Students prepare for various competitive examinations for admission to reputed universities, particularly medical colleges and engineering institutions, throughout the year. The problem comes when education becomes more expensive every year.
The education system was disturbed for almost two years due to the COVID-19 pandemic. Due to this, the market for education loans also remained cold. Colleges and universities have opened over the years. Meanwhile, the admission season has also begun.
According to the ‘All India Survey of Higher Education’, the cost of doing an MBA from a leading private business school is around Rs 15-20 lakh. Five years ago, this expenditure was Rs 6-10 lakh. In such a situation, many families will need an education loan. However, with the help of this loan, there is a risk of not getting a well-paying job after completing studies and being in debt for years. If the planning of loan payment is decided smartly, then this problem can be avoided.
Here are four essential things to keep in mind before getting an education loan:
- Repayment period
Repayment Period Education loan need not be repaid until the course gets completed. Banks and non-banking companies offer a moratorium period of 1 to 2 years even after completing studies. But as soon as you get the loan, interest starts charging. The loan has to be repaid in 15 years from the start of instalments
- Loan amount
The maximum loan amount for studies in India and abroad ranges between Rs 10 lakh and Rs 20 lakh. However, some banks or non-banking companies (NBFCs) may sanction more loans for studies in reputed institutions like the Indian Institutes of Management, technology and Institute for Social and Behavioral Sciences.
The loan amount should be such that other major education expenses are also covered apart from the course fee. It includes hostel fees and expenditure on laptops and books.
- Interest rate
Usually, the interest rate of an education loan starts from nearly 5.00% per annum. Normal interest rates during the moratorium period and compound interest rates are applicable after the equated monthly instalment. Some banks also offer a rebate of up to 1% on interest if you pay only interest during the moratorium period.
- Margin money
Margin money is not required for education loans up to Rs 4 lakh to take a loan of more than this amount. The cost involves 5 to 15% for the Indian and foreign courses, respectively, which will have to be arranged independently. However, suppose you want to be admitted to a reputed educational institute like the Indian Institutes of Technology (IITs). In that case, some banks like the State bank of India do not put margin money conditions.
