By Kanupriya Shekhar, Director- Admissions, Manav Rachna Educational Institutions

Today, more than ever, quality education has indeed become the key to unlocking potential professional and personal opportunities. Contrary to traditional norms, higher education institutions are now more vested in providing holistic education to the students, including the use of new-age technologies, experiential mode of learning and industry-integrated curriculum.

This paradigm shift has also resulted in escalating tuition fees and fierce competition for enrollment to institutions of repute. As such, students either need to bear the guilt of watching their parents shell out all their savings or are compelled to opt for less expensive courses despite their merit and interest in an otherwise costly discipline.

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One of the easiest ways to get free of the financial shackles of expensive tuition is to opt for a student education loan. Of course, there are other loan types that can be availed to avoid being weighed down by economic burdens, but choosing to take out an education loan is a highly beneficial move. Here’s why:-

Double Tax Exemption Benefit: Unlike other loan types, availing an education loan can provide you exemptions in

  • TCS (Tax Collected at Resource): According to budget 2020, students who have not taken a student loan to study at a foreign university with a tuition fee above 7 lacks will need to pay a minimum of 5% tax at the source. However, students who take out an education loan need to pay a mere 0.5 per cent TCS.
  • Tax Exemption while filing Income Tax Returns: Under Section 80E (Income Tax of India), students can claim an unlimited tax deduction on interest paid for 8 years

Personal Savings remain untouched

Parents no longer need to liquidate their emergency assets like real estate, equities or gold to meet the tuition need of their wards. In addition, they do not need to dip their retirement funds either.

Option to choose from tailored loan offerings: Based on their profile and course requisitions, students can choose to opt for a loan type that suits their unique study needs. Further, an array of varied loan amounts to select from can also cover other allied expenses like refundable security deposits that can incur during the course completion.

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Repayment Moratoriums: Generally, EMI payments are scheduled to commence 6 to 12 months after the completion of the course in the case of Education Loans. This provides the students with enough time to arrange for a job and settle down before they start the repayment cycle.

Building credit history for the future: Repaying education loans build the credit history of the students which helps them in procuring other loans like a home loan or an auto loan in the future in a more hassle-free manner. Also, credit card companies are stringent in providing credit facilities to candidates without a good credit history.

No need for Collateral deposit: Most banks provide collateral-free loans up to Rs 7.5 lacks.

Building financial discipline in students: Repaying EMIs means putting aside a sum of money early in the professional lives of the students that inculcate a lifetime habit of savings and financial planning in them.

Lower interest rates and additional benefits to women: Typically, for secured education loans, the interest rates for women start at 7.85% and for men at 8.35 per cent which is significantly lower than other loan types like a personal loan.

Long Repayment Tenure: Contrary to other loan categories, the repayment tenure for education loans can last up to 20 years.

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Things to Keep in Mind before taking a student loan:

  • Tax benefits are only applicable on the Interest and not the principal amount to be paid
  • The co-applicant needs to be either a parent or a guardian and the liability of loan repayment would also fall on them in case of failure to do so by the primary applicant.
  • Verification of income and academic credibility of both the applicant and the co-applicant is mandatory.