What Are The Terms And Conditions Of Education Loan?
Education Loan: What is education loan? Here’s a guide The tentative cost of an MBA is up from Rs 2.5 lakh to Rs 20 lakh in 15 years. Quality education is a must for a complete and successful life. For many, it is equivalent to graduating from a top institution. The cost of education is, however, increasing rapidly.
- In fact, the cost of studying at reputed institutions is already quite high.
- Eeping this in mind, parents, who want to provide their children with the best possible education, invest their money in (MFs), (FDs), (ULIPs), etc., for the long term.
- But despite all this, one may still encounter shortage of funds.
An, therefore, plays a vital role in such a scenario by helping to bridge the gap between the shortfall and the required amount. According to studies, the cost of education is increasing at an average of 15% per annum. The tentative cost of an MBA is up from Rs 2.5 lakh to Rs 20 lakh in 15 years.
- Who can apply for the loan?
- Whom is the loan offered to?
- Types of courses covered under the loan
- Eligibility, documents required
A student is the main borrower. A parent, spouse or sibling can be the co-applicant. It is offered to students who want to study in India or pursue higher education overseas. The maximum amount offered for studies in India and overseas are different and varies from one bank to another.
- It can be taken for a full-time, part-time or vocational course and graduation or post graduation in the fields of engineering, management, medical, hotel management, architecture, etc.
- To apply for the loan, one must be an Indian citizen, having secured an admission into a college/university recognised by a competent authority in India or abroad.
The applicant must have completed his higher secondary level schooling. Some banks offer the loan even before one has secured admission into the university. As per the Reserve Bank of India (RBI) guidelines, there are no restrictions on the upper age limit, but some banks may have it.
- Loan financing, collateral requirement
- Interest rate
- Repayment
- Precautions
- Benefits under Income-tax Act
- Conclusion
- (With Inputs from Sunil Dhawan)
- Click to check out the education loan calculator.
The banks can finance up to 100% of the loan depending on the amount. Currently, for loan up to Rs 4 lakh, there is no margin money required. For studies in India, 5% of the required money has to be financed by the applicant. On the other hand, for studies overseas, the required margin money increases to 15%.
- The banks also ask for collateral for loans above Rs 7.5 lakh.
- Presently, the banks do not ask for any collateral or third-party guarantee for loan up to Rs 4 lakh.
- For loans above Rs 4 lakh up to Rs 7.5 lakh, a third-party guarantee is required.
- A collateral is asked for loan exceeding Rs 7.5 lakh.
- Once the loan application is accepted, the banks disburse the amount directly to the college/university as per the given fees structure.
The banks uses the Marginal Cost of Funds based Lending Rate (MCLR), plus an additional spread to set an interest rate. Presently (in 2017), the additional spread is in the 1.35-3% range. The loan is repaid by the student. Generally, the repayment starts when the course is completed.
- Some banks even provide a relaxation period of 6 months after securing a job or a year after the completion of studies for repayment.
- The repayment period is generally between 5 and 7 years, but can be extended beyond that as well.
- During the course period, the bank charges simple interest rate on the loan.
The payment of simple interest during the course period lessens the equated monthly instalment (EMI) burden on the student for future repayments. While applying for a loan, one should also look out for bank charges such as those related to processing, pre-payment, late payment of EMIs, etc.
Most lenders charge processing fee of around 0.15 percent of the loan amount. Section 80E of the I-T Act allows for deduction on the interest paid on the repayment. This deduction is allowed only for the individuals paying interest on the loan for himself, spouse or children or for the student to whom you’re a legal guardian.
You can deduct the entire interest amount paid from your taxable income. This deduction is allowed for a maximum of 8 years. The principal amount does not qualify for any tax deduction. Taking an education loan helps you in building a good credit score as this is the first loan in a person’s life.
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What are the conditions for education loan in India?
Education Loan Eligibility Guidelines – It is important for students to understand the eligibility guidelines and qualify the same, to be able to apply to their preferred money lending institution/bank for their Education Loan. The eligibility criteria vary for different banks. However, some common factors that are taken into account by all money lending institutions (banks) include:
The student is required to be a citizen of India. The loan applicant must have attained the age of 18 else his/her parents will have to avail of the loan. The candidate must possess a good academic background. The aspirant must have secured admission to a recognized foreign university/institution/college. The desired course which the applicant is going to undertake must be a technical or professional one, as banks give preference to job oriented courses The aspirant must be pursuing a graduate, postgraduate, or post-graduate diploma. Faster loan acceptance is made possible by a solid academic record. Full-time students must have a co-applicant, who may be either a parent, a guardian, a spouse, or a parent-in-law (in case of married candidates). The co-applicant needs a steady source of income.
What things cover in education loan?
Basic Criteria for Educational Loan One of the most vital questions that you may wonder about is the amount of the educational loan. In general, you can get up to 4 lakhs of educational loan for higher studies without any collateral. Under education loan scheme, you can get a maximum of 15 lakhs for studies in India and more 25 lakhs for abroad studies.
- When you take education loan up to 4 lakhs, only the student and the parent have to sign the document and no collateral are necessary.
- However, if your loan amount is between 4 lakhs and 7.5 lakhs, you will have to provide third party guarantee to the bank.
- If the loan is above 7.5 lakhs, you will have to furnish the bank with collateral documents.
These are documents of any securities like NSC which the bank can sell to recover the amount if you fail to pay. How to apply for an educational loan for higher studies? In order to apply for an educational loan, you will have to prepare a number of documents beforehand.
The process goes as follows: Once you have determined to study at an institution and completed the process of admission, then you will have to concentrate on taking out an educational loan. Here are the documents which you should keep ready: You will have to provide a proof of admission to the selected recognized institution.
Proof of your consistently high academic performance along with the last mark sheet will need to be produced. The cut-off marks generally differ from general students to reserved students. You need to produce a schedule of fees. Depending on the amount that you are applying for, you will need to produce income statement, statement of assets and liabilities etc.
- If you are going to study abroad, you need to produce your passport with a valid visa also.
- Your education loan will cover a number of things in addition to your tuition fees.
- These include hostel fees, exam fees, library fees, purchasing books, travel and other expenses for educational projects.
- After all the documents have been submitted and verified, you will have to appear for an interview.
It is best to know as much as possible about the course and the institutions that you have chosen. It takes around 15 days for an educational loan to be sanctioned. Once it has been sanctioned, you will get a promissory note which you will have to sign.
In most cases, banks pay the institution directly and or to you. You should check the repayment clause. In most cases, repayment starts six months after the end of the course or as soon as you get a job – whichever comes earlier. Interest rates on educational loans depend on a number of factors. In general, they vary between 10% and 15% rates of interest.
You can claim tax deduction on the interest of the education loan. However, no deduction can be claimed on the principal. : Basic Criteria for Educational Loan
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What are the 3 characteristics of a student loan?
Student Loans – Understand the Features of a Loan –
Types of Loans Borrowing Impacts Credit
Credit History Credit Score
Strategies of Borrowing
As an undergraduate student, you have a lot on your mind — whether it’s moving away from home and adjusting to college life, or studying hard to make those grades. Moreover, many students first get involved with major finances — such as student loans — during their undergraduate years, adding to the responsibility of being a college student.
Interest rate: The cost of borrowing money
Compounding interest: The accrued interest is added to the principal (the amount originally borrowed) or the loan balance which increases what you owe to the lender. The next time interest is calculated, it is based on the new principal. This continues until the loan is paid in full. Flexible or variable interest: An interest rate that can increases and/or decreases during the life of the loan. Fixed: A set interest rate that remains the same for the life of the loan.
Loan period: The time it takes for a loan to be paid in full. Loan limits: The maximum amount of money lent to a borrower.
Annual: The maximum amount of a loan in a year (academic year). Aggregate: Maximum amount a student can borrow.
Grace period: Time period after disbursement which no payment on loan is required of the borrower. For student loans, it’s the time period after the borrower is not enrolled or is enrolled less than half-time or graduated during which no payment on loan is required.
How many years will it take to repay education loan?
Plan To Repay –
In case of SBI Student loans, repayment will start after the completion of course period and moratorium period (Repayment commences one year after the course completion or 6 months after securing a job, whichever is earlier). The Loans are sanctioned as Term Loans and to be repaid in EMIs over a maximum repayment term of 15 years (180 EMIs) for Student, Scholar and Global Ed-vantage Education Loans. The repayment of EMI starts 12 months after the completion of the course or 6 months after getting the employment, whichever is earlier for Student and Scholar Loan Schemes. In case of Global Ed-Vantage Loans, repayment of EMI starts 6 months after the completion of the course. The accrued interest during the moratorium period and course period is added to the principle and repayment is fixed in Equated Monthly Installments (EMI). If full interest is serviced before the commencement of repayment; EMI is fixed based on principle amount only. There are NO penalty charges for prepayment. You can prepay your education loan anytime.
Processing Fees These include the lender’s servicing charges (usually 1%-5% of loan amount) and statutory charges. Additionally, these also include like stamp duties, charges for duplicate copies and other documentation charges which help the lender facilitate your loan.
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Who can not get a student loan?
Why were you denied a student loan? – Every lender has their own requirements for getting approved for a student loan, Lenders may look at your employment history, credit score, debt-to-income ratio, and enrollment status at your school. One of the most common reasons why a student might not qualify for a private student loan is because they don’t meet their lender’s FICO® Credit Score criteria.
Your FICO ® Credit Score is a three-digit number that lenders use to measure how likely you are to be able to repay debt. If you’ve never borrowed or had to pay back money before, this number may not be high enough to qualify you for a loan. If you’re no stranger to borrowing but have missed or been late on payments, your credit score may have also been impacted and can affect your chances of getting approved.
Having a limited or bad credit history can make getting approved for a private loan difficult, but there are steps you can take to move if you’ve been denied a student loan.
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Can I get student loan easily?
Easily available: Education loans are widely and easily available. In fact, they are a priority product in all banks as per the RBI’s guidelines. Varied loan amounts: Banks can offer loans anywhere between Rs.2 lakh and Rs.
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What are the normal terms for a student loan?
Payments are fixed and made for up to 10 years (between 10 and 30 years for consolidation loans). This repayment plan saves you money over time because your monthly payments may be slightly higher than payments made under other plans, but you’ll pay off your loan in the shortest time.
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What is the rule of thumb for student loans?
How much should you borrow in student loans? – Although student loan limits define how much you can borrow, you aren’t required to borrow the maximum if you don’t need it. Depending on the loan terms, it could take years to pay off the debt, and the longer it takes, the more interest accrues — so it’s usually best to borrow just as much as you need.
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Can a bank reject education loan?
Education loan rejection due to Poor CIBIL Score: – To those who have applied for any kind of loan previously, CIBIL score may not be an alien subject. The Credit Bureau of India Ltd, or as it famously called CIBIL is the major governing body that examines every loan applicant’s credit score.
This is done so in order to determine an applicant’s worthiness to receive any particular loan. When it comes to education loans, most lenders have very strict policies regarding the CIBIL scores of both, education loan applicants, as well as their co-applicants. A CIBIL score lower than 600 is one of the reasons behind an education loan rejection in a majority of the cases.
In order to know whether you qualify for an abroad education loan with your current CIBIL score, get in touch with the financial team of WeMakeScholars at the earliest. Let us move on to understand the next factor which invites an education loan rejection.
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Can I cancel my education loan after 1 year?
Things To Know If You Want To Cancel Student Loan Before Or After Disbursement Yes, a student loan can be cancelled. But you need to be well versed with the terms and conditions to abide by for cancelling the Education Loan. Along with the fulfilment of some requirements, you also have to provide some certain proof to meet those specific requirements.
- When a loan cancellation request is made, you are asking the lender to cancel the portion of debt you still owe.
- If the lender agrees to cancel or write off the loan, you are released from all liabilities, though you still have to pay taxes on the cancelled debt.
- If a loan is to be cancelled before its disbursement, you can write an email or visit the bank stating reasons as of to why you want to get the loan cancelled.
The bank will then reverse the process of sanctioning the loan. While if the loan is to be cancelled after its disbursement, then it may be cancelled under certain circumstances like:
Dropout from college- In case the borrower wants to drop out from the course for which he/she has taken a loan from the college, the bank accepts to cancel the loan. Cancellation due to death- All loans gets cancelled it the borrower dies before the debt is fully paid.
In all the above circumstances as well as any other reason (if any) after the loan cancellation you need to pay the debts if remaining within the stipulated period set by the bank. Some banks also charge some cancellation fees if a loan is cancelled in between the tenure.
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Do student loans expire after 7 years?
When Do Student Loans Go Away? All Your Questions, Answered Student loan debt can go away — even if you haven’t made a payment in years. But you may need to dig federal loans out of default before you can qualify for loan forgiveness programs or other debt-relief options. And if you took out private student loans, there are options for you as well.
“Do student loans go away?” is a natural question to ask, given the incredible amount of higher education debt Americans are carrying. Thankfully, the federal government has various programs that offer loan forgiveness, cancellation, and discharge. Keep reading to learn when your student loans will go away and what to do if you haven’t paid your student loans in years.
Related: Student loans don’t go away after seven years. There is no program for loan forgiveness or cancellation after seven years. But if you recently checked your credit report and are wondering, “?” The answer is that you have, The big credit bureaus — Equifax, Experian, TransUnion — remove the default status and late payments from your report seven years after the first missed payment that led to the loan defaulting or being charged off.
- Most borrowers will see a jump in their credit scores the following month after their student loans fall off their report.
- That’s a good thing.
- But it doesn’t remove their responsibility to pay back the loans.
- You’ll still owe the debt until you pay it back, it’s forgiven, or, in the case of private student loans, the statute of limitations runs out.
Read more about, Learn More: How to handle People who work for 10 years in public service jobs and make regular payments can have the remainder of their federal student loans forgiven. Many types of work qualify, from nonprofit employment to teaching in a charter or public school, to law enforcement, or providing medical care at a public hospital.
Make 120 on-time monthly payments while working full-time in an eligible public service position. Have the right kind of loan — only federal Direct Loans qualify, not Perkins loans or the old Federal Family Education Loans. Be in the right kind of payment plan — the Congress designed to help lower-income borrowers.
The Program was broken for years. Few borrowers got relief. The eligibility requirements made qualifying challenging. But the Biden administration recently introduced sweeping changes that are fixing PSLF — at least temporarily. As a result of the coronavirus pandemic, the Education Department is using its authority under the to count payments borrowers made on nonqualifying retroactively.
The department expects this change will benefit around 550,000 borrowers. Learn More: The UK writes off student loans after 30 years. But the same isn’t true in the United States. Here, the U.S. Department of Education doesn’t write off student loans automatically after a set number of years. And since there’s no statute of limitations for federal loans, you can end up paying those debts until you die.
The American student loan debt crisis has prompted a national conversation about expanding relief options for borrowers. President Joe Biden campaigned on $10,000 student loan forgiveness, increasing Pell Grants for low-income borrowers, and making community college free.
But so far, his administration has focused on fixing existing relief options and extending the to prepare borrowers to eventually enter repayment. Learn More: Federal student loans are never written off because they’ve grown old or expired. On the other hand, banks and loan holders write off its debts when they’ve lost the right to sue borrowers for missing payments.
When that happens, the lender considers the debt “stale” or “time-barred” and clears it from its books. But you by debt collectors demanding payment. Most states allow them to call and send letters so long as they don’t violate the Fair Debt Collection Practices Act.
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Is 12th percentage required for education loan?
What are the Eligibility Criteria For Axis Bank Education Loans? – For Student:
- The student should be a citizen of India.
- The student should have scored a minimum of 50% marks in high school as well as in the bachelors.
- The student must have secured admission into a reputed university or college abroad and must have the admission letter at the time of loan application.
For Co-Applicants:
- The co-applicant should be an Indian resident citizen.
- The co-applicant should have a stable monthly income and should be a regular tax-payer.
- The co-applicant should have a CIBIL score of at least 700.
What percentage is required for education loan in India?
CHENNAI: Banks cannot fix 60% of marks as minimum required percentage for extending education loan to students, Madras high court has ruled. A division bench of Justice N Paul Vasanthakumar and Justice M Sathyanarayanan, coming to the aid of an engineering student who got admission under management quota, said on Wednesday that it was incorrect on the part of the bank to deny loan to him on the ground that he has scored only 59% of marks and not the minimum required percentage of 60%.
- After being denied an education loan by the Indian Overseas Bank, A Ravi moved the high court for a direction.
- In June last year, a single judge directed the bank to extend loan to the boy, saying banks cannot deny loans on the ground of minimum marks percentage, that too after he is given admission under management quota.
The bank filed the present appeal saying candidates who have secured 60% marks and above alone are eligible to get education loan as they alone can be treated as meritorious candidates. Rejecting the submissions, the bench said, “The Government of India launched the scheme of providing educational loans to the economically disadvantaged people, through nationalised banks.
Sanction of educational loan is not free, but it is repayable with interest at a later point of time, of course, at reduced rate of interest. The whole idea behind the scheme is to finance the economically disadvantaged people. It is a social commitment for the upliftment of weaker, vulnerable and other sections of the society.
It is a social welfare measure. In a way, it is some sort of social banking.” The judges said public sector banks and other financial institutions should bear the government’s policy in mind while sanctioning educational loans covering the genuine, reasonable and justified educational expenses and relieve the students and their parents from pressing financial crisis.
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