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What is Educational Loan?

An education loan is a sum of money borrowed to finance post-secondary education or higher education-related expenses. Education loans are intended to cover the cost of tuition, books and supplies, and living expenses while the borrower is in the process of pursuing a degree. Payments are often deferred while students are in college and, depending on the lender, sometimes they are deferred for an additional six-month period after earning a degree. This period is sometimes referred to as a “grace period.”

Types of Educational Loan?

Education loans are basically a form of monetary assistance availed by students to meet the expenses associated with their studies. Education loans can be taken by means of funding, scholarships, financing and rewards, and are granted in cash, which has to be repaid to the lender along with a rate of interest. Students who wish to avail education loans are advised to borrow based on their needs as the repayment periods for these loans can vary to a great extent depending upon the lender and the amount borrowed by the student.

Most of the student loans available to individuals in India are granted at a relatively low rate of interest, and interest payments need not be made immediately. Students are usually granted a period of time before from the time they take the loan to the time they start making repayments.

Education loans are unsecured loans that can be used to cover expenses related to education, such as tuition fees, books, living expenses and other such expenses as transportation costs, etc. If you wish to avail an education loan but are unemployed or still studying, a co-signer may be required to avail an education loan, like an eligible adult such as a friend, parent or relative. The repayment of the loan can be done once the student has completed his/her education. Given the flexible terms and conditions associated with the repayment of an education loan, availing one is fairly simple and straightforward.

These are the Following Educational Loan

  • Undergraduate Education Loan
  • Professional / Graduate Education Loan
  • Career Education Loan
  • Loans for Parents


Undergraduate Student Loan

Undergraduate student loans can be availed by individuals who have completed secondary education and wish to undertake a three- or four-year course to enhance their job opportunities.

Professional / graduate student loans

Professional / graduate student loans can be availed by students who wish to pursue advanced degrees or higher education at colleges across the country. An undergraduate course must be completed in order for the student to apply for a graduate student loan.

Career education loans

Career education loans can be availed by students who wish to attend undergraduate career-oriented programs at trading and technical schools and colleges across the country.

Loans for Parents

Parents of students can avail these loans, which are unsecured, to meet expenses related to their child’s education, such as tuition fees, living expenses, books, uniforms, and other expenses such as transportation costs. The loan can be availed by not only parents, but also other adult relatives who wish to enroll their children in secondary schools, military elementary schools, religious, private or non-public schools across the country.

Benefits of Educational Loan

Education loan not only helps you fund your higher education but also provides various other benefits. Read further to know how you can benefit from taking education loan.

The assesse on whose name the education loan is taken can claim deduction for the entire interest part of the loan under Section 80E of Income Tax Act.

But if you want to avail the deduction, you have to fulfil the following two conditions

  • The loan must have been taken from a specified financial institution which includes banks and any other financial institution which the Central Government may, by notification in the Official Gazette, specify in this behalf. If you take educational loan from any other institution, you won’t be able to get any tax deduction.
  • It can only be taken for higher education that is after passing senior secondary exam.

The education loan not only covers the cost of the course but almost the entire expense of education. Majority of the banks generally fund up to 90% of the cost of education. Following are the expenses that will be covered under the education loan

  • Tuition fees as well as hostel expenses
  • Exam, library, and lab fees if applicable
  • Any refundable fees paid to the institute
  • Cost of uniforms, books and other essentials
  • Traveling expenses

Generally, banks offer 0.5% discount on the education loan interest rate to female students pursuing higher education.

You get a holiday period known as the moratorium period under which you don’t have to repay the loan. This means that the repayment does not start immediately after the completion of the course. There is a holiday period of generally 6 months to 1 year after which the EMI will start. However, you have the option of serving the interest cost of the loan during the moratorium period. If you do so, the bank may consider reducing your interest rate by 1 percent.

Documentation requirements for education loan

  • Two passport size photographs
  • Age proof
  • Identity proof
  • Residence proof
  • Bank account statement for past 6 months
  • Papers validating any scholarships the applicant has qualified for and admission confirmation letter
  • Expense for the course
  • Mark sheet of test
  • Foreign exchange permit copy