India’s leading lender State Bank of India has came up with the decision to slash the interest rate for students’ loan by 1 per cent. This decision to slash the interest rates is likely to be followed by other banks offering education loans in the country too.

Education loan becomes affordable

The bank sources had said that the move is to make education loan accessible by more students who wish to pursue their education in India and foreign universities. They say that the education loan will now be affordable for the students.

The new interest rates for different amounts

In the case of education loans up to the amount of Rs 4 lakhs, the interest rates have been slashed from 13.75 per cent to 13.50 per cent, a .25 per cent reduction. In the case of education loans ranging between Rs 4 lakhs and 7.5 lakhs, the interest have been reduced from 14.25 per cent to 13.25 per cent, a good 1 per cent less. Loans above Rs 7.5 lakhs will be charged with an interest rate of 12 per cent, a .25 per cent down from the previous rate of interest. The education loan scheme permits banks to provide up to a maximum of Rs 10 lakhs as loan for education in India. In the case of overseas education the amount extends to Rs 20 lakhs.

Loan for education in premier institutions in India

The new interest rates are currently in place. In the case of education loan for studying in top institutes such as Indian Institutes of Technology, Indian Institutes of Management and National Institutes of Technology, the present interest rate is 12 per cent. A loan amount up to Rs 4 lakhs does not require any collateral security. In the case of girl students, there is a concession of .50 per cent in interest rate for bank loans.

Impact of reduction in interest rates

This step of lowering interest rates is however a blessing for the students who wish to avail bank loan for their higher education. This will attract more students to join various colleges, which otherwise would not have been possible. It will lessen the burden on the students who repays the loan. There will be a considerable reduction in the amount that is to be paid as interest.

As the SBI reduces the interest rates, more banks are said to follow suit and thus help more number of students. The concession in the interest rates for girl students is intended to attract more girls to higher studies. The slash in the interest rates will encourage more students to go abroad for higher education. They will also be benefitted with considerable savings in terms of reduced interest amount.

This move will attract more students and to a certain extend will help in inclusive development in the field of education. We should understand that the more educated population, the more contribution towards development of the country. Let this be a stepping stone in that direction.