What is Education Loan?

What is Education Loan?

What is an Education Loan?

Ever dreamt of studying at a prestigious university but worried about the cost? An education loan can turn those dreams into reality! It's a financial tool provided by banks and NBFCs (Non-Banking Financial Companies) to help Indian students pursue higher education, both domestically and abroad. With education costs rising steadily, education loans bridge the financial gap, making quality education accessible to a wider range of students.

How does an Education Loan Work?

• Let's say you secure admission to your dream medical college. The fees might seem daunting, but an education loan can cover them. You borrow a specific amount (principal) from the bank at a pre-determined interest rate. You then repay the loan amount and the interest in equated monthly instalments (EMIs) after a specified course completion and moratorium period.
• These education loans can be tailored to specific courses like medicine, engineering, MBA, etc. Course-specific education loans offer higher loan amounts considering the potential higher course fees.
• General education loans are applicable to a wider range of courses, with loan amounts determined by factors like university reputation and course duration.

Features and Benefits

Education loans offer various advantages to students.

• They enable you to finance your education comprehensively, covering expenses such as tuition fees, hostel charges, book costs, and other education-related expenditures.
• Education loans provide flexible repayment options. You can repay the loan after completing your course, with a moratorium period that allows you to get established in your career before beginning repayments.
• There are potential tax benefits associated with education loans. Depending on prevailing tax laws, you may be able to claim deductions on the interest paid on your education loan, reducing your tax burden.
• Obtaining a degree from a reputable institution through an education loan can significantly improve your career prospects. It can enhance your employability and potentially increase your earning prospects in the future.

List of Expenses Covered under Education Loan

• Education loans cover a broad spectrum of expenses, including tuition fees, examination fees, and library fees.
• Other covered expenses include hostel charges, lab fees, and travel expenses, particularly for students studying abroad.
• Costs associated with purchasing books and study materials are included. Some loans also cover the purchase of a laptop or computer if it is necessary for the course.

Conclusion

While education loans provide valuable opportunities, barriers like limited awareness and strict collateral requirements can make them hard to access. NBFCs can play a key role where major banks fall short in providing loans to low-income families. Additionally, financial literacy programs can equip families with the knowledge needed to make informed decisions. These efforts can make education more accessible and open doors to a better future for students and families who cannot afford the rising costs of education.