Highlights of Educational Loan Scheme
What is Education Loan?
An Education
loan is designed to help students pay for college tuition, books, and living expenses. It differs from
other types of loans in that the interest rate is substantially lower and the
repayment terms are easy.
FAQs
1. For what type of courses
can educational loans be taken?
Educational loans
can be taken to pursue a wide variety of courses, for example: ·
School/graduation courses, like High School, B.Sc., B.Com., B.A., etc. ·
Post-graduate/specialized courses, like B.Sc., M.Sc., B.A., M.A., B.Com,
M.Com., etc. · Professional courses, like M.B.A., M.C.A., B.E., M.E., BTech,
M.B.B.S., etc. · Other courses, like computer courses, fashion designing,
commercial pilot training, etc. Keep in mind, however, that, usually, the
courses financed should be for durations of more than a year, i.e., 12 months.
2.
What are the costs covered under educational loans?
Educational loans
usually cover the costs of tuition fees, hostel fees, mess fee and examination
fees. Some banks may also finance the cost of books, equipments and other
instruments required by the student for that course. For studies abroad, banks
may provide one-way air fare. But this needs to be checked with your individual
bank
3. Who is eligible for an
educational loan?
There are many criteria that determine the eligibility of a student
for an educational loan. These vary greatly from bank to bank. The most
important criterion is that the student must have qualified for, or have a
confirmed admission in a college or institute. The other factors that are
normally important with nationalized banks are the age band, i.e. the student
applying for the loan must be in the age group of 16-26 or some such specified
range. Other criteria are good academic record (first class throughout, with no
gaps or breaks in education, etc.), and a regular source of income for the
parents. The recognition granted to the institution the student has opted for
is also an important criterion.
4.
What is the maximum amount that can be availed under
educational loans? / How is the maximum loan amount calculated?
The maximum loan amount varies from bank to bank, but, most
importantly, it depends on the course for which the loan is sought and the
institution chosen. For example, the loan amount for an M.B.A. course would be
different for different institutes--the fees at I.I.M.'s would be approximately
Rs 2 Lac, whereas at Somalia it would be Rs 80,000. Hence the loan amount will
vary drastically. But many banks have a margin criterion, which means that they
would provide up to 75 per cent or 90 per cent of the total cost of the course,
while the balance has to be paid by the applicant. The loan amount can also
depend on the borrower's parents/guardians net monthly salary. The loan amount
could also be calculated as being six or 10 times the monthly salary of the
parent. Ultimately, however, the loan amount would depend on the discretion of
the bank.
5. What
security does one needs to provide for the loan?
The security depends on the loan amount. It is quite possible that
banks may not require security for a loan of up to Rs 25,000, but would require
it for amounts greater than that. These limits are usually in slabs that vary
with banks. The usual security that the banks generally take is National
Savings Certificates (NSCs), bonds, gold, vehicle, house or property, etc. In
addition to these, some banks might also require the applicant to have a life
insurance policy equivalent to, or greater than, the loan amount.
6.
What are the documents required for an educational loan?
The general
documentation required by the banks for disbursing education loans is usually
very simple. The most important among them is proof from the college/institute
that the student has a confirmed admission there. Then comes an agreement with
the students or the parents/guardians, and proof of residence. Proof of age is
also important, considering that quite a few banks have a clause that they
would not finance a student above a certain age limit. Also required are
documents to prove that the parents/guardians have a regular source of income,
namely, salary statements, IT returns, etc. And, lastly, a resume of the
student, clearly showing his past academic performances.
7. What is a holiday
period?
A holiday period is
the maximum time given to the student before he/she needs to start paying back
the principal loan in Equated Monthly Instalments (EMIs). In other words, it is
the period between the student's final examination in the course for which the
loan was availed and when he/she actually starts paying the EMIs. Typically,
holiday periods range from six to 12 months. Take note, however, that if the
student starts working immediately after completing the course, he does not
enjoy a holiday period. Repayment usually starts six months after the course
completion or the commencement of a job, whichever is earlier.
8. Will I get an
educational loan for payment seats' also?
Yes, one can get an
educational loan for payment seats too. Usually, the banks have a ceiling for
each course, and, based on that, they decide the loan amount. So long as the
loan amount does not cross that ceiling, the student can be assured a loan,
provided he/she satisfies the other eligibility criteria.
