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About
Education
Loan
How to take education loan Eligibility Criteria Application Checklist
Education Loan Interest Rate Education Loans from Different Banks & more...

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Know All About Education Loan

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Contents

Introduction

03

How much education loan should you take?

04

Interest rate of education loan

05

Default on education loan repayment

06

Document checklist to apply for education loan 

07

Eligibility criteria to take education loan

09

Steps to take education loan

10

Education loan from State Bank of India

11

Education Loan from Punjab National Bank

13

Education loan from Canara Bank

15

Education loan from Credila

17

Other Useful Resources

19

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Know All About Education Loan

Introduction

n education loan can be a saving grace. However, high

interest rates and the cumbersome process could
come as a dampener. Read on to find out how to get
the best deal?
The first thing that comes to a students mind while arranging funds for his education abroad are Scholarships and
Financial aids. However, given the huge crowd and competition in international education it is not always possible to
secure such benefits.
As such, Education loans to study abroad become an easier
way to secure funds. The following points helps you gain
some insight into why exactly you should consider applying
for an education loan for studying abroad:
1. Education loan is one of the priority sector under which
banks are required to lend by the Reserve Bank of India.
2. Students applying for education loan for education
abroad can avail tax benefits under section 80 (E) of
Income Tax Act 1961. Some of the highlights of this Act
are:
l

Most banks are into lending of education loans. In fact,

study loans are categorised as priority sector lending for
public sector banks. But again, it does not mean that lending
institutions are quick to disburse loans to all kinds for all programmes and for all institutions. In this E-Book, we discuss
about all that you need to know about taking an education
loan to fund your studies.

Loan should be taken from approved financial institution

Loan should be for full-time studies for any graduate
or postgraduate course
Deduction is allowed for a continuous period of eight
years

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How much education loan should you take?

his question may haunt you if you are dont do cost

benefit analysis. The maximum loan that lenders disburse for studies in India is Rs. 10 lakhs and for overseas, Rs. 20 lakhs. Credila provides loan above Rs 20 lakhs.
The education loan you should take would depend on the
course fees and your capacity of generating down payment
(payment from own pocket) towards it. For a loan above Rs.
4 lakhs, one has to generate minimum down-payment of 5%
for studies in India and 15% for studies abroad. For a loan

below Rs. 4 lakhs, one can get the entire fees as loan, as the
banks claim. But you can pay the down payment or the margin money piecemeal. Allahabad Bank, for instance, takes the
margin money on year-to-year basis and disbursements are
made on a pro-rata basis. Though a student may be eligible
for uppermost loan limit he should exercise prudence while
filling the loan amount. If the course for which the loan is
being taken enables better earnings then it may more than
justify the loan.

Loan
amount

Moratoriumperiod

Loan
repayment
period

Interest
rate

Loan
amount
after
moratorium

EMI

Gross
Salary

Net
Salary

50% of
Net
Salary for
servicing
debt

Amount
left in
hand
after
paying EMI

500,000

11%

657,500

11,085.89

25,000

22,000

11,085.89

10914.11

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Interest rate of education loan

nterest rate of education loan depends on whether you

are studying in India or abroad, the course that you are
applying for, your loan amount and the tenure. Students
getting admission to highly rated institutions are offered
loans with a lower rate of interest. There have been talks
that IBA will soon come up with comprehensive ratings of
the institutes to guide banks in making right decisions while
granting educational loans. From a students perspective, the
irony of it is that they will have to shell out more for Equated
Monthly instalments (EMI) due to high interest rates in case
institutes have been rated on the downside. On the other
hand its likely they would be placed at lower packages from
such institutes! Special concessions on interest rates of 0.5
percent are available for women students.

Two types of interest rates

These comprise fixed interest and floating interest rate.
Usually, nationalised banks offer variable interest rates for
student loans, while private and foreign banks offer fixed
interest rates. Interest rates vary between 12 to 16 percent.
Considering the present macro-economic environment it is
advisable to go for floating interest rate loans. SBI is the leading player with 25 percent share in education loan segment.

Simple vs. compound interest

Simple interest is to be charged during the study period
and up to commencement of repayment. There have been
complaints that banks charge compound interest. Servicing
of interest during the moratorium period is optional and
students can avail one percent rebate on interest rate if they
decide to pay.

Education Loan Reckoner

l Education loan procurement is easy if the pro-

gramme is recognised and the college/ university

is government affiliated/ approved. Education loan
sanction is easy for job-oriented professional/technical courses. Students applying in private colleges
which have good placement record are entertained.

l Banks lend up to Rs. 10 lakh for studies in India and

Rs. 20 lakh for education overseas.

l Banks provide loans only between 75 to 90 per cent

depending on the total cost of the course and the

rest of the fund percentage you have to generate
from your own sources. Credila, however, provides
loans above Rs. 20 lakhs and without any margin
money

l Education loan interest rate varies from bank to

bank, which could be anywhere between 11-14%

l Banks may claim to offer loan up to Rs 4 lakh without

collateral, however, thats usually on paper. Banks

ask for collateral.

l Collateral includes assets like national security

certificates, insurance policies, bonds and property

papers.

How much credit to take? Check the placement record of the institution and do a rough calculation on
the expected monthly income you are likely to draw
as fresh employee. Dont forget to take into account
the running expenses.

l A few banks allow a moratorium on interest payment,

but under this option, the interest is compounded

quarterly and added to the principal sum for repayment. Banks offer lower interest rates (usually one
percent if you start repayment during the moratorium period).

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Default on education loan repayment

he education loan repayment period is between five

and seven years and it starts from one year after the
course completion or six months after securing a job,
whichever is earlier.
Considering that the default is unintentional, when a student foresees hiccups arising in loan servicing then he/she
should request the lender to re-schedule the payoff beforehand. If the lender agrees - as they did in quite a few cases
in early 2009 when the employment markets was adversely
hit - then it is fine. Otherwise there is no real option. In case
the student is not able to pay education loan, the default
will be reflected in his credit information report. Default
gets reported in the Credit Information Bureau Limited
(CIBIL) as well, which can affect the credit history of the
student. Legal proceedings take place in case of defaults.
Also, the collateral can be confiscated in case of the default.
If students are regular in servicing the loan then access to

future loans like auto Loans, housing loans can be negotiated

at competitive rates, based on the good credit history. So,
follow the golden rules and approach your dreams in good
faith. Set off now.

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Document checklist to apply

for education loan
l

A completed and signed application form

Two passport size photographs applicant

Photo id of the applicant. The applicant can submit one of

the following
a) Passport
b) Pan card
c) Voters ID card
d) Driving license
e) Employee ID (if working)
f ) Defence ID card

f ) Telephone/ electricity/ water bill not older than three

months

g) Aadhar Card

g) Voters ID card

h) Photo ID issued by central or state government

i) Bank passbook with photograph of the account attested

by the bank
l

Admission documents
a) Printed admission offer letter from the university/institute. The letter must be on their letter head and must be
signed by the authority

Residence proof of the applicant

b) I-20 form for students going to the US for higher studies
a) Passport with address
c) Fee details of the institute/ university
b) Driving license with address
l

Academic documents

c) Bank statement with address

a) Mark sheets and certificates of Class 10 and Class 12
d) Ration card (except Maharashtra)
e) Aadhar card

b) Mark sheets and certificates of graduation (if the candidate is going for post graduate studies)

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i. Last two years Income Tax Returns

c) Documents of scholarships (if the candidate obtained

one)

d) Documents of any entrance exam take- GRE, GMAT,

IELTS, TOEFL

ii. Last two years Certified Financial Statements or

Provisional Financial Statements Duly Certified by
CA

Income proof of the applicant

iii. Proof of office

a) In case of a salaried employee:

iv. Any other valid income proof

i. Salary certificate on employers letterhead or latest

three months salary slip

Income proof of the guarantor if the applicant is not

employed. The same documents mentioned above is
required for guarantor also

ii. Last two years Form 16 from the employer

l

iii. Last two years Income Tax Returns

Declaration/ affidavit confirming that the candidate has

not obtained any other loan from other banks

iv. Any other valid income proof

b) In case of self employed person

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Eligibility criteria to take education loan

l

The candidate must be a citizen of India

The candidate must have obtained a place to study in one
of the recognised universities/ institutes abroad

The candidate must be aged between 16 and 26 years old

The candidate must have good academic record

The candidate must submit all the required documents for

education loan
The co-applicant/ guarantor must be either primary
(parents, spouse, siblings) or secondary (father-in-law,
mother-in-law, brother-in-law, paternal/maternal uncles/
aunts)

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Steps to take education loan

Step 1: Fill in the application form
The candidates can either collect the application form from
the banks or apply online by visiting the banks official web
page. The candidate must have in hand his/her admission
offer letter from the University along with the details of the
study expenditure. The candidate must also provide the
required documents for education loan such as:
l

Passport size photograph

Resident proof of the applicant

Photo identity proof

Academic documents

Income proof of the guarantor

terms and conditions of the student loan, interest rate and

repayment strategies. Once the loan is granted, the student
needs to sign a promissory note.

Step 2: Verification of the details and documents

Once the candidate submits the application form along with
the supporting documents for student loan, the bank will
verify the details. The process of verification differs from
bank to bank. Some banks prefer a personal conversation
with the candidate where they enquire about the academic
qualification and excellence. In case the bank requires more
details, it will inform the candidate.

Step 4: Disbursement of education loan

Once all the formalities are completed, the bank will disburse
the education loan. The education loan amount is given to
the candidate through:
Demand Draft
Cheque

Step 3: Sanction/ rejection of education loan

Electronic transfer to the University

If the bank is satisfied with the documents provided by the

candidate, it sanctions the educational loan. Once the loan is
sanctioned, the bank will issue a Loan Offer Letter mentioning the amount to be given to the candidate. The candidate
can use this letter for admission process to state the source
of income to support his/her studies. The bank also sends an
Education Loan Agreement to the student, which states the

10

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Education loan from State Bank of India

he State Bank of India is one of the top education

loan providers in India. Every year the bank grants
loans to the students who secured admissions in
various recognized universities in India and abroad with no
processing fee. Here are the details of obtaining a student
loan from SBI.

Eligibility to get education loan from SBI

The candidate must be a citizen of India
l

The candidate must have obtained admission in any of the

recognised universities in the world

11

The candidate must have obtained admission to one of the

following courses:
a) Job oriented professional degree courses
b) Job oriented professional diploma courses
c) Job oriented technical degree courses
d) Courses conducted by CPA (Certified Public Accountant) in USA and CIMA (Chartered Institute of Management Accountants) London

Education loan amount given by SBI

SBI provides education loan for upto Rs. 30 lakhs for students who wish to go abroad for higher studies. The expenses
covered in the student loan are:

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Tuition fee payable to the university/ college

Examination/ library fee

Caution deposit/ refundable deposit

Travel expenses

Documents required to take

education loan from SBI
l

Completed application form

Two passport size photographs

Letter of admission from the University

Documents on the cost of studies

Security needed to take education loan from SBI

If the candidate is taking a student loan up to four lakhs,
the only security needed is the parent or guardian as the
co-borrower. If the loan amount is between 4 lakhs and 7.5
lakhs, the candidate must provide parent or guardian as the
co-borrower and collateral security in the form of the details
of the Gross Annual Income of the parent or guardian. If the
candidate is applying for an education loan above 7.5 lakhs,
the parent or guardian must be the co-borrower and the candidate must show tangible collateral security.
Repayment of education loan from SBI
The candidates who take educational loan upto 4 lakhs or
between 4 lakhs and 7.5 lakhs will get 10 years to repay the
amount. The repayment period for the loan amount above
7.5 lakhs is 20 years.
The rate of interest of education loan is given below:

PAN card of the candidate

Proof of identity (any one)
a) Passport
b) Driving license
c) Voters ID card
d) Aadhar card
Proof of residence
a) Passport
b) Driving license
c) Voters ID card
d) Electricity bill
e) Telephone bill

Loan
amount

Above Base
Rate

Current
Rate

Upto Rs. 4 lakhs

3.50%

13.50%

4-7.5 lakhs

3.75%

13.75%

Above 7.5 lakhs

1.75%

11.75%

* Girls will have 0.50% concession

Student/ co-borrower/ guarantors bank account statement for the last six months
Statement of assets and liabilities of student/ co-borrower/ guarantor
Student/ co-borrower/ guarantors proof of income

12

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Education loan from Punjab National Bank

he Punjab National Bank provides various schemes

to issue education loan for the students who want to
go abroad for higher studies. The educational loan
to study abroad by the PNB is called PNB Saraswati. The
bank provides education loan for upto Rs. 20 lakh for studies abroad.

Post graduation courses such as MBA, MCA and MS

Courses conducted by CIMA- London and CPA in USA

Courses covered for PNB education loan

The Punjab National Bank provides student loan for the
below given courses:
l

Job oriented technical courses offered by reputed universities

Diploma and degree courses such as pilot training, shipping, aeronautical etc. Provided by recognised regulatory
bodies abroad. The diploma courses other than these will
not get an education loan from PNB

Job oriented professional courses offered by reputed universities

13

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Eligibility to take education loan from PNB

Travel expenses from the home country to the host country

Caution deposit

Purchase of books etc.

The eligibility criteria for education loan from PNB are:

l

The candidate must be an Indian citizen

The candidate must have obtained admission in a reputed
university/ institute abroad

Application checklist for education

loan from PNB
l

Completed application form

Passport size photograph

Proof of address
a) Passport
b) Driving license
c) Voters ID card
d) Electricity bill
e) Telephone bill

Proof of age

Academic transcripts and certificates of the latest degree

Prospectus of the university/college the applicant is going

to join which explains the tuition fee, examination fee and
hostel fee
Information about the assets and liabilities of the parents
or guarantor
Copy of passport and visa

Expenses considered for the education

loan from PNB
l

Fee payable to the university/ college

Examination fee

14

Security needed to take education loan from SBI

There is no security needed to take education loan for upto
Rs. 4 lakh. However, the guardian or parent must be the coborrower. The candidates taking loan between Rs. 4 lakh
and Rs. 7.5 lakh must provide collateral security in the form
of suitable third party guarantee. For the loans above 7.5
lakh, the candidate must provide tangible collateral security
suitable value acceptable to bank along with the assignment
of future income of the student for payment of installments.

Interest rate for education loan by PNB

Amount of Loan

Repayable in
less than 3 yrs

Repayable in
3 yrs & above

Upto Rs 4 lakh

BR+3.00%
(13.25%)

BR+2.50%+
TP (13.25%)

Between Rs 4 lakh
and Rs 7.50 lakh

BR+4% (14.25%)

BR+3.50%+
TP (14.25%)

Above
Rs 7.50 lakh

BR+2.00%
(12.25%)

BR+2.00%*
(12.25%)

Loan repayment
The students who are taking the loan upto Rs. 7.5 lakh will
get 10 years repayment period. The repayment period of
the education loan above that is 15 years. The moratorium
period to start repaying the loan is six month to one year after
completing the course or getting a job (whichever is first).

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Education
loan from
Canara Bank

anara Bank offers various educational loan schemes

for the students doing higher studies in India and
abroad. The bank provides upto Rs. 20 lakh loan to
the students who go abroad for higher studies.

Eligibility to apply for education loan from

Canara Bank
l

The candidate must be a citizen of India

The candidate must have obtained admission in a reputed
university/ institute abroad
The candidates must be going abroad to study:
a) Job oriented professional courses
b) Job oriented technical courses
c) Post graduation courses such as MBA and MCA
d) Courses conducted by CIMA- London and CPA in
USA

15

e) Diploma and degree courses such as pilot training,

shipping, aeronautical etc.
The processing charge for the loans to study abroad is 1% of
the loan amount. In case the sanctioned loan amount is taken
by the candidate, the amount will be reimbursed.
The education loan amount will be directly disbursed to the
university/ institute. There is no margin for the candidates
who take education loan for upto Rs. 4 lakh. The margin for
the candidates who take loan for above Rs. 4 lakh is 15%.

Documents checklist for education

loan from Canara Bank
l

Completed application form

Mark sheets of all qualifying exams

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Letter from the University confirming the admission

Expenses for studies including tuition fee and living
expenses

Proof of age

Proof of residence

Passport size photograph

Last six months bank statement of the candidate

Documents to be submitted by the co-applicants

l

Know All About Education Loan

Security for education loan from Canara Bank

There is no security needed to take education loan up to Rs. 4
lakh. For the loan amount between Rs. 4 lakh and Rs. 7.5 lakh,
a satisfactory third party security is needed. For the loans
above Rs. 7.5 lakh, 100% collateral security equal to the loan
amount must be given.

Repayment of education loan from Canara Bank

The candidates must repay the education loan amount one
year after completing the course or six months after getting
the job, whichever happens first. The repayment period for
the education loan up to Rs. 7.5 lakh is ten years and above
Rs. 7.5 lakh is 15 years.

Proof of residence of the co-applicant- passport, voters ID

card, Aadhar card, telephone or electricity bill

ID proof- passport, voters ID card, Aadhar card, pan card

Last six months bank statement

16

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Education loan from Credila

edilla is a HDFC Limited Company that provides

education loan for students. Credila provides loans in
Indian rupees that can be converted to the currency
of the country the student goes for higher education. The
repayment of the loan will be in Indian rupee. Credila loans
start from Rs. One lakh upto Rs. 20 lakh.

Eligibility to get education loan from Credila

l

The candidate must be an Indian citizen

The candidate must be above the age of 18 years

Co-borrowers eligibility
l

The co-borrower must have a bank account in one of the

Indian banks with cheque writing facilities
The candidate must have obtained admission in a recognised university abroad

17

The co-borrower must be an Indian citizen

The co-borrower must be a relative of the applicant such
as father/ mother/ brother/ sister/ spouse (for married
candidates)
Co-borrowers has co-extensive liability with the candidate
The co-borrower must provide valid proof to establish the
relationship with the candidate
In case the collateral security cannot be provided by the
relatives mentioned above, the candidate can also bring
father-in-law/ mother-in-law/ sister-in-law/ brother-inlaw/ maternal or paternal uncle/ aunt/ grandparents/ first
cousins

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The types of collaterals accepted as:

a) Residential house/ flat
b) Fixed deposit
c) Non- agricultural land

Costs covered in education loan by Credila

The interest is calculated using Simple Interest Rate

Floating rate of interest to be (Credilas CBLR + Spread)%
per annum
The current CBLR is 12.35% per annum

The entire tuition fee

Education loan repayment policy of Credila

Examination fee

Library and laboratory fees

Purchasing of books

Hostel fees and living expenses

Travel fare (economy ticket from India to the destination

country)

Education loan disbursement by Credila

Credila disburses the education loan in Indian rupees. The
tuition fee will be directly disbursed to the educational
institution through an authorised servicer or directly. The
amount for living expenses and other expenses will be
disbursed in instalments from time to time as per Credilas
underwriting norms.

The interest payment of the loan starts soon after the disbursement of the first instalment of the loan
Tenure of the loan is the Duration of Study + Grace Period
after the Study + Repayment Period
The maximum tenure for the repayment of the loan is 10
years
The major factors determining the tenure is the repaying
capacity of the candidate, age of the co-applicant and the
future prospects of the course
The monthly payment of the loan will be deducted from
the bank account of the borrower/ co-borrower using
Electronic Clearing System (ECS)

Interest rate for taking education loan from

Credila
l

It will be floating rate of interest linked to Credilas Benchmark Lending Rate (CBLR)

18

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Other useful resources

Education Loan:
The Myths

19

Study abroad
Education loan:
How it works to
your advantage

Education
loan FAQ

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