Education has emerged as a powerful tool that not only shapes careers but also empowers individuals to contribute meaningfully to society. As the demand for quality education continues to rise, so do the associated costs, often becoming a barrier for many aspiring students. This is where education loans step in as a lifeline, bridging the gap between dreams and reality. Whether you’re a student planning to pursue higher studies or a parent looking to secure your child’s educational future, understanding the intricacies of education loans is essential.
In this comprehensive guide, we’ll delve into every aspect of education loans, unraveling their significance, types, eligibility criteria, application process, and much more.
What is an Education Loan?
An education loan is a type of financial assistance provided by banks, financial institutions, or government agencies to individuals seeking funds to cover the costs associated with their education. It is designed to help students and their families manage the expenses of tuition fees, course materials, living expenses, and other related costs, especially for higher education pursuits such as undergraduate, postgraduate, vocational, or professional courses.
Education loans come with specific terms and conditions, including interest rates, repayment schedules, and eligibility criteria, which may vary depending on the lender and the country’s regulations. These loans can play a pivotal role in promoting equal access to education and empowering individuals to invest in their future by acquiring the necessary skills and knowledge for personal and professional growth.
Eligibility Criteria for Education Loan
To get approved for the education loan, the candidate must fulfill the following education loan eligibility criteria in all respects-
- The applicant must be a resident of India.
- He/she must have confirmed admission to a recognised educational institution, either in India or overseas.
- The educational institution must be affiliated with the University Grants Commission (UGC,) the All India Council for Technical Education (AICTE,) or the government.
- The applicant must be within 18 to 35 years of age at the time of loan application.
- The application must be opting for a graduate or a postgraduate degree, or a postgraduate diploma.
- The applicant who is pursuing a full-time course should have a co-applicant who is either a parent or a guardian, or in the case of married candidates – their spouse or a parent-in-law. This co-applicant must have a steady source of income.
- To improve the chances of loan disbursal, the student must be good at academics.
Documents Required for the Education Loan
- Documents to be attached with the loan application form
- Two passport-size photographs
- A copy of the latest education certificate or a copy of the 10th or 12th examination mark sheet
- A statement of course expenses
- Copy of the Aadhaar card and the PAN card of the student and the co-applicant
- Results of the entrance exam that was taken for admission, like GMAT, GRE, TOEFL, or IELTS
- A valid offer letter or admission letter from the educational institution
- Loan account statement for the last year if a loan from a bank or lender is still due
- Age and Identity Proof
- Proof of Residence
- Rental agreement copy
- Six-month bank statement of the student or co-applicant
- Ration card copy
- Gas book
- Copy of the electricity bill
- Copy of the telephone bill
- Proof of Income
How to Improve the Eligibility for Education Loan?
Banks and financial institutions evaluate a candidate’s loan application with scrutiny before approving the same. Some factors, like the academic prowess of the student and the course applied for, improve the chances of loan approval. Some of these criteria are:
- Getting high grades in the qualifying examinations
- A good academic record
- Admission into a reputed educational institution
- Sound financial background of the co-applicant
- Displaying promise of future employment and income generation
Process of Applying for an Education Loan
Banks have made it easy for students to apply for an education loan. Follow these steps:
- Select a bank or financial institution that offers student loans. Most banks in India offer education loans to citizens who meet the education loan eligibility criteria.
- Check the student loan eligibility criteria for that specific bank. The lenders usually have particular criteria like the minimum percentage of marks required, course of study, and the educational institution. Check the exact list of requirements with the bank.
- The required list of documents that must be submitted along with the application form will be given by the bank.
- Download the student loan application form available either on the bank’s official website or get it from any branch of the bank and fill it out diligently.
- After reviewing and approving your application, the banks will disburse the funds in your bank account.
Types of Education Loan
The education loan details differ according to the type of education loan. The loans are of various types:
Location Based Loans
According to the location, education loans can be domestic or overseas.
- Domestic education loan: This type of student loan is available for people who want to pursue education in India. The loan is approved only after the student is admitted into an Indian educational institution.
- Overseas Education Loan: These loans cover the cost of airfare, accommodation, and tuition fees for students who wish to study abroad and avail of an education loan for studying abroad.
Course Based Loans
Depending on the type of course, the education loan can be divided into these kinds:
- Undergraduate loans: These student loans are given to students so they can complete an undergraduate degree. These courses are usually 3 to 4 years, depending on the specifications of the course. A good undergraduate degree helps the student eventually secure a good job.
- Postgraduate loans: Undergraduates might want to continue their education and get a postgraduate degree. In India, these courses usually last 2 years. A postgraduate degree is typically an advanced degree in a particular area of interest and gives the student detailed knowledge.
- Career development loans: These loans are suitable for professionals who take a break from their corporate jobs and pursue professional courses to improve their employability and salary. These individuals usually get into renowned business or technical schools to enhance their skills.
Collateral Based Loans
Depending on the collateral to secure the loan, the student loan can be of these types:
- Loan against property or security: Education loans can be taken against immovable assets like land, flats, houses, fixed deposit certificates, gold deposits, bonds and debentures, and equity shares.
- Third-party guarantee: Education loans can also be given against a guarantee letter from an employee of the bank or home bank.
Education loans have made it easy for students to get their desired education from a reputed educational institution. However, it is essential to factor in the terms and conditions of the loan, repayment schedule, and the interest rate before finalising any loan. Read all the documents carefully before availing of the loan.