Educational Loans

A Couple of decades ago, only the extremely well-heeled or the exceptionally brilliant student could think of studying abroad. But that has changed today – the easy availability of education loans has put it virtually within everyone’s reach. Loans for foreign education are easy to obtain from several banks, but there is the paperwork to deal with. Expenses covered under education loans are fairly comprehensive, including the tuition fee, examination/library/hostel fee, books and a computer, travel expenses for studies abroad. The student and the parent/guardian act as co-applicants for the loan. For a loan of up to Rs.4 lakhs, there is no need for any collateral.

For between Rs. 4 to 7.5 lakhs, a third party guarantee is required. Loans exceeding Rs. 7.5 lakhs require tangible collateral security or a third party guarantee. Education loans come with a repayment holiday – you start paying back the loan only after you’ve graduated. This holiday period is either one-year from graduation, or six months after getting a full-time job, whichever is earlier. During this period, interest is computed as simple interest and compounded from the commencement of the repayment period. The repayment period in most cases is 5 to 7 years in the form of equal monthly installments.

Students can now avail of education loans up to Rs. 7.5 lakhs collateral-free. This was stated by the Indian Banks’ Association (IBA) while saying that the security norms under the Education Loan Scheme had been simplified, in keeping with Union Finance Minister P. Chidambaram’s budget announcement. According to an IBA, the loan amount that could be sanctioned to students without collateral securities was Rs. 4 lakhs. Earlier, for loans exceeding Rs. 4 lakhs, banks were taking tangible collaterals or third party guarantee as security. Now, loans exceeding up to Rs. 7.50 lakhs would be sanctioned with only satisfactory third party guarantee. Under the Education Loan Scheme, banks can sanction loans up to Rs. 7.50 lakhs for studies in India and 15 lakhs for studying abroad. The scheme being followed by the banks is based on a Model Scheme recommended by the IBA.

Paperwork includes:

  • Proof of admission to the course
  • Mark sheets of the last qualifying examination
  • Schedule of expenses for the course.
  • Copies of the letter confirming scholarship if any
  • Copies of foreign exchange permit, if applicable
  • Two passport size Photographs
  • Statement of Bank Account for the last six months of borrower
  • Income tax assessment order not more than two years old
  • A brief statement of assets and liabilities of the borrower

Education Loans through private institution against mortgage Property i.e. “Citi-Financial”, which gives education loan for higher studies abroad in any county up-to Rs. 90 Lacs.

Note: The Department of Secondary and Higher Education, Ministry of HRD has launched the website which has comprehensive Information guide on scholarships in India & Abroad and student loan facilities. Log on to: