RBI guidelines on student loans

To apply for an education loan, a student should be an Indian citizen, and

should have got admission for a study program in a reputed foreign
university.
To apply for an education loan, a student;

Must be an Indian citizen

Must have cleared the selection process and obtained admission for any study
program in a reputed foreign university.

Courses

A student must secure admission to a graduate or post-graduate study program like

the MCA, MBA, MS or a professional or technical course in any discipline, including
courses conducted by international professional bodies like the CIMA (London) or
CPA (USA); or even an employment oriented course to upgrade skills from a
recognized international school.

Management, hospitality, healthcare and IT enjoy an edge while universities in US,

Canada, UK, Australia and New Zealand are popular destinations.

Age

There is no minimum age restriction but students are usually above 16 years and
have completed either the Senior Secondary course (SSC) or grade 10 or the Higher
Secondary Course (HSC) or grade 12. There is no upper age limit.

Maximum loan

The maximum study loan is for Rs 20 lakh ($40,000) subject to the repayment
capacity of the parents and student.

Repayment on the loan starts one year after the completion of the course or six
months after getting a job, whichever is earlier and the loan must be cleared within
five to seven years.

However, to ease the interest burden, a parent/ guardian may choose to pay the
interest during the moratorium period and avail of an interest rate concession.

Collateral

For a foreign study loan above Rs 4 lakh ($ 8,000) parents or the guardian become
joint borrowers. The bank may also insist on a third party guarantee, suitable
collateral security like fixed deposits, national savings certificates, mortgages and an
assignment of future income of the student for payment of instalments.

Margin Money

There is no margin money required for a study loan up to Rs. 4 lakh.

For a foreign education loan of over Rs 4 lakh, the student or guardian pays 15% of
the loan amount. This amount need not be paid up-front. It may be put up as and
when disbursements are made by the bank year to year on a pro-rata basis.

This amount would include the value of any scholarship acquired by the student. For
instance, if a student needs a loan amount of Rs 15,00,000 ($30,000) and has
received a scholarship worth $10,000 then the margin money requirement would be
covered by the proof of the scholarship.