A recent press report said that the tenure of education loans is expected to be increased to 15 years. At present the repayment period for the same has been set at 5 to 7 years.
Reports said that the pressure of installments is going to be lightened with the repayment period getting extended. The extension of the repayment period is also going to benefit the banks as with the reduced load of repayment on the part of the borrower, the chances of loan defaults is also expected to decline.
Mr. K. Unnikrishnan, Deputy Chief Executive, Indian Banks’ Association, said that the increased repayment tenor is very much like the repayment tenor type followed in the UK. He said that the UK education loan scheme allows for an extended repayment period, till almost the time the borrower nears retirement. He also said that the loan repayment starts only when borrower earns more than 2,100 pounds a month. Once the borrower starts earning more than this, his employer will have to cut the education loan installment and remit the same to the bank.
Reports said that according to the scheme, the maximum loan permissible to a student is Rs 10 lakh for education in India and Rs 20 lakh abroad. Margin money is exempted for loans up to Rs 4 lakhs. Up to Rs 4 lakh, there is no collateral needed with the loan though parents bear co-obligation.