In our country 29 lakh students have got educational loans sanctioned for the year 2012-13 and banks have almost given Rs 60 thousand Crores as education loans. In our state 2.33 lakh people have got Rs 5,275 crores sanctioned as education loans and in this financial year the target is set for Rs 2,083 crores to be sanctioned as educational loans. This is being followed by Andhra bank, Indian bank, Syndicate bank, State bank of India and State bank of Hyderabad from our state as the lead banks in sanctioning education loans.
Criteria for Educational Loan Sanction
The students who are studying in our country can get a loan up to 10 lakhs and those going abroad to study can get up to 20 lakhs as education loans. This is the limit set in the bank branches and those who would like to apply for more amount as education loans need to meet the higher officials of the bank. Based on the student’s merit and the university chosen abroad for higher education and taking into consideration the fees and other expenses over there, Andhra bank has sanctioned 50 lakhs education loan to a student.
For those joining in local or abroad universities the expenses for tuition fees, hostel fees, uniform/dresses, books, library fees, study tours, project work, thesis and other expenses are all calculated to sanction the study loan. For abroad studies additionally flight charges and insurance is also taken into consideration for the loan amount.
For those students who are studying in the country and applying for a loan there is no need of surety for a loan amount of up to 4 lakhs.
For loan amounts ranging between 4 to 7.5 lakhs third party security is enough for sanctioning the loan.
If the student applies for a loan amount of Rs 4 lakhs to study in the country there is no need of any margin amounts to be paid by the students’ parents. If the loan amount is between Rs 4 to 10 Lakhs than 5% margin money has to be paid by the parents. This means that if the total education expenses amounts to Rs 10 lakhs than the parents have to spend Rs 50,000 while the bank sanctions Rs 9,50,000. The bank recovers the education loan by adding interest based on the bank base rate.
Appreciation at market value:
If education loan is requested above the specified amount than physical property as security should be shown to the bank equivalent to that excess amount. If Rs 10 lakhs loan is required then Rs10 lakhs valued property should be shown by the student as security for getting the loan sanctioned from the bank. The value of the property is appreciated at the market value rather than the value as in the registration records. This value is evaluated by the engineer recognized by the bank.
Along with this one should also take legal opinion from the attorney as suggested by the bank. All the documents that are required to buy or keep the property as collateral should be submitted to the attorney along with the Property EC and old documents.
However parents are complaining that there is lot of delay in accessing market value of the property, offering a legal opinion and also being asked to submit property documents more than the value of the study loan amount. The bank officials however state that they take time in following a procedure but they don’t delay loan sanctioning processes unnecessarily.
Complaints can be made
After submitting all the required documents the educational loans should be sanctioned within 30 days as per the government order. If there is any problem from a particular bank branch in sanctioning the loans complaints can be made either through the bank website else to the concerned higher officials in the main bank branch. Complaint can also be done to the central finance ministry or to the Indian reserve bank.
Recovery of the loan after completion of education
After completing education the loan should be repaid from the 13th month onwards which means after 1 year. If the student gets a job after completing his education the loan can be paid after six months onwards. Whichever is first that shall be taken into consideration for the loan repayment by banks. Loans below Rs 7.5 lakhs should be repaid within 10 years and loans more than 7.5 lakhs should be repaid within 15 years as every monthly installment.
If loan is taken for engineering education then the loan has to be repaid after the four years of education and one more year as grace period in 10 years that amounts to total 15 years time for the loan repayment from the time of being sanctioned by the banks. If possible the loan can be repaid before the loan tenure for which there is no prepayment penalty.
The fees for the engineer who assess the property value and the attorney offering his legal opinion before the sanction of the loan have to be paid by the bank customer only.
Interest is calculated on the educational loan amounts that are sanctioned periodically. In the government sector banks interest is calculated on daily basis on any loan amount sanctioned by them. But in the educational loans this interest is not added to the principal amount. If 10 lakhs loan is taken in the four years tenure of the education the interest on the loan amount sanctioned periodically and the principal amount should be repaid within 10 to 15 years time as every monthly installments.
Is there any subsidy on Interest Rates of Educational Loans?
The educational loans taken for the children of the employees belonging to government, government sector organizations, corporations, corporate organizations and multinational companies who have agreements with the banks shall have 1% subsidy on the interest rate as mentioned by assistant general manager of syndicate bank V. Chakrapani. Similarly SC and ST candidates have 0.5 percent, SC and ST girl students are given 0.75 percent subsidy on the interest rate for education loans.
If parents pay the interest on the education loans during their children’s education period itself then they are given full exemption on tax according to section 80E. If the loan is repaid after getting job by the student then also he or she shall get full exemption on the interest rate.
What are the rules for sanctioning education loans?
Educational loans can be applied for diploma to post graduation courses.
If all the relevant documents are submitted the loans has to be sanctioned within 30 days.
For only loan amounts more than Rs 4 lakhs the banks should ask for surety in sanctioning the education loans as per the Indian reserves bank orders.
But some bankers are asking for collateral security even for small education loan amounts and are also putting pressure on the parents to pay the interests on the loans during the education period itself.
But bankers say that by the time the students completes his education the interest rates become a burden hence we are asking the parents to pay as early as possible. They also say that the education loans are being sanctioned as soon as possible for the students to pursue their education dreams.
To what courses educational loans are sanctioned?
Students who are studying degree or post graduation in colleges recognized by university grants commission (UGC), AICTE, AIBMS, ACMR, ICWA, IIM, IIT, NIT, XLRI along with central government and state government are eligible to take educational loans from the banks. Along with that polytechnic, DGCA, shipping ministry recognized aeronautical, pilot, shipping courses degrees are also eligible for the loans.
This means that students who are pursuing engineering, medical, MBA, MTech, MS and so on courses can get the education loans sanctioned. In our country students from the universities and affiliated colleges to the universities are eligible for the education loan.
To join in those courses one should get the seat based on their marks in relevant subjects or in the entrance test. If one is qualified in EAMCET and gets a seat in the management quota the education loan shall be sanctioned taking into consideration the fee amounts for the regular seat.
Students who would like to go abroad for higher education (MS) have to show their 10th, intermediate, degree certificates along with address and identity proofs, pass port, I20 from the university have to be show to the bank for applying the education loan.
These should be observed:
University also plays a key role: For the loan sanction, banks also take into consideration the reputation of the university in which the student is planning to join. To get a job as soon as completing the education it is important to join in a good college.
Surety on Property: The students who are going abroad for higher education and requesting for a loan amount of Rs 7.5 lakhs and above have to compulsorily show property as surety equivalent to the loan amount. Along with this 15 percent has to be ready as margin amount. If 20 lakhs is estimated as expenses then 3 lakhs has to be shown individually for the loan sanction.
Loan amount sanctioned periodically: The total loan amount is not sanctioned at a time. It is released in different phases to meet the expenses of tuition fees, hostel, books, for buying computers and so on. If the student buys with his own money the receipts can be presented in the bank for the amount to be deposited in their accounts.
Help for visa clearance: Students planning to go to countries like Australia to study in their universities where there are few chances to earn while studying then the bank education loans are helpful in getting visa clearance. The principal sanction letter by the banks for loans is taken into consideration by the consulate officials in sanctioning the visa. This is because of the security that there won’t be any problems in meeting the expenses in abroad. After getting the visa only the loan amount is sanctioned.
The above article will clear most of the doubts that a student face while planning to take educational loan to pursue higher education in India or abroad.
Published by Employment News Today