education loan

What is an education loan?

A loan designed to support the students to pay for their education tuition fees, living expenses and books is called an education loan. These loans differ from other types of loans. The interest rates are considerably lower and the refunding of the loan can be deferred till the student is in the school for an education loan. It may also differ accordingly to the countries’ laws regulating the loan structure. An education loan can prove as a saving grace. But, high-interest rates and the long and clumsy procedures can create misery for the loan taker.

An education loan can be rationed. A high cost of education doesn’t imply that a student will be denied choose the programme in which he is interested in. As most banks are into providing of education loans, that doesn’t mean these institutions are quick in the disbursement of loans to every kind of programmes and all institutions.

Procedure for getting an education loan

Education costs, particularly for all higher education programmes have increased to a limit in the past years that it has become almost impossible for not only the middle class but also the upper middle class to stand the educational costs on their own. Students require educational loans for either the higher studies in the same country or even the overseas professional studies. The procedure for applying for an education loan is:

  • Before applying for the education loan, the applicant must decide upon the amount that can be taken in the form of loan considering the tuition fees as well as boarding and lodging costs, etc. Thus, before applying for the loan, the applicant must finalise the amount with all possible expenses.
  • After finalising the amount, the applicant must decide upon the type of loan he should take. The applicant can go for Government loans, scholarships or private loans.
  • Before applying for an education loan with a private institution, the applicant must carefully check the reputation of the institution and must look for those which provide loans at competitive interest rates. The applicant must conduct a thorough study on the terms and conditions concerning the repayment of the loan, etc. before going for such loans.
  • Once decided with the amount of loan and the institution from which to get the education loan, how to get that loan must be considered.
  • Students can then approach the bank with various schemes of education loans in mind and their pros and cons and then strike the correct deal for themselves.

Necessities for an education loan

  • A co-applicant is compulsory. A co-applicant can be parents, siblings or spouse.
  • For all the loans between Rs.4-7.5 lakhs, a third-party guarantor is mandatory.
  • For all the loans above Rs.7.5 lakhs, the lender will ask for collateral.
  • Repayment of the loan may start six months – one year after the completion of the programme. It may vary.
  • Default in the repayment of loan may result in affecting the credit history of the student as well as of the co-applicant
  • If the student goes abroad, then the lender will recover the loan amount from the co-applicant.
  • For abroad programmes, loan alone might not be sufficient, the applicant should look for a part-time job or even sponsorship.
  • Insurance is mandatory for the foreign programmes.
  • Loans are provided to the students who are the citizens of India and should have consistent good academics and the admission to an approved institution for following a recognised programme.
  • The co-applicant must be earning.


After looking at the pros and cons of each scheme then only the applicant should rest for the loan. Every bank has their own set of procedures and the applicant must adhere to them accordingly. The set rules may vary.

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