What are some lesser-known facts about education loan?

It is no secret that the cost of gaining quality education is increasing every passing year. Today, most private schools charge thousands to a few lakhs. The cost of acquiring a bachelors and master’s degree from a good university is higher. Parents sponsoring their child’s education typically need to save funds for years for a course that lasts between two to four years. But bright students who come from economically lower or middle-income groups often find it challenging for seeking admission in a school of their choice owing to higher fees. However, such students need not lose hope.

They can fulfil their aspirations by taking out an education loan. Following are some facts you should be aware of –

Coverage of a wide range of aspects

Unlike the popular belief, loans taken for higher studies cover more than the college fees. It encompasses a wide range of expenses concerning quality education. For instance, if you want to attend school in a university away from India or abroad, you get the lodging and food coverage under the student loan. You can use the funds for buying books and study materials for other things like travel, payment of associated fees such as an exam, library, laboratory fees, etc.

Subsidies available under the loan

Education loan in India is offered at a subsidised interest rate, especially for those bright students with lower annual income. Students coming from families whose yearly wage is less than INR 4.5 lakh can avail the subsidised interest rates on such loans. As such, when the borrower starts repaying the loan EMIs, the interest component of the loan gets borne by the Government, and the borrower only needs to pay for the principal amount in EMIs. However, such subsidy is only applicable for the students completing their higher education in India.

Affordable loans for students aspiring to go abroad

Those who aspire to go overseas for higher education have a unique advantage when it comes to repayment of student loan in India. This gets attributed to the fact that such students have a greater chance of finding employment in a foreign country, which therefore allows them to earn income in foreign currencies. For example, if some studies and seeks employment in the USA, you make in US dollars. Also, you can get the borrowed loan amount in INR, when the value of the dollar drops. While the EMI you pay is almost the same, there is a benefit of a few rupees on every dollar earned.

Tax benefits on the loan Considering this loan is a necessary investment, it enables the student’s parents to avail some tax benefits. Uder Section 80E of the Income Tax Act of India, borrowers can claim tax exemptions for a sum that equals the interest amount payable against the loan. As such, the entire interest amount on loan is tax-free, thus promoting awesome deals on savings, if the borrowed amount is high.