Means of availing education loans

TRENDS

The easiest way to realise your academic dreams is to avail an education loan. It is easily available; makes you feel independent; does not burden your parents; and also provides tax benefit when you start paying your EMIs.

Education Loan

A host of expenses are considered for education loan ranging from fees payable (tuition / examination / library / lab fees), purchase of books or equipment, travel money, purchase of computers for completion of course etc. Today, interest rates range from 13 to 14 per cent, and both Floating and Fixed options are available.

Almost all nationalised and private banks offer educational loans to students for studies in India, as well as, abroad. Besides, some private trusts also run ‘study loan schemes’, the terms and conditions of which vary from organisation to organisation.

Applying for Education Loan: Documents required

Apart from the usual photographs, ID/address proofs, one should also provide the following documents while applying for an education loan –

*All mark sheets (attested).

*Passing certificate of the last qualifying exam for the course selected.

*Letter of admission for the course selected.

*Schedule of expenses for the specified course.

*Undertaking by guarantor.

A brief statement of assets and liabilities of the co-borrower, which is usually the parent or guardian, and proof of income, if any

There could additional documents called for by the bank, based on how the bank perceives the candidate’s repayment ability. it is generally easier to avail an education loan, if the Guarantor is well placed and is seen to be in a position to repay incase of default by the borrower. For availing education loan where the education is abroad, the list of documents could include foreign exchange permits and other such pertinent approvals.

Repayment schedule

One would be required to start repayment, after a certain (agreed) period of the course completion. This is normally six months (this varies depending on the bank) – and is termed as the gestation period. However, the student has the option of initiating earlier repayment, if he / she so desires.

Tax Benefit

One can avail the tax benefit on the interest amount repaid towards such education loan under section 80E. There is no maximum limit under this section. However, the benefit is restricted to the extent of the interest component (The principal amount is not eligible for tax benefit.)

Budget Implication

As stated earlier, Section 80E of the Income-tax Act provides for a deduction in respect of interest on loans taken for pursuing higher education in specified fields of study. The scope of this has now been widened to cover all fields of study, including vocational studies, pursued after completion of schooling. Now, students can realise their dreams of funding ones own education after passing the senior secondary examination itself.

Availing an education loan is no longer a tedious job involving running from pillar to post. Today, students have a lot of friendly options for availing funds for education, and the recent budget has only made it easier.

(The author is the CEO and founder of Right Horizons)