education loans

Education Loans in India

These days education comes with a cost and higher education seems to be proving costlier day by day. The question haunting most of the deserving students, whose parents / guardians are not rich enough, is with respect to any available financing options. To support such students so that they may not left behind from the main league of education, the government of India has formulated Educational Loan Scheme.

Two banking and financial Apex Bodies, the Reserve Bank of India (RBI) and Indian Bankers Association (IBA) have helped the government in preparing the plan and procedure for educational loans. The new scheme covers all types of courses including professional courses in schools and colleges in India and abroad.

Eligibility for Loan Application

  • Should be a citizen of India
  • For vocational training courses and job oriented course age of the individual should be between 15-28 years, and 18-30 in case of post graduate courses and/or studies abroad
  • The applicant should have a good academic record
  • For studies abroad, the candidate should have secured admission in a particular university after having appeared in the specific entrance examinations
  • The applicant should have secured a minimum of 50% marks in the major subject
  • In case of SC/ST candidates eligibility norms may be relaxed

Some of the key-features of educational loan scheme are mentioned below.

  • The scheme provides loans up to Rs. 10 lakh for studies in India and up to Rs. 20 lakh for studies abroad
  • For loans up to Rs. 4 lakh no security or margin is necessary and the interest rate is not to exceed the Prime Lending Rates (PLR). For loans above Rs. 4 lakh the interest rate will not exceed PLR plus 1 percent
  • The loans are to be paid back over a period of 5 to 7 years; there is provision of grace period of 1 year after completion of studies
  • Tax Benefit – The repayment of an educational loan is deductible under section 80E of the Income Tax Act. The annual limit for deduction is Rs. 40,000 (for both the principal and the interest). Only loans borrowed for higher education (fulltime studies in any graduate or post-graduate, professional, and pure and applied science courses) may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start paying back

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