Funding your education: Points to ponder
All the students wish to get good quality education from well known education institutions. However some of them find it difficult to pursue a course in an institute of their desire as it is difficult for them to meet the educational expenses. In order to support the education of such students the government has introduced the provision for students’ loan. In most of the cases students are not properly aware of the provision for students’ loans and even if they are aware of it, they are not clear on the procedures to be followed for availing the loan. There are also instances where students fail to repay the loan.
Know the education loan scheme well
Before availing the student loan, it is very essential for the students to understand the various aspects associated with student loan, so that they can make a good use of it for their education. So it is better that students take advices from experts and/or consultants to avoid any misunderstandings about the student loan.
In India, student loans are offered by all the nationalized banks and all other scheduled and private banks. The student need not provide any collateral security of any kind to avail the loan. The students need to start repaying the money one year after the course. This whole process becomes an issue when the students fail to repay the loan. The percentage of students who fail to repay the students loan is increasing every year.
Points to be considered before applying for loan
Before applying for a loan, there are many points students must keep in mind. There are different types of education loans and the student need to select the best suited for them. Following are the few points that the students need to ponder before they make the decision to avail a student loan.
The student needs to first study about the loan. It means that the student must learn about the percentage of interest for the loan, the different courses for which the loan will be given, the minimum and maximum amounts that can be availed as loan and similar sort of things.
The student must decide on the college which he or she wishes to join. The placement record and the compensation packages offered by the companies should be considered while selecting a college. It is important as the student is the one who should repay the loan after the course. So the salary he or she may earn after getting a job is important to determine whether it is possible to pay for the loan and meet the personal expenses.
The student should look for other sources before going for student loan. It is better to consider education loan as a last resort. If there are no options left, then it is better to go for a student loan.
Before applying for a student loan, both the advantages and disadvantages of the loan should be taken into account. It includes the amount that can be availed, the interest rate, the payback period etc.
It is also important to understand the grace period that will be offered by the bank in case of difficulty in repaying the amount.
- The student should select the suitable repayment option from among the available options.
- The repayment process should be well understood.
- The student should enquire about the pre-payment fees that need to be paid for availing the loan.
The loan amount limit and other conditions
The maximum amount of money that will be provided by the banks to study in India is up to Rs 10 lakhs. In the case of education in foreign universities, the amount will extend to Rs 20 lakhs. To apply for the education loan, the applicant must be a citizen of India and should be between the ages of 16 to 35 years. For a loan amount up to Rs. 4 lakhs, there is no need for any security. But in the case of amount exceeding Rs. 4 lakhs, the students need to provide a third party security for an amount above Rs 7.5 lakhs. In the case of amount exceeding Rs 10 lakhs, the student needs to provide a collateral security which is tangible in nature.
Expenses covered under loan
The various expenses for which loan will be offered includes:
- Tuition fee and hostel fee
- Amount required for buying books, instruments and uniforms
- Travel expenses for studies, including overseas education
- Insurance premium for the student
- Fee such as examination fee, laboratory fee etc
- Refundable deposits that are collected by the institution and that do not exceed 10 per cent of the tuition fees for the course.
- Amount required for buying computers
Any expenses that are needed for the completion of the course such as project, internship, industrial visits etc.
Repayment of loan and duration
The student need to start repay the loan after one year from the completion of the course. The loan should be repaid within 5 to 7 years from the commencement of repayment. In case the student is not able to repay the amount in time, he or she will be given a maximum time of 2 years to repay the loan.
Select the loan based on processing time
The loan should not be selected purely on the basis of lower interest rates. There are banks which offer low interest rates, but in such cases the chances of longer processing time are high. So students should look for banks with lesser processing time and this is important in the case of overseas education. The student should take interest in maintaining contact with the bank so that it is easy to determine how much has been paid and how much needs to be paid.
Income tax deductions
The parent of the students can claim income tax deduction for the tuition fee paid to the institution. This is available in the case of education loan also. Income tax deduction is given to parents or individuals who service education loan. This is applicable to individuals’ only and not Hindu undivided family.
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