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Education Loan Types: Choosing the Right Financial Aid

Noida June 27, 2024: Education loans are financial aids provided to students to help cover the cost of their education. These loans can be taken from banks or Non-Banking Financial Companies (NBFCs) and come with competitive interest rates.

Top Education Loan Interest Rates 2024

Bank Name Interest Rate (% p.a.)*
Bank of Baroda 9.15% onwards
Punjab National Bank 9.25% onwards
Canara Bank 9.25% onwards
Union Bank of India 11.30% onwards
State Bank of India 8.55% onwards
Central Bank of India 8.55% onwards
IDBI Bank 9.01% onwards
Indian Overseas Bank 11.05% onwards
HDFC Bank Preferential rates per college
Axis Bank 13.70% onwards
Federal Bank 12.55% onwards
ICICI Bank 9.95% onwards
Kotak Mahindra Bank Up to 16%
Karnataka Bank 10.44% onwards

*Note: Rates as of March 2024, subject to change as per bank regulations.

Types of Education Loans

Based on Location

Domestic Education Loan: For students pursuing education within India.

Overseas Education Loan: For students aiming to study abroad, covering airfare, accommodation, and tuition fees.

Based on Course

Undergraduate Loans: For students pursuing undergraduate degrees, typically 3-4 years in duration.

Postgraduate Loans: For students seeking postgraduate degrees, usually 2 years long.

Career Development Loans: For professionals looking to enhance their skills through courses and training.

Based on Collateral

Loan Against Property, Deposits, and Securities: Financing by pledging immovable assets or financial instruments.

Third-Party Guarantee: Obtaining a guarantee letter from a bank employee or a home bank.

Features and Benefits

  • Loan amount up to Rs.1 crore for international students and Rs.50 lakh for domestic students.
  • 100% financing under certain conditions.
  • Covers additional expenses like travel and laptops.
  • Preferential forex rates for international disbursements.
  • Parents as joint borrowers.
  • Repayment tenure up to 15 years.
  • Moratorium period up to 6 months to 1 year post course completion.
  • Tax benefits on interest payments for up to 8 years under Section 80E.

Expenses Covered

  • Fees to educational institutions.
  • Examination, library, and laboratory fees.
  • Travel expenses for studies abroad.
  • Insurance premiums for student borrowers.
  • Caution deposit and refundable deposits.
  • Books, equipment, instruments, uniforms.
  • Computers if required for the course.
  • Other expenses like study tours, project work, and thesis.

Courses Covered

  • Graduation and post-graduation courses (professional/technical/diploma).
  • Courses conducted by autonomous institutions like IIM, IIT, IISc, XLRI, NIFT, NID.
  • Pilot training, aeronautical, shipping courses approved by respective authorities.
  • Job-oriented courses for graduation, post-graduation, or diploma.
  • Skill development courses.

Eligibility Criteria

  • Loans for approved undergraduate, postgraduate programs, PhDs, diploma courses, and job-oriented courses.
  • Admissions in recognized institutions, both domestic and international.
  • Completed 10+2 for undergraduate courses, a degree for postgraduate courses.

Documents Required

  • KYC documents.
  • Academic mark sheets.
  • Admission letter.
  • Fee structure.
  • Co-applicant KYC and income proof (if required).
  • Additional documents as requested by the bank.

Tax Benefits

  • Interest paid on the education loan can be claimed as a deduction under Section 80E.
  • No limit on the deduction amount for interest repayment.
  • Deduction available for 8 years from the year of loan repayment or until full repayment.

How to Apply

Online Application

  1. Visit the bank’s website and select the education loan scheme.
  2. Download or access the application form.
  3. Fill the form and submit with necessary documents.
  4. Bank verifies documents and evaluates the course and collateral.
  5. Upon approval, the loan amount is disbursed.

Offline Application

  1. Visit the bank branch.
  2. Fill the application form and submit it with documents.
  3. Bank verifies the application and processes the loan.

Applying for an education loan involves understanding various options and fulfilling eligibility criteria, ensuring students can finance their education effectively.

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