Education Loans in India – understanding the basics - Eligibility and limits

Education Loans in India –understanding the basics - Eligibility andlimitsFor a majority of parents in India today who wish to provide higher education to their children – both inIndia and abroad – it has become a necessity to take a loan from a bank or a financial institution to meetthe course fees and other related expenditure. With new educational courses being introduced and theever increasing fees, the education system has become nothing less that a great business venture forthe institutes. It is therefore important to understand the fundamentals of education loan system inIndia .The education loan scheme is basically aimed at meritorious and financially backward students to enablethem to pursue higher education. But in these times of increasing living costs, even the well-earningfamilies encounter financial issues and they too go for education loans.Who can apply for an education loan in IndiaThe following is the eligibility criteria for getting an education loan :1. The student must be a citizen of India2. The student must have got admission for the desired course in a recognized educationalinstitute in India or in another country by means of an entrance exam.3. If the admission is though an entrance exam, the banks are required to evaluate the reputationof the concerned institute and employability factor.4. Even if a student is admitted in an institute under management quota, preference is given bybanks to meritorious students.Eligible courses for education loan in IndiaThe following are the courses in India and abroad for which an education loan may be given:1) For studies in India• Graduate, Post Graduate or Diploma courses under colleges or universities recognized by theUGC, Government, AIBMS or AICTE, etc.• Professional courses like Chartered Accountant (CA), Chartered Financial Analyst (CFA), Instituteof Cost and Works Accountants of India (ICWA), etc• Courses offered by IITs, IIMs, NIFT, NID, etc.• Regular degree or diploma programmes like shipping, aeronautics, pilot training, nursing orother related courses approved by the governing authorities or regulatory bodies.2) For studies abroad• For Graduation: Professional and technical courses which are job oriented offered by reputedand recognized universities.

• For Post Graduation: Courses like MS, MCA, MBA, etc.• Other courses like Certified Public Accountant (CPA) in the US, Chartered Institute ofManagement Accountants (CIMA) in London, etc.• Regular degree or diploma programmes like shipping, aeronautics, pilot training, nursing, etcapproved by the governing authorities or regulatory bodies in India or abroad for getting employment inIndia or abroad.Also See: Various loans available in India and when to use themExpenses covered under educational loan• Education fees of the institutes.• Library, examination and/or laboratory fees.• Expenses of traveling abroad for higher studies.• A premium of insurance for the student• Various deposits like caution deposit, refundable deposit, building fund, etc. The total of theseexpenses must not exceed 10% of the total loan amount.• Expenses for buying books, uniforms, computer, instruments, etc. The total of these expensesmust not exceed 20% of the total loan amount.• Miscellaneous expenses like money for project completion, thesis work, study tours, etc.• If the student is eligible for any scholarship, fees reimbursement, fees waiver, etc, even thesefactors are taken into account with computing the required loan.Maximum education loan given by banks in India• For studies in India: Rs. 10, 00,000 (Maximum)• For studies abroad: Rs. 20, 00,000 (Maximum)These limits are decided by the Reserve Bank of India (RBI), but they are not final. Banks do have thepower to alter the limit for courses that require funds higher that the prescribed limits.Recommended: Education Loans In India – understanding the basics- formalities and repaymentMargin money on educational loan in IndiaMargin money is that part of the loan amount that you need to pay to the bank from your own pocketfor the purpose of security. For example, if you are availing a loan of Rs.10 lakh and the bank fixed amargin of 10%, this means that you need to give the bank securities worth 10% of the loan amount i.e.Rs. 1, 00,000. The bank will give a cheque of Rs.10 lakh. Here the bank is providing 90% of the loanamount.The margin money on educational loans is:• For loans up to Rs. 4 Lakh – No Margin• For Loans above Rs. 4 lakh – 5% (For studies in India) and 15% (For studies abroad)Source:techulator.com/resources/14474-Education-Loans-in-India-understanding-the-basic-features-1.aspx