Education is the key to the development of the human resources of a country and over the years, the scope of overseas education has widened. However, there is a cost factor, which deters many interested and meritorious students from pursuing study abroad.

Nonetheless, that was past, as today this problem is tackled by the availability of easily accessible educational loans being offered by various banks in India. The educational loan scheme aims at providing financial support to deserving students. This is really good news for the students looking for financial assistance to meet their tuition and other education related expenses.

Here is a look at the typical education loan scheme offered by public sectors bank:

Eligibility

The only criterion the Indian student needs to fulfill for availing education loan is to have secured admission to foreign university or institution.

Salient Features

The loan would cover fee payable to:

• Institution Fee
• Hostel Fee
• Examination Fee
• Library and Laboratory Fee
• Purchases of Books
• Equipment and Instruments
• Caution or Refundable Deposit
• Travel Expenses

Loan Amount

Need-based finance subject to repaying capacity of the parents, guardians, students with maximum ceiling of Rupees 15 Lakhs for studies abroad which may vary within the banks and depending upon the course.

Margin

Margin money is that part of education expenses which the bank will not finance and has to be borne by the student himself. With public sectors bank, there is usually no margin for a loan of up to Rupees 4 Lakhs. For loans above Rupees 4 Lakh the margin of 15 percent for studying abroad.

Interest Rate

• Interest rates are as per the RBI guidelines from time to time. No service charges are usually levied on educational loans.
• Disbursement is directly to Institution, Hostel or other concern authority.
• The interest rate is equal to MTLR (Medium Term Lending Rate) for loan up to Rupees 4 Lakh, and MTLR plus 1 per cent for loans above 4 Lakh.
• Please confirm the interest rate at the time of applying.

Repayment Term

You are allowed a repayment holiday (or moratorium) during the course period plus, one year or six months after getting a job whichever is earlier. This provision should indeed provide students a much-needed breather. The loan has to be repaid in 5-7 years after commencement of repayment. The provision that during the moratorium period, interest will be calculated at simple (not compound) is a further sweetener. Students are also offered 0.5 percent concession of loan amount is paid every month towards part payment of interest. A one per cent concession can be offered during the moratorium period if full interest is paid during this period.

Security

No security is asked for a loan up to Rupees 4 Lakh. Above Rupees 4 Lakh the borrower has to offer collateral equal to 100 per cent of loan amount, or guarantee from a third person known to bank.

Processing Fee

Processing fee is nil. Finally, there are no pre-payment charges.

Claim Tax Deduction on Education Loans

Under the Income Tax Act, 1961, Section 80 E deals with a deduction that can be availed from total income on educational loans. Note that this is a deduction, which means that the amount available here will be subtracted from the income earned by an individual to arrive at the taxable income. However this deduction will not be taken into consideration for calculating the limit of gross total income under Section 88. A sum re-paid up to Rupees 40,000 per year on the loan can be deducted from the total income of the person.

However, several requirements have to be fulfilled for claiming the deduction. First, the deduction is available for an individual only. The loan that qualifies for the deduction has to be taken by assessee himself, which means that the person claiming the deduction has to have the loan in his name. Further, this loan has to be used for one's own education. This is important because usually one of the parents takes loan on behalf of the child.

Moreover, the loan has to be for the purpose of full time studies for a graduate or post-graduate course. The second category includes the fields of medicine, engineering, management, applied sciences or purse sciences, which would cover mathematics and statistics. To qualify for the tax benefits, the amount that is repaid has to be out of the income that is to be chargeable to tax for the year. The amount qualifying for the deduction would be both capital and interest that is paid back to the lending institution. There is, however, a limit of Rupees 40,000.

Such deduction would be available for the period of eight year from the date of initial repayment of the loan, or till the entire loan along with the interest is paid off, whichever is earlier. Thus in case of a very long repayment period, the deduction benefit may be disallowed in the latter years.

Another positive point is that the loan can be from a bank, from a financial institution or even an approved charitable institution.

Thus, with adequate intention, education loans can be turned into an advantage on the tax front as well.

List of Banks providing Education loans

Vysya Bank
www.vysbank.com

Oriental bank of Commerce
www.obcindia.com

Punjab and Sind Bank
www.psbindia.com

Punjab National Bank
www.pnbindia.com

Bank of India
http://www.bankofindia.com/bank_credit_schemes.html#educationalloans

Canara Bank
http://www.canbankindia.com/services.html

Corporation Bank
http://www.corpbank.com/personal_loans.html

Bank of Baroda
www.bankofbaroda.compersonal/bob-scholar.asp

Indian Overseas Bank
www.iob.com/vidhyajyoti.htm

Vijaya Bank
www.vijayabank.com/loan1.htm#edu

Private and foreign banks offer loans for educational purposes under personal loans.

If you want us to assist you for the fastest loan disbursement, please send your email at theteam@triomind.com