About Education Loan

Education Loan is a financial solution to fulfil the dreams and aspirations of the students with regard to the education they wish to pursue. These dreams were normally curtailed due to monetary constraints. Now banks and other financial institutions have removed this constraint by offering a loan for pursuing studies in India as well as abroad. The repayment of the loan will be done by the student after obtaining employment. The burden of education does not fall on the parents while their children are following their dreams and passion.

Education Loan is the credit facility provided by banks and other financial institutions for studies inland and abroad. The mandatory requirement to qualify for this loan is merit. The income of the parents does not play a part in the process of obtaining the loan. Up to a certain amount, there is no requirement for a guarantor or collateral security. However, above the benchmark stipulated, collateral will have to be made available.

Education Loan interest rates

The following are the interest rates stipulated by some of the top banks:

Name of the Bank Rate of Interest

Punjab National Bank

PNB Sarawathi/ Udan

  • For a loan amount up to 7.50 Lakhs: 1-Y MCLR + 2 = 10.45%
  • For loan amount above 7.50 Lakhs: 1-Y MCLR + 2.60 = 11.05%
  • For loans where 100% collateral security is available in the form of immovable property, for loans provided to pursue higher studies abroad and, for loans other than the ones in the above category: 1-Y MCLR + 1.85 = 10.30%

PNB Prathiba

  • Loan obtained for admissions in institutions other than IIM, NIT, XLRI, Jamshedpur and, IIT where the loan amount is up to 7.50 Lakhs: 1-Y MCLR + 0.60 = 9.05% and 1-Y MCLR + 0.10 = 8.55% for loan amount above 7.50 Lakhs
  • Loan obtained for enrolment in NIT, IIM, XLRI, Jamshedpur and IIT for loans up to 7.50 Lakhs 1-Y MCLR + 0.50 = 8.95% and 1-Y MCLR = 8.45% for loans above 7.50 Lakhs

For PNB Honhar

For the loan under PNB Honhar the rate of interest charged for an amount up to 10 Lakhs is 1-Y MCLR + 2 = 10.45%

For PNB Bihar Student Credit Card Scheme

For the loan under this scheme up to 4 Lakhs the interest charged is 1-Y MCLR + 2 = 10.45%

For PNB Kaushal

  • Under the above scheme, where a loan is granted to children of employees, rate of interest for a loan up to 1.50 Lakhs is 1-Y MCLR + 1.50 = 9.95%
  • For a loan where co-obligation or the guarantee of the employee is available, the rate of interest will be 1-Y MCLR + 0.50 = 8.95%
  • In all other cases, the rate of interest will be 1-Y MCLR + 0.10 = 8.55%

Education Loan to children of the employees

1-Y MCLR + 0.10 = 8.55%

Syndicate Bank

Synd Vidya

  • For a loan up to 4 Lakhs: 1-Y MCLR + 1.60 = 10.25%
  • For a loan above 4 Lakhs and up to 7.50 Lakhs: 1-Y MCLR + 1.85= 10.50%
  • For a loan above 7.50 Lakhs: 1-Y MCLR + 2.85 = 11.50%

Synd Vidya - Vocational courses

Base Rate + 2.25 =11.75%

Synd Super Vidya

1-Y MCLR + 0.10 = 8.75%

Synd Vidya Abroad

1-Y MCLR + 2.10 = 10.75%

Synd Vidya Skill Loan Scheme

1-Y MCLR + 1.50 = 10.15%

Axis Bank Education Loan

  • For a loan up to 4 Lakhs: 15.2%  
  • For a loan above 4. Lakhs and up to 7.5 Lakhs: 14.7%
  • For a loan amount above 7.5: 13.7%

ICICI Bank Education Loan

The rate of interest starts at 11.5% p.a.

Central Bank of India

  • Cent Vidyarthi
    • For male students: 1-Y MCLR + 2 = 10.55%
    • For girl/SC/SC/IIT students: 1-Y MCLR + 1.50 = 10.05%
  • Cent Vidyarthi for Executive MBA
    • For male students: 1-Y MCLR + 0.50 = 9.05%
    • For girl/SC/SC/IIT students: 1-Y MCLR = 8.55%
    • For students pursuing MBA in the institutes other than the ones mentioned above: 1-Y MCLR + 1.25 = 9.80%

Cent Skill Loan (for vocational training)

1-Y MCLR + 1.50 = 10.05%

Cent Vidyarthi at IIMs and other 4 institutes of repute

1-Y MCLR = 8.55%

Union Bank of India

  • Union Education
  •  If covered under CGFSEL
    • For male student: 1-Y MCLR + 2 = 10.60%
  • If not covered under CGFSEL
    • For a loan amount up to 4 Lakhs: 1-Y MCLR + 3.15 = 11.75% for male students and 1-Y MCLR + 2.65 = 11.25% for female students
    • For an amount above 4 Lakhs and up to 7.50 Lakhs: 1-Y MCLR + 2.90 = 11.50% for male students and 1-Y MCLR + 2.40 = 11% for female students
    • For an amount above 7.50 Lakhs: 1-Y MCLR + 2 = 10.60% for male students and 1-Y MCLR + 1.50 = 10.10% for female students
  • Union Education Loan for ISB Students
    •  For PGPM course: 1-Y MCLR = 8.60%
    • For PGP-PRO course and for PGPMAX: 1-Y MCLR + 0.20 = 8.80%
  • Union Special Education Loan
    •  For scheme for students of Premier Management and Technical Institutes: 1-Y MCLR = 8.60%
    • For students of Tier II Management and Technical Institutes: 1-Y MCLR + 1.65 = 10.25% for male students and 1-Y MCLR + 1.15 = 9.75% for female students
  • Union Education Skill Development
    • For loan without deviation with CGFSSD: 1-Y MCLR + 1.50 = 10.10% for all students
    • For loan without CGFSSD: -Y MCLR + 3.15 = 11.75% for male students and 1-Y MCLR + 2.65 = 11.25% for female students

Andhra Bank Education Loan

For a loan up to 7.50 Lakhs: 1-Y MCLR + 2 = 10.75%

For a loan above 7.50 Lakhs: 1-Y MCLR + 1.70 = 10.45%

Kotak Mahindra Bank

The rate of interest varies from 11.5% to 24%

*The interest rates mentioned in the above table was last updated on 08.06.2019

Features and Benefits of Education Loan

The features and benefits of Education Loan are as mentioned below:

Purpose: The loan is provided to pursue education inland and overseas

Quantum of loan: The maximum loan provided for studies inland is 10 Lakhs and a margin of 5% is stipulated. For studies abroad the maximum loan eligibility is 20 Lakhs while some of the banks provide up to 30 Lakhs. 15% margin is stipulated for studies abroad.  For pursuing studies at IIMs, IIT, and ISB, the maximum quantum of loan available is 30 Lakhs with a margin of 5%.

Repayment: The repayment will begin one year after the completion of the course for which the loan is availed or 6 months after the candidate obtains employment, whichever is earlier. Thereafter a repayment period of 5 to 7 years will be available. During the holiday period, if the interest is serviced as and when due then there will be a concession of 1% on the rate of interest charged.

Security: For loans up to 4 Lakhs, the parent/guardian has to be the co-borrower for the loan. For loans beyond 4 Lakhs and up to 7.50 Lakhs, a third party guarantee other than the parent/guardian being co-borrowers for the loan is required. For loan amount above 7.50 Lakhs, collateral security to the extent of 100% to 133% of the loan amount is required.

Rate of interest: The rate of interest charged ranges from 8.50% to 24% depending on the bank from where the Education Loan is availed.

Expenses considered for the loan: The expenses considered for the loan are:

  • Fees for admission that includes tuition fees and examination fees
  • Hostel Fees/Mess charges
  • Van fees if van facility is availed
  • Cost of stationery/books and purchase of computer if the course demands
  • Cost of educational tours and project work
  • Cost of flight ticket, if loan availed for studies abroad

Processing charges: There are zero processing charges for the loan in most of the banks/financial institutions.

Pre-payment charges: No pre-payment/part payment charges will be collected

Types of Education Loan

The following are the different types of Education Loans:

  • Loan for study at school: Some of the banks like Bank of Baroda provide loans for study from Nursery to 12th Standard in any recognised schools.
  • Loan for inland study: This loan is provided to pursue any graduation, post-graduation, or professional courses across the country. The main criterion for this loan is that the candidate should have obtained admission for the course. This loan is also given to pursue skilled based vocational courses. Under loans for inland study, there are special schemes for study at institutions of repute like IIT, IIM, XLRI, Jamshedpur, and NIT.
  • Loan for study abroad: This loan is provided to pursue higher studies abroad in any recognised university.

Education Loan Eligibility

The eligibility criteria for Education Loan are as follows:

  • The student should have an Indian citizenship
  • The candidate should have secured admission for the higher education that they want to pursue through entrance tests or any other selection process which is merit-based for studies inland.
  • For studies abroad, the student should have got enrolment in any of the recognised universities acceptable to the bank/financial institutions.

Education Loan from Top Banks

Details of Education Loan from Top Banks are as given below:

Axis Bank Education Loan

Earlier Axis Bank was known as UTI Bank. In 2007 UTI Bank, the third largest bank in India changed its name to Axis Bank. The head office of Axis Bank is in Mumbai. They offer a variety of retail loans and Education Loan is one among them.

The salient features of the loan are:

  • Purpose: The loan is given for pursuing higher studies within India and overseas
  • Quantum of loan: The minimum quantum of the loan is 50,000 and the maximum quantum is determined as per the eligibility and the cost of the course, on a case to case basis. The loan facilitates hostel fees, tuition fees, cost of books, stationery, purchase of computer, and special expenses required for the course like study tours, project cost, and so on.
  • Margin: No margin is stipulated for a loan up to 4 Lakhs. For a loan above 4 Lakhs, a margin of 5% on pro-rata basis has to be brought in by the borrower for studies inland. For studies abroad, a margin of 15% is stipulated.
  • Security: For loan up to 4 Lakhs, including the parent/guardian as co-borrower for the loan is mandatory. For loan above 4 Lakhs and up to 7.50 Lakhs, in addition to the parent/guardian being the co-borrower, personal guarantee of a third party has to be provided. For loans above 7.50 Lakhs, collateral security up to 100% of the loan amount in the form of land and building has to be provided.

HDFC Bank Education Loan

Established in the year 1994, HDFC Bank has its registered office in Mumbai. HDFC Bank offers a wide range of retail products, Education Loan being one of them.

For Education Loan within India

The key features of the loan are:

  • Purpose: The loan is provided for inland studies
  • Quantum of loan: The maximum loan quantum is 10 Lakhs
  • Security: For loans up to 7.50 Lakhs, parent/guardian has to be the co-borrower. Beyond 7.50 Lakhs, collateral security in the form of land and building, NSCs Policy or HDFC Fixed Deposits should be made available in addition to the parent/ guardian being the co-borrower.
  • Repayment: A maximum repayment period of 10 years for a loan up to 7.50 Lakhs and a maximum repayment period of 15 years for a loan above 7.50 Lakhs.
  • Other benefits: Insurance cover is available for the Education Loan amount from HDFC Life

For Central Government Interest Subsidy Scheme

The key features of the loan:

  • The scheme introduced by the Government of India to make sure that every child as a matter of right gets higher education.
  • This scheme was introduced for children from the low- income group where the income per annum for the family from all sources including the income of the parent is not more than 4.50 Lakhs.
  • Interest is charged at competitive rates. For the holiday period, the interest subsidy is available for the interest charged.

Education Loan for studies abroad

The key features of this loan are:

  • Purpose: The loan is provided to pursue higher studies abroad
  • Quantum of loan: Loans beyond 20 Lakhs can be availed
  • Security: The parent/guardian has to be co-borrowers for the loan. Apart from this collateral security accepted by the bank has to be provided in certain cases.
  • Repayment: Maximum repayment period is 15 years. Repayment will start one year after the completion of the course or 6 months after the obtaining employment, whichever is earlier.
  • Margin: Nil

Syndicate Bank Education Loan

Syndicate Bank was established in the year 1925 and has its headquarters in Manipal. Ever since, the bank has been providing various products under loans & advances and deposits. Education Loan is one of the popular products of the bank.

The following are the different categories under Education Loan:

Synd Vidya

  • Purpose: For studies inland and abroad
  • Quantum of loan: For studies inland, the maximum quantum is 10 Lakhs. For studies abroad, the maximum quantum is 20 Lakhs. A higher quantum will be considered for courses at ISB and IIMs.
  • Security: For loans up to 4 Lakhs only co-obligation of parent/guardian. For loans above 4 Lakhs and up to 7.50 Lakhs, third-party guarantee in addition to co-obligation. For loans beyond 7.50 Lakhs, collateral security up to 100% of the loan amount in the form of land and building or any other security acceptable to the bank has to be provided. If the loan amount is eligible for coverage under the Credit Guarantee Scheme, the third-party guarantee will be waived.
  • Margin: Nil margin for loans up to 4 Lakhs. For loans beyond 4 Lakhs, margin at 5% stipulated for studies within India and 15% for studies abroad.
  • Repayment: The maximum loan repayment tenure is 15 years from the date of commencement of the first instalment. The repayment will begin one year after the completion of the course.

Synd Super Vidya

The key features of this loan are:

  • Purpose: For students with outstanding merit and who have obtained admission in reputed institutions. Special provisions are offered for these students. Courses offered by Leading Technical Institutes, Executive Development Programmes, Post Graduate Masters Degree, and Technical courses are eligible under this scheme.
  • Quantum of loan: The Maximum quantum available is 20 Lakhs
  • Security: For loans above 4 Lakhs, a guarantee of parent/guardian has to be available. No collateral security required.
  • Margin: Margin stipulated at 5%
  • Interest: Interest is charged at 8.75% p.a.
  • Repayment: Maximum repayment period is 15 years from the date of the first instalment

Synd Vidya Abroad

The key features of the loan are:

  • Purpose: This loan is provided for studies abroad
  • Quantum of loan: The minimum quantum of loan is 20 Lakhs with a maximum of 2 Crores.
  • Security: Tangible securities in the form of KVP, RBI Relief Bond, NSC or land and building up to 125% of the loan amount should be available.
  • Margin: 15% margin is stipulated
  • Repayment: The maximum repayment period is 15 years from the date of the first instalment. Repayment commencing 1 year after completion of the course.

Synd Vidya Vocational Course

  • Purpose: For students of Indian Nationality who have secured admission for some vocational courses that would generate employment after passing 10th
  • Quantum: The maximum quantum of loan is 2 Lakhs as per the course applied for
  • Security: Nil
  • Margin: Nil
  • Repayment: For a course of 1-year term, the maximum repayment period is 5 years. For a course with more than 1-year term, the maximum repayment period is 7 years.

ICICI Bank Education Loan

ICICI Bank is the wholly owned subsidiary of ICICI Limited and it was established in the year 1994. It offers a wide range of banking services and products, Education Loan being one of them.

The key features of the loan are:

  • Purpose: Loan provided for studies within India and abroad
  • Quantum of loan: The maximum quantum of the loan for studies inland is 50 Lakhs and 1 Crore for studies abroad.
  • Security: No collateral security required for loans up to 40 Lakhs. For loans above 40 Lakhs collateral security which is accepted by the bank has to be provided.
  • Margin: Nil margin for loans up to 20 Lakhs and 15% margin for loan above 20 Lakhs
  • Repayment: For loan availed for post graduation courses with collateral security the repayment period is 10 years and 8 years without collateral security and the repayment commencing 6 months after the course completion.

For loans availed for under graduation within India without collateral security, the maximum repayment period is 5 years and with collateral security, the maximum repayment period is 7 years and the repayment commencing 6 months after the course completion.

Corporation Bank Education Loan

Corporation Bank was established in the year 1906 and has its head office in Manipal. The bank offers a range of products and services and under retail banking, the most popular product is the Education Loan.

The key features of the loan:

  • Purpose: For studies inland and abroad
  • Quantum: The maximum quantum of loan for inland studies is 10 Lakhs and for studies abroad, the maximum loan amount is 20 Lakhs.
  • Security: For loans up to 4 Lakhs only co-obligation of the parent/guardian. For a loan beyond 4 Lakhs and up to 7.50 Lakhs, personal guarantee of a third-party along with the co-obligation of the parent/guardian. For loans beyond  50 Lakhs collateral security in the form of mortgage of property should be provided.
  • Margin: Nil margin for loans up to 4 Lakhs. For loans beyond 4 Lakhs for inland studies the margin is 5%. For studies abroad, the margin stipulated is 15%.
  • Repayment: The maximum repayment period is 15 years from the date of the first instalment. The repayment commences 1-year after the completion of the course.

How to Calculate Education Loan EMI?

The following formula has to be used to calculate Education Loan EMI:

EMI = {P x R x (1+R)^N}/{(1+R)^N-1}

In this formula:

EMI is Equated Monthly Instalment

P = is principal or the sanctioned loan amount

R = is the Rate of Interest. Interest should be monthly rate.

N = is the tenure

Education Loan Fees and Charges

Details of fees and charges of Education Loans of various banks are given below:

Name of the Bank Processing charges Pre-closure charges Penal charges

Axis Bank

  • For loan up to 10 Lakhs: Nil
  • For secured loans above 10 Lakhs 5,000 + GST
  • For Studies abroad, up to 20 Lakhs, 15,000 + GST
  • For loans above 20 Lakhs, 0.75% + GST for the amount over and above 20 Lakhs

Nil

2% p.m. on the overdue amount

HDFC Bank

A minimum of 1,000 or 1% of the loan amount, whichever is higher

Nil

2% p.m. on the overdue amount

Syndicate Bank

Nil

Nil

2% over and above the normal rate of interest for the overdue amount for the overdue period

ICICI Bank

Nil

Nil

2% p.m. on the overdue amount

Corporation Bank

Nil for inland studies

2,000 for studies abroad

Nil

2% p.m. on the overdue amount

Bank of Maharashtra

Nil

Nil

2% p.m. on the overdue amount

Tax Benefits on Education Loan

  • Under Section 80E of the Income Tax Act 1961, interest paid on Education Loan is eligible for deduction.
  • The maximum amount that is allowed as a deduction is not defined
  • The tax benefit can be availed for a maximum period of 8 years or till the interest is paid on the loan, whichever is earlier.

Documents Required for Education Loan

The following documents are required for the co-borrower/guarantor:

  • Proof of Address like Aadhaar Card, Voter's ID, Passport, Driving Licence, Utility bills, etc.
  • Photo ID proof like PAN Card, Passport, Voter's ID or Driving Licence
  • Income Proof like Salary Certificate/IT Returns
  • Two passport size photographs
  • Application form

The following documents are required for the student:

  • Marks card of SSLC, PUC and Graduation
  • Admission letter from the College/University
  • Course fee structure
  • I20 for studies at the USA
  • Address Proof like Voter's ID, Aadhaar Card, and Passport
  • Photo ID proof like passport, Voter's ID, Aadhaar Card or PAN Card

Frequently Asked Questions - Education Loan

Who is eligible to avail Education Loan?

The following eligibility criteria have to be complied with to avail Education Loan:

  • The student should be of Indian Nationality
  • Should have obtained admission for the course for which the loan is applied for
  • Should have secured at least 50% marks in the previous academic years

What are the security stipulations for availing Education Loan?

Some banks do not insist on collateral security even up to 40 Lakhs, but generally, the slab-wise security requirement is as detailed below:

  • For loans up to 4 Lakhs, parent/guardian should be the co-borrower
  • For loans beyond 4 Lakhs and up to 7.50 Lakhs, a third-party guarantee in addition to the parent/guardian being the co-borrower/co-obligant.
  • For loans beyond 7.50 Lakhs, collateral security in the form of land and building, NSCs, KVP or Fixed Deposits of the bank where the loan is availed up to 100% to 125% of the loan amount should be provided.

What is the maximum repayment period provided for the loan?

The maximum repayment period ranges between 7 years to 15 years

Are there any processing charges for the loan?

Most of the banks do not charge processing charges for the loan. Some of the banks collect processing charges for inland studies at 1% of the loan amount and up to 15,000 for studies abroad.

Is there any tax benefit on availing Education Loan?

The interest paid on the Education Loan is eligible for deduction under Section 80E of the Income Tax Act 1961.

Education Loan - Latest News Snippets

07.03.2019: Education Loan can be availed from PNB for higher studies

Education Loan is being provided for pursuing higher studies abroad at an interest rate between 8.95% to 11.10% by Punjab National Bank, a leading provider of Education Loan. Interest at 10.50% will be charged for loans up to 4 Lakhs and for loans above 7.50 Lakhs the interest will be 11.10% p.a.

21.02.2019: Get hassle-free Education Loans with Vidyalakshmi website

The launch of a website Vidyalakshmi which makes applying for Education Loan hassle-free and simple was announced by the Government. NSDL has developed the website and the maintenance also will be done by NSDL. Many banks have registered on this platform including Dena Bank, Axis Bank, Canara Bank, Kotak Mahindra Bank, etc.

OTP is sent to your mobile number

Enter OTP

Resend OTP