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May 21, 2019
High cost involved in higher education is the major reason why many students hesitate to opt for it.
Lack of awareness about the support they get from banks in the form of education loans could also be the major reason.In addition lack of knowledge about these loans makes them pay higher rate of interest. Hence it is essential to assess each and every aspect of these loans before opting for them.
According to Shweta Jain, an independent Certified Financial Planner, if a student is aware about the options available and the eligibility criteria followed by the banks, it is easier to get money for higher education.
"There are certain when it comes to courses in India and abroad that are allowed. Usually up to 4 lakhs, the bank funds the entire fees. But beyond this, the applicant has to bear some part of the cost as well. Banks don't bear 100 per cent of the cost in this case," she said. Jain explained that between Rs 5 and Rs 10 lakhs loan amount, a co-applicant is needed. "Their income tax returns and other documents are needed. Beyond Rs 10 lakh, usually collateral is required. Although these amounts vary from bank to bank. Students should also look out for other charges, late EMI charges, etc, too," she added.
If the loan amount is small or the institute is well reputed then getting an education loan is not very difficult. The students who do not study in reputed institutions and when the amount go beyond 4 lakhs, they many find it difficult to get a loan, she said.
Avinash Sharma, an executive with a private firm who took loans for his Masters degree, said, "A student has to convince the bank that he/she has the potential to repay the loans. The students also must compare the interest rates before availing the education loan. Many students end up paying higher interest rates, as they do not compare the rates offered by various banks. Reputed institutions such as IITs, IIMs, and well-known private ones help students get loans. But, students who study at institutions which are not very reputed find it difficult to get a loan."
The students must also look at the components that are covered under the loan and whether it meets their requirements, he said. In India, education loans normally cover the fees charged by the institutions. However, for foreign education, loans may cover stay and stay and other expenses. While offering loans banks consider various factors such as potential of the students to repay the loans, the reputation of the institution where the students is going to enrol, course duration, and how the student convince the bank, Sharma added.
Jitendra Solanki, a Sebi-registered investment advisor, said that the students should first go through the details on the expenses that will be covered under the loan. They should also bargain for cheaper interest rate. If the loan amount is big then a student has to shell out much higher amount in return. However, many students due to lack of experience in handling personal financial matters, end up taking expensive loans to only later find that they have incurred additional burden due to higher interest rate."
The students who are going abroad must be more careful while taking an education loan because living expenses, course fees, and rents are higher in developed countries. They must make sure that all the expenses that are expecting to cover under the loan are there, he said.
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