Study abroad Education loan: How it works to your advantage

Once you have decided what and where you will pursue your education abroad comes the second and most difficult part- arranging and managing the funds required to study outside India. Education loan is an important element to manage funds to study abroad compared to other financial aids like scholarships and grants. Pursuing education outside your home country is a costly proposition. In 2013, HSBC published a report in which Australia was deemed the world’s most expensive place to pursue education. In fact, the combined average cost of university fees and living expenses puts the cost of education in Australia at more than $38,000 per year for international students.

The USA at $35,000 was the second most expensive country while UK with an annual cost of $30,000 was the third. Interestingly, according to the United Nations Education, Scientific and Cultural Organisation (UNESCO), the USA and UK attract three in ten international students. With more than 3 million people pursuing higher education outside their own country, it is a possible conclusion that despite high cost of education students are not being deterred from studying abroad.

Education loan-- a fair option?

The first thing that comes to a student’s mind while arranging funds for his education abroad are Scholarships and Financial aids. However, given the huge competition in international education, it is not always possible to secure such benefits. As such, education loans to study abroad have become an easier way to secure funds. The following points will help you gain some insight into why exactly you should consider applying for an education loan for studying abroad:

1. Education loan is one of the priority sector under which banks are required to lend by the Reserve Bank of India.
2. Students applying for education loan for study abroad can avail tax benefits under section 80 (E) of Income Tax Act 1961. Some of the highlights of this Act are:
a. Loan should be taken from approved financial institution
b. Loan should be for full-time studies for any graduate or postgraduate course.
c. Deduction is allowed for a continuous period of eight years.

Click here to get the details of the benefit

3. The loans provided for education usually cover the following areas:
a. Institution Fee
b. Hostel Fee
c. Examination Fee
d. Library and Laboratory Fee
e. Purchase of Books
f. Equipment and Instruments
g. Caution or Refundable Deposit
h. Passage money to the host country.

4.Most of the banks provide an average of 7 to 12 years for the candidates to repay the education loan.
5.An aspirant can expect to be provided with atleast 20 to 40 lakh rupees for pursuing studies abroad.

In India, there are many commercial banks, which provide education loans to students who want to study abroad. Some of them are:

1. State bank of India: India’s largest bank provides education loan for courses abroad upto a maximum of Rs.30 lakhs. An interesting fact is that SBI provides a Top up loan or second loan within the overall limit. This is a big advantage for students studying abroad as they could experience sudden fund crises.
2. HDFC Credila: HDFC has partnered with Credila-an education loan specialist. With upto 100% financing, Credila provides doorstep service of education loans. HDFC Credila provides loans for around 4000 institutes across 36 countries worldwide. Its standout facility is that the education loans can be sanctioned even before confirmation from the institute.
3. Indian Overseas Bank: Known as Vidya Jyoti, the loan department of Indian Overseas Bank provides loan upto Rs 40 lakhs for students studying abroad. It provides loans for pursuing both professional and technical courses abroad.

Most banks in India provide education loans to study abroad. While the criteria imposed by most banks are same, it is the maximum loan limit and the corresponding interest rates that differ.

IBA benefits for higher education

The Indian Banker’s Association, in its model loan scheme, 2012, for education loan to study abroad lists the following subjects as eligible for a fund benefit.

• Graduation : For job oriented professional/ technical courses offered by reputed universities.
• Post-graduation: MCA, MBA, MS, etc.
• Courses conducted by CIMA- London, CPA in USA etc.
• Degree/diploma courses like aeronautical, pilot training, shipping etc, provided these are recognised by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.

According to the IBA scheme, even if a student is able to avail scholarships and funds he/she can be considered for education loan and, if required, such benefits may be used for computing the loan amount. As per the new scheme, banks can also issue capability certificate for students going abroad for higher studies as some of the foreign universities require the students to submit a certificate from their bankers about the sponsors’ solvency or financial capability.

Education loans are attractive to students not only from economically backward classes but also for students from middle and high-income families as it ensures easy repayment facilities and access to funds. Timely availability of loans has also set the education loans sector on an upward rise. With the global economy experiencing volatility in recent years, education loans provide security to students whose personal funds might dry up due to sudden crises.

Hence, one of the biggest benefits of an education loan is that students studying abroad can devote their time to pursue dreams while leaving the banks to worry about the cost of their dream!