interest part of the loan under Section 80E of Income Tax Act.
However, if you want to take benefit of the deduction, you have to comply with the following two conditions :
- The loan must have been taken from a particular financial organisation which includes banks and any other financial institution that the Central Government may nominate in this name by notification in the Official Gazette. If you take educational loan from any other organisation, you will not be able to seek any benefit of tax deduction.
- Higher education can only be taken after the completion of the secondary examination.
Not only does the education loan cover the cost of the course, but almost all the education costs. Typically, the majority of banks finance up to 90 per cent of educational costs. Following are the expenditures that will be covered under the study loan:
- Tuition fees and accommodation costs
- Exam fees, library and laboratory charges where necessary
- Any charges owed to the Institute
- Price of uniforms, books and other important items
- Travelling costs
Generally banks propose discount on the study loan interest rate to female students pursuing higher education.
You get a vacation period known as the cessation period under which you do not have to repay the loan. This means that you do not have start the repayment process immediately after the completion of the course. There is a vaction period of generally 6 months to 1 year after which the EMI process will commence. However, you have the alternative of serving the interest cost of the loan during the vacation period. If you do so, the bank may consider lowering your interest rate.
Eligibility for an Education Loan
Every bank has its own eligibility conditions for study loan but following are a few common factors –
- The applicant should be of Indian nationality.
- At the time of application, the applicant should have the documents verifying the admission.
- Applicant should be in the age of 16-35 years.
Documentation requirements for education loan in India
- Passport size photographs of the applicant
- Age proof
- Proof of identity
- Proof of residence
- Bank account statement for past 6 months
- Papers confirming any scholarships the applicant has eligible for and admission approval letter
- Cost for the course
- Mark sheets
Foreign exchange consent copy
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