Reviewed by Sep 30, 2020| Updated on
An education loan refers to the amount borrowed to finance college or other school-related expenses. Payments are often deferred until such time the student graduates school or college and further by a six-month grace period after graduation.
Age criterion has been set for deciding the eligibility for education loans in India. These are classified based on four different courses, as follows:
Education loans are provided with an idea of attending an academic institution as well as for pursuing an academic degree. Education loans can be obtained from the banks or through financial institutions. Bank education loans are often offered at lower interest rates and some receive an interest subsidy from the government. Private-sector financial institutions provide loans by following a traditional lending process for application with higher interest rates.
Accumulated borrowings from college can be a burden after finishing school. The borrowers, after graduation, need to begin payments on their student loans, usually after a six-month grace period.
Several employers provide the option to integrate multiple loan facilities and a feasible student loan payment benefit with their employee benefit programs. It helps increase the support available for handling student loan debt after college.
Students and their families must consider all available options before signing up for loans because these could become compelling in the future. There are some ways of reducing the burden or the size of the education loans. These include working as a part-time employee, taking up work-study offers and by studying at a less expensive school. It includes accepting a job that offers reimbursement of tuition fees and applying for scholarships.
The education loan may be classified based on the location of the institute and the nature of the course. The location of the institute may be either in India or abroad. For studying abroad, the lenders have a list of institutions or specifications they support. The loan is approved if the applicant secured a seat in one of those institutes abroad. Domestic loans are for those applicants who wish to complete their higher education in India. An eligibility criterion is defined for the Indian institutes as well. Accordingly, domestic education loans are approved if the applicant secures admission in an institute that meets the requirement.
Many banks offer loans that are based on the type of course that the applicant is taking up. There are loans for studying in a premier institution such as IITs and IIMs. These are broadly classified as undergraduate, graduate or professional, and career loans.