In today’s world, education is perhaps the most expensive thing, especially if one wishes to enroll for a higher degree in a premium institute abroad. According to the Google’s AdWords Keyword tool, nearly 1.5 lakh people from India, on an average, searched information for keywords like Education Loan, Student Loan Abroad and similar other phrases. This clearly points out that the craze of going abroad for further studies is snowballing in the Indian students.
Seeing the present state of the Indian currency, studying abroad has become more expensive than ever. Students planning to study abroad or are already a student of an international university are in a soup because the tragic devaluation of the Rupee against the British and American currencies has made the course fee soar at a rapid pace. While some might be in a state to postpone their studies until the following year or when the rupee becomes stable in the international market, the others will desperately seek education loans to deal with the sudden shortfall.
The Indian banking sector has helped students with their education since 2001 by providing student education loan at amazing rates and without much hassle. However, a majority of students can be seen mourning about their decision to take a student loan. They aren’t able to earn that much and there is nothing much left to be done except struggling hard to make both ends meet and deal with their loan obligation. Consequently, there has been a constant rise in the number of cases where students have failed to repay the loans within the stipulated period. Seeing the NPA (Non-Performing Assets) figures rising quickly over the last few years, the IBA (Indian Bankers Association) has decided to revise the original education loan scheme that was framed in 2001.
Higher Fees – Low Funding Situations
The latest document of IBA on the new education scheme gives a fair idea about the government’s observation regarding the current public funding policies for higher education abroad. The government thinks that the present scheme isn’t feasible and needs to be more viable and sustainable in order to meet the aims and objectives of the society. Though the basis of this new international education funding scheme is not yet revealed, the critics believe that it is designed keeping in mind that it is not in the interest of the students to be burdened with the loan obligations in the early phases of their career.
More importantly, they finally realised that an expenditure of below 1% of GDP on the higher studies of the nation’s aspiring individuals is less than many other developing nations. Seeing the low tax-to-GDP ratio, there is a greater scope for funding the higher education of Indian students through tax revenue. The RBI has also included student loans as an integral part of the priority sector lending of public banks. This necessarily aims at providing need based education loans to the meritorious students without much hassle.
Students need to bear in mind that financing their higher studies will now be more like obtaining any other commercial credit and is only in the bank’s hands to sanction the loan after carefully evaluating the credit worthiness of the student. Though students don’t have a credit history, the banks presume their credit worthiness for granting student loans. Also, a clear credit history of the parents, who are generally the joint borrowers, will be a plus point.
Not only the students, it is also important for the bank that the students land up in a good and better paying job upon the successful completion of their overseas course. This would give them the power and confidence of repaying the loan within the stipulated time period. Therefore, banks go through the ratings available at public domains regarding the employment prospects in the respective field of study or the employability by the means of campus placement of the underlying institute before granting an education loan.
The IBA made some changes in the education loan guidelines lately. Students need to be aware of these changes in order to avoid any complications that might arise in the application process and reduce the odds of loan approval.
- Eligibility: Loan is provided to Indian nationals for pursuing graduate, postgraduate or other recognized courses from reputed foreign universities.
- Eligible Expenses: The education loan covers fees payable, hostel fees, library and exam fees, expenses for purchasing books and required equipment like laptop, travelling expenses and any others as mentioned in the university’s prospectus.
- Finance Limit: A maximum amount of Rs. 20 Lakh for studying abroad, or higher, which is only given in special cases.
- Security: Parents are required to be joint owners and a tangible security of reasonable value is to be kept with the bank.
- Moratorium Period: The course duration plus one year or six months after getting a job, whichever is earlier
- Margin Money: 15% on the amount above Rs. 4 Lakhs
- Tenure: 15 years
- Tax Exemption: Interest paid on the loan by students is exempted under section 80E for a period up to 8 years.