Education loans play a pivotal role in shaping the academic aspirations of students across India. As the cost of education continues to rise, these loans serve as a financial bridge, enabling individuals to pursue higher studies and achieve their career goals.

Education loans are offered by banks and financial institutions to support students’ educational aspiration. These loans typically cover tuition fees, accommodation expenses, study materials, and other related costs incurred during the course duration.

Accessibility of Funds

One of the primary advantages of education loans is their accessibility. Students from various economic backgrounds can apply for these loans to pursue education in India or abroad. The loan amount sanctioned is determined based on the course fee, institution reputation, and the applicant’s financial circumstances.

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Interest Rate

Interest rates on education loans may vary based on the lender, the loan amount, and prevailing market conditions. Many banks offer competitive interest rates, and certain schemes provide subsidised interest rates for students.

Repayment

Repayment of education loans usually begins after the completion of the course. Some lenders offer a grace period, allowing borrowers to secure employment before commencing repayments. The repayment tenure can extend for several years, providing flexibility to students in managing their finances post-education.

Adhil Shetty, CEO, Bankbazaar.com, says, “Borrowers have the option to repay their education loan over a span of up to 15 years. Additionally, students are granted a payment hiatus known as a moratorium. Typically lasting for 12 months post-course completion, this allows students the needed time to secure employment before commencing repayments. Furthermore, extensions for the moratorium period are also a possibility.”

Tax Benefits

There are many benefits of an education loan after thoroughly paying attention to the student’s requirements and financial needs. You get exemption under Section 80E of the Income Tax Act for repaying your education loan.

“You can save tax without limit on the interest paid on your education loan for eight years from the start of repayment. If the student’s parents have taken the loan, they will be eligible for the tax exemption. This exemption is available only on loans taken from a certified lending institution such as a bank or a non-bank institution. If the loan is taken from family, friends, or office, no exemption is provided,” adds Shetty.

Terms and Conditions

However, despite the numerous benefits, there are certain aspects students must consider before availing education loans. Loan applicants must thoroughly understand the terms and conditions, including interest rates, repayment schedules, and any associated processing fees or hidden charges. Additionally, maintaining a good credit score and ensuring timely repayments is crucial to avoid adverse effects on one’s credit history.

While education loans serve as a significant support system for students, it’s essential to use them judiciously. With careful financial planning, these loans can be a stepping stone towards a brighter future for students.