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How do education loans work?
Students need to apply for the loan by providing documents such as proof of admission, academic records, income details, and identification proof. Some schemes allow pre-visa loan approval.
The loan amount is disbursed to the student’s school, which applies to tuition, fees, and other expenses.
After graduation, the student begins repaying the loan, usually with interest. Students can repay through EMIs over a fixed period. Repayment terms vary, but most loans have a standard repayment period of 10 years.
Interest rates vary depending on the loan type and lender. Federal student loans have fixed interest rates, while private loans often have variable rates. Borrowers can also claim tax benefits on the interest paid under Section 80(E) of the Income Tax Act.
Some education loans come with fees, such as origination fees or late payment fees.
Here are some benefits of education loans in India:
Section 80E: Tax deduction on interest paid on education loans for up to 8 years.
No tax on the loan amount: The loan amount itself is not taxable.
Padho Pardesh Scheme: Interest subsidy on education loans for minority students pursuing higher education abroad.
Moratorium period: Repayment holiday during the course period, usually up to 1 year after completion of studies.
Low interest rates: Competitive interest rates are often lower than personal loans.
Long repayment tenure: The repayment period can range from 5 to 15 years.
No collateral required: Many banks offer collateral-free education loans up to a certain amount.
Pradhan Mantri Vidya Lakshmi Karyakram (PMVLK): A government scheme providing education loans to students from economically weaker sections.
National Scholarship Portal: A platform offering various scholarships and education loans to students.
Some banks offer lower interest rates for women and minority students.
Various organisations and government schemes offer scholarships and education loans specifically for women and minority students.
These benefits may vary depending on the lender, loan scheme, and individual circumstances.
(Edited by : Sudarsanan Mani)
