Mamta Jani, Founder, On Track Education

Education is becoming increasingly expensive with the passing years, and therefore education loans have turned out to be an indispensable financial aid for Indian students. While pursuing education either in India or abroad, students tend to require finances to remit tuition fees, living expenses, and miscellaneous costs. Fortunately, some financial institutions and banks in India offer attractive interest-rate-based education loans along with comfortable repayment plans. The following article covers the best banks and loan schemes for Indian students and important factors to consider before getting a loan.

Types of Education Loans

Education loans generally come in two types: domestic education loans and study abroad loans. Domestic education loans are provided to students who are going for higher studies in India, whereas study abroad loans are provided for students studying outside India in foreign institutions. The loans can once more be categorized based on collateral requirements:

Secured Loans – Use property, fixed deposits, or insurance policies as collateral.

Unsecured Loans – Do not ask for collateral but generally charge higher interest and stricter lending terms.

Top Banks Offering Education Loans

Several banks in India provide education loans with attractive features. Here are some of the best options:

State Bank of India (SBI) – SBI Education Loan

SBI provides various schemes of education loans to meet the different needs of the students. The SBI Student Loan Scheme sanctions loans up to ₹7.5 lakh as unsecured, and loans more than this with security. SBI Global Ed-Vantage Scheme is for international students and gives loans between ₹20 lakh and ₹1.5 crore with collateral. SBI’s interest begins at approximately 9.15% per year.

HDFC Bank – HDFC Credila Education Loan

HDFC Credila, an education loan company focused exclusively on providing loans to students, provides personalized loan products for students. Loans are provided for Indian and foreign universities at competitive interest rates of 9.5% per annum. Unsecured loans up to ₹50 lakh are provided for admission to premier institutions.

Punjab National Bank (PNB) – PNB Udaan

For students who want to study abroad, PNB has started PNB Udaan, particularly for them. It finances tuition fees, travel costs, and other expenses. Collateral-free loans of up to ₹7.5 lakh are offered, while loans above this amount need security. The interest rate begins at 9.25% per annum, which is a reasonable price for students to pay.

ICICI Bank – ICICI Education Loan

ICICI Bank provides both secured and unsecured education loans. Top-ranking university-admitted students are eligible for unsecured loans worth ₹40 lakh, whereas secured loans up to ₹1 crore. The bank even has a facility for pre-approved loans to the students of particular institutions. The annual rate of interest is between 9% to 12%.

Bank of Baroda – Baroda Scholar Loan

Bank of Baroda provides the Baroda Scholar Loan, which is apt for foreign students. The loan can be up to ₹1.5 crore for high-end institutions. The rate of interest begins at 8.85% per annum, and the bank offers flexible repayment terms to reduce the financial load on students

Axis Bank – Education Loan

For students who pursue education in India and overseas, Axis Bank provides education loans of up to ₹75 lakh. The bank sanctions the loan before admission for certain institutions, enabling students to get funding in advance. Interest rates begin at 9.2% per annum.

Eligibility Criteria for Education Loans

Each bank has specific eligibility criteria, but some common requirements include:

1. The applicant must be an Indian citizen.
2. Admission into a recognized institution in India or abroad is mandatory.
3. A co-applicant (such as a parent or guardian) is usually required.
4. The student should have a strong academic record.

Documents Required for an Education Loan

Students need to submit the following documents before applying for any education loan –

1. Admission letter from the institution.
2. KYC documents (Aadhaar, PAN, etc.).
3. Academic records and mark sheets.
4. Proof of income and assets (for the co-applicant).
5. Detailed fee structure of the course.
   

Government Education Loan Schemes

The Indian government, with access to various initiatives, is increasing loans for education.

Vidya Lakshmi Portal

The Vidya Lakshmi portal is a centralized platform where students can apply for loans for education from several banks. He simplifies the process of applying for a loan and provides students with a transparent system to track their applications

Credit Guarantee Fund Scheme for Education Loans (CGFSEL)

This scheme allows students to use unsecured loans up to 7.5 loops of unsecured loans. The Indian Bankers Association (IBA) supports this model, ensuring that financial support is available to students from economically vulnerable families without security.

Dr. Ambedkar Central Sector Scheme for Interest Subsidy

This program offers a percentage of subsidy for educational loans for students of the economically lower sections (EWS). The government covers payments of interest during the moratorium (of the course for more than one year).

Key Factors to Consider Before Taking an Education Loan

Before choosing an educational loan, students must carefully assess the following factors:

1. Interest Rates – Compare interest rates of the various banks to find the most affordable option.
2. Repayment Period – Select a repayment term that fits your financial ability after graduation.
3. Moratorium Period – Most loans provide a moratorium period before repayment starts. Look if they have this option.
4. Processing Fees – Certain banks have processing charges, which need to be included in the cost of the loan.
5. Prepayment and Foreclosure Charges – Choose banks that do not charge for repaying the mortgage early.

Education loans are very essential for students who wish to pursue more studies. Large banks such as SBI, HDFC, ICICI, and PNB have various loan schemes. The schemes provide students with flexible repayment terms and reasonable interest rates. There are government schemes such as CGFSEL and Vidya Lakshmi that also facilitate loans to students from diverse backgrounds. Students must thoroughly examine all their options before applying for a loan. One needs to know the repayment terms and select a scheme that suits their budget. Through proper planning, education loans may assist students to excel in higher studies and careers.

Also read: Scholarships vs. Education Loans: Making the Right Choice for your future