Educational Loan Procedures

Education Loan Procedures and Interest Rates

13 April, 2017

Availing loans can be overwhelming, but intelligent borrowing with exact decisions on how much to borrow; checking the ability to repay, and creating rational repayment schedules for an educational loan is definitely an investment for the future. Although the Indian government offers free compulsory education for children up to 14 years, getting a quality education from a private college is extremely expensive. Eventually, to manage the higher education expense, the students take up loans offered by the banks, microfinance organizations, and the P2P solutions.

Private Education Loan Procedures

The significant information like the course tenure, fees, course materials, hostel fees and other expenses incurred to take up the course are considered by the banks while processing the educational loan. Many lenders disburse the amount directly into the educational instruction. If the college is situated abroad, the money is converted into the required currency or into US dollars and is directly paid to the college.

Educational loan eligibility details

The key criteria include:

  • According to the Indian law, Indian students between 15 to 30 years can take up education loan.
  • An education loan application should include a guarantor, who is either a guardian or a working parent.
  • Academic record of the student is considered
  • The guarantor’s income, liabilities, assets, etc, are taken into account.
  • The income potential of the course is also validated.
  • The reputation of the institution and the universities might be checked.
  • Ability to raise the down payment, apart from the loan amount, is verified.
  • For course worth more than Rs. 4 lakhs, a minimum of 5% to 15% down payment is required.
  • Loans above Rs. 4 lakhs require collateral

Education loan interest rate in India

The Indian students can get the private student loans up to Rs.10 Lakhs (Indian Institutes) and Rs. 20 Lakhs (Abroad Institutes). The rate of interest may differ according to the rules of the lender. It may range 11% to 14%.

Education loan interest subsidy (2017)

The aspirant students are encouraged to take up loans with an appealing education loan interest subsidy and tax benefits.
  • Interest paid for a student loan is deducted from the income tax.
  • Economically weaker section students (family income below Rs. 4.5 lakhs) enjoy full interest subsidy, during the course period.
  • They can start paying after six months or one year of completion or after getting a job, whichever is earlier.
  • RBI has listed student loans under priority sector lending and hence the banks are under a pressure to offer education loans, at a lower interest rate.
  • Female students are eligible for an additional 0.50% discount on the interest rate.
  • Some reputed banks offer Rs. 30 lakhs for admissions in reputed institutions like IITs, IIMs, etc., without collateral security.

Apply for education loans

As the study loan is approved under strict conditions and the process takes up months in the banks, today’s youths prefer to opt P2P online portals, where the same day approval takes place. offers education loans up to Rs. 5,00,000, without any pre-payment fees.