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5 things to keep in mind when applying for a student loan in 2022

Considering that an education loan is one of the first big financial decisions that a person makes, which will remain for nearly six to seven years into their working lives, there are a few things they should be careful about.

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A long tenure decreases the EMI, however, it increases overall repayment cost. 

Getting into a dream college or going abroad for higher education has become a pipe dream for most students due to the spiralling cost of education.

Mayank Batheja, Founder of Credenc, says, “Despite many efforts made by both parents and students, the goal of getting access to quality education may not be met due to the rising education inflation.”

As per the data by National Sample Survey Office (NSSO), between 2008- 2014, the cost of general education in private institutions increased by 175% on average and the same for technical and professional education rose by 96%.

In such times, Batheja explains, “An education loan can be a solution whether one wants to pursue a graduation course, a master’s degree, or a short-term professional upskilling course.” 

Considering that an education loan is one of the first big financial decisions that a person makes, which will remain for nearly six to seven years into their working lives, there are a few things they should be careful about.

  1. Getting clarity on the loan process – Before filing a loan application, Batheja points out “students should be thorough about the entire process of taking and repaying the loan from any institution.” 

For instance, as a student, you must be aware of the course fees, documents required, scholarships, interest on any important aspects of the loan and any processing fee associated with the loan.

  1. Keep documents ready – The documents that have to be submitted differs across lenders, it is essential to get all the documentation in place when the student applies for an education loan. Here are some of the documents that are generally required;
  • KYC documents of students and co-applicants – Aadhar card, PAN card, passport
  • Any additional documents by co-applicants 
  • If the student is a working professional – address proof, last two Form 16, last 3 month’s salary slip, salary account bank statement and company ID or offer letter
  • Copy of admission letter of the Institute along with fees schedule
  • Mark sheets or passing certificates of S.S.C., H.S.C, degree courses
  1. Formulate repayment strategy – Education loans are usually available for a period of up to 8-10 years. The long tenure decreases the EMI, however, it increases overall repayment cost. 

Thus, Batheja says, “if an individual can repay the loan sooner, he/she should opt for a shorter tenure. Also, there are instalments with zero penalties on prepayment of education loan, thus one can repay the outstanding loan amount to save on interest costs.”

  1. Learn about job opportunities available post the course – Before finalizing the course of your choice, as a student, you should first get a fair understanding and knowledge about the minimum salary that you can expect after getting the degree. 

“This can be a fair indicator of whether you can pay your loan’s monthly instalments or not,” adds Batheja. 

  1. Tax benefits of education loan – Applying for an education loan will make you eligible for tax deduction under Section 80(E) of the Income-tax Act, 1961. Note that such deduction can be easily claimed on the interest paid towards the education loan.

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