By Shabir Ahmad Shah
Education Loan Scheme is linked with Subsidy namely Credit Guarantee Fund Scheme for Education Loan (CGFSEL). The CGFSEL is applicable to the students for studying in recognized Technical or Professional courses in India or abroad. Similarly, the interest subsidy is linked with the Education Loan disbursed to the students enrolled in recognized Technical or Professional courses after 10+2 (Hr. Secondary Party II). The lndian Banks’ Association (IBA) formulated a comprehensive model for educational loan scheme aimed to provide financial support to deserving and meritorious students for pursuing higher education in India or abroad. The Government of India approved the scheme to provide full interest subsidy during moratorium period (the Course Period plus one year or six months) after getting a job whichever is earlier. The loan is provided to the students belonging to Economically Weaker Sections and is disbursed by scheduled banks under the Educational Loan scheme.
The amount of Education Loan for the students studying in India fixed by IBA to maximum limit of Rs.10 lacs while as the students studying in Abroad can avail loan upto Rs.20 lacs. The interest rates charged on the educational loan is one year Marginal Cost Lending Rate (MCLR) and as per the provisions of interest rates under the IBA Education Loan scheme. The interest subsidy under the Scheme shall be provided to the eligible students for the undergraduate degree course or the post graduate degrees or diploma. Interest Subsidy shall, however, be admissible for integrated courses (graduate + post graduate). Under the IBA Scheme, 1% of interest concession is provided to the students on the interest served during the period of loan.
An educational loan is a sector which promotes and gives students an opportunity to study further. It enhances the growth and development of the citizens considered an investment into the future. Government and banks also offer subsidies and lower interest rates to promote education for all.
The students interested in pursuing their education for higher studies, Banks offer these loans to meritorious and deserving students who require finance to continue their studies. These loans have helped to boost careers and given people a chance to pursue higher education which they wouldn’t have otherwise been able to afford. Banks set certain criteria for applicants to meet before they lend on education loan. These factors are:-
The academic background and qualifications of the student.
The course for which the loan is being sought.
The institution at which the course will be studied will also play a role.
Whether the applicant can offer collateral on the loan or not. The bank will take into account what kind of collateral is offered and the value of it.
Whether the parents, guardians or an acceptable third party are co-borrowers or guarantors of the loan. They will also check the job profile and credibility of the co-borrowers.
Mostly the following courses are eligible for Education loan.
Undergraduate degrees or diplomas and special courses.
Postgraduate degrees or diplomas and special courses.
PhDs and Doctoral Programmes.
Recognized Colleges and Institutions
Banks also consider the institution you have selected to pursue your studies. They will not lend money to just any course or any university. The bank needs to make sure that you will be able to complete your course and get a good job when they provide you any loan facility. Most banks have a list of reputable and pre-approved universities. They also have a list of blacklisted universities for which they will reject your application.
Besides, KYC complainant students seeking a loan for studies have to provide the documents like fee structure including hostel fee and transport charges if any.
Proof of admission to the university and the course
Schedule of course expenses
Copy of Foreign Exchange permit if you have it.
Bank account statement for last six months of the borrower, parents or guardian.
Last 2 years’ Income Tax assessment of the borrower, parents or guardian.
For loans with collateral, the details of security offered must be furnished. You might also be required to provide an advocate’s search and report about its marketability, mortgage ability, etc.
Proof of the source of margin is required.
(The author writes on socio-economic issues and can be reached at email@example.com)