A ready reckoner to all your doubts on Educational Loan-
Nobody can prevent an idea whose time has come. (Victor Hugo)
Similarly paucity of money can’t prevent the educational ambitions of any bright student. Because of the enabling atmosphere created by Central/state governments and RBI guidelines all the commercial banks in India, both PSU and private, are VYING WITH EACH OTHER to disburse education loans to eligible borrowers.
Purpose: The purpose of education loan is to provide financial support to eligible students to pursue higher studies in areas like management, medicine, engineering etc., The loan can be availed for higher education in India and abroad.
Upto Rs. Ten lakhs for education in India
Upto Rs. 20 lakhs for education abroad
Eligibility: Any Indian National who has secured admission to a professional course through an entrance test or any other merit based selection process like MAT, C MAT etc. The selected course of study and the Institute must have all the required approvals/recognitions like NAAC, AICTE and affiliation to a recognized University etc. The loan may be availed from the branch nearest to the residence of the applicant for loan.
Quantum of finance: Need based finance for covering all eligible expenses like tuition fees, hostel fees, exam fee, library fee, cost of books, caution deposit, expenses for computer purchase, uniform, project work/ study tour etc., is sanctioned by banks. The repayment capacity of the parent/guardian/ co-obligant also reckoned with while arriving at the maximum permissible bank finance.
Margin: NIL for loans upto Rs 4(four) lacs
Margin : 5% for loans above Rs. 4 lacs
Margin : 15 % for loans above 4 lacs for studies abroad
Period of Repayment:
Moratorium (repayment holiday) period + five to seven years; but now in eligible cases it stands enhanced to Moratorium + 10 to 15 years. Moratorium means the duration of the course plus one year/6 months after getting the job, whichever is earlier. During moratorium period only simple interest is payable. The loan with interest has to be repaid by means of EMIs (equated monthly installments) in the agreed period for repayment.
The rate of interest varies within a gradient of 11.25% to 14.25% among various banks. There is an interest concession of 0.50% for girl students. As on date Govt of India is reimbursing the full amount of interest accrued during the course period to those students whose parent’s annual income is less than 4.50 lacs. This is done through a nodal bank which is Canara bank as of today.
Guarantors/Co obligants: The parent/guardian of the student has to join the documents as a guarantor/co-obligant.
SECURITY: For loans up to 4 Lakhs – No security
For loans more than 4 lacs to <7.50 lacs – 3rd party guarantee/ collateral security
For loans above Rs. 7.50 lacs—Collateral security with required margin
Also a single premium insurance policy on the life of the student to be taken covering the entire loan amt and loan period.
Documents to be submitted :
1) Proof of residence – ration card, voters’ ID card, Passport etc.
2. Academic record – copy of all qualifying exams passed
3. Proof of date of birth – Copy of relevant page of SSLC book, TC etc.
4. Community – certificate for statistical purpose only & for scholarships in eligible cases
5. Family income – for interest reimbursement purpose
6. Admission – admission letter from college as proof
7. Fee structure – to arrive at permissible, need based finance
8. Guarantor/co – obliging – parent/guardian to join as guarantor
9. Collateral – Where ever required and collateral security details to be furnished.
10. Declaration by student & parent: Has to furnish a joint statement to the effect that no education loan is outstanding in the name of the student in any other bank/FI as on date.
Thomas. V. George M.Sc,MBA, CAIIB, NCFM (Former Principal,Staff Training College Federal Bank and Certified Associate of the Indian Institute of Bankers )