Education loan is provided for the further studies of students. These loans are very much important for the people because these loans give height to the advancements of education. Education is of utmost important for the people, because without the education one could not be civilized. For the civilization one needs to be educated. Many banks have special education loan schemes for meritorious and needy students. The educational loan scheme aims at providing financial support from the banking system to deserving and / meritorious students for pursuing higher education in India and abroad. The main emphasis is that every meritorious student though poor is provided with an opportunity to pursue education with the financial support from the banking system with affordable terms and conditions. No deserving student is denied an opportunity to pursue higher education for want of financial support.
Salient features of the scheme are given hereunder:
1. Eligibility Criteria:
1.1. Student Eligibility:
- Student should be an Indian National
- Secured admission to professional / technical courses in India or abroad through entrance Test / Merit Based Selection process.
- The student should not have outstanding education loan from any other Institution.
- Father/Mother should be co-borrower.
- Branch nearest to the permanent residence of student will consider the loan.
1.2. Courses Eligible:
(a) Studies in India: (Indicative List)
- Graduation courses: B.A. B.Com, B.Sc., etc.
- Post Graduation courses: Masters & Phd.
- Professional Courses: Engg. , Medical, Agriculture, Veterinary, Law, Dental, Management, Computer etc.
- Computer certificate courses of reputed institutes accredited to Deptt. of *electronics or institutes affiliated to university.
- Courses like ICWA, CA, CFA etc.
- Courses conducted by IIM, IIT, IISc, XLRI, NIFT, etc.
- Courses offered in India by reputed foreign universities.
- Evening courses of approved institutes.
- Other courses leading to diploma / degree etc. conducted by colleges/ universities approved by UGC/ Govt/ AICTE /AIBMS/ ICMR etc.
- Courses offered by National Institutes and other reputed private institutions. Banks may have the system of appraising other institution courses depending on the future prospects/recognition by user institutions.
(b) Studies Abroad:
- Graduation For job oriented professional/technical courses offered by reputed universities.
- Post Graduation MCA, MBA, MS etc.
- Courses conducted CIMA-Londin, CPA in USA etc.
1.3. Expenses considered for Loan
- Fee payable to College/School/hostel.
- Examination/library/laboratory fee.
- Purchase of books/equipments/instruments/uniforms.
- Caution deposit/building fund/refundable deposit supported by institution bills/receipts.
- Travel expenses/passage money for studies abroad.
- Purchase of computers-essential for the completion of the course.
- Any other expense required to complete the course- like study tours, project work, Thesis etc.
2. Quantum of Finance.
Need based finance subject to repaying capacity of the parents/students with margin and the following ceilings.
Studies in India – Maximum Rs. 10.00 lacs
Studies abroad – Maximum Rs. 20.00 lacs.
Up to Rs.4.00 lacs : NIL
Above Rs.4.00 lacs : Studies in India: 5%
Studies Abroad: 15%
Scholarship/assistantship to be included in margin.
Margin may be brought in on year to year basis as and when disbursements are made on a pro-rata basis.
Up to Rs.4.00 lacs : No Security
Above Rs.4.00 lacs & : Collateral in the form of a suitable third party
Up to Rs.7.5 lacs guarantee. The Bank may, at its discretion waive third party guarantee if satisfied with the net worth/means of parent who would be executing the documents as “joint borrower.”
Above Rs. 7.5 lacs Collateral security of suitable value or suitable third party guarantee along with the assignment of future income of the student for payment of installments.
Repayment holiday/Moratorium : Course period + 1 year or 6 months after getting job, whichever is earlier
The loan to be repaid in 5-7 years after commencement of repayment. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extension as may be deemed necessary to complete the course.
• The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Installments (EMI) fixed.
• 1% interest concession may be provided for loaners if the interest is serviced during the study period when repayment holiday is specified for interest / repayment under the scheme.
6. PROCESSING CHARGES
No processing/upfront charges are collected on educational loans by banks.
7. TAX BENEFITS ON EDUCATION LOANS
- You can claim a deduction under section 80 E of the Income-Tax Act for the interest paid on an educational loan.
- You will get the tax benefit on an education loan only if the loan is in your name and is taken for the purpose of higher education of yourself, your spouse or your children. Education loan taken for the higher education of siblings (brother or sister) is not covered in this regard.
- Earlier, only the lesser of the two amounts was eligible for tax deduction: either the total amount paid during the year (principal repaid and interest paid) or Rs 40,000. Now, this has been done away with, you can deduct the entire interest amount from your taxable income, without any limits. No deduction, however, is available for the principal that you repay.
- These deductions are available only for a period of eight years starting from the year in which you start paying the interest on the student loan.
- Do remember that you cannot claim tax deductions if your employer, family or friends gives you an educational loan. You can get tax benefits only if the student loan is from a financial institution, bank or an approved charitable institution.
- Tax benefits are not available in respect of interest paid on a loan taken for any course. The course has to be for full-time studies (no part-time courses covered) for any graduate or post graduate course in engineering, medicine, management, or for post graduate course in applied sciences or pure sciences including mathematics and statistics.