Education is the foundation of a successful and fulfilling career. But let’s be honest, in today’s time where everything comes with a price, education is also attainable at a hefty price. Course fees are skyrocketing and additional calls such as tuition fees, accommodation, books, instruments and related expenses make it even more expensive, putting it out of reach. In such situations, education loans serve as supporting pillars to students who aspire to pursue higher education in India or abroad.
If you’re spiraling out, if an education loan is a right choice for you, then let me tell you, yes it is. But only when you’ve the complete knowledge and thorough understanding of it. In this article, I will walk you through the top reasons to apply for an education loan and how it can be a game changer for your academic and professional journey.
Relieves Financial Burden
Education of a student is primarily supported by parents. However, solely relying on them can be challenging as they have more responsibilities such as home expenses, younger sibling’s education, and the medical expenses of their parents. If you take a student loan, it will give a sense of assurance that you can attain quality education without putting a burden on their shoulders.
Covers a Wide Range of Expenses
An education loan is not all about paying admission fees or college fees. They also cover various other fees such as:
- Accommodation and hostel fees
- Laptop and software expenses
- Books and study materials
- Travel and living expenses, especially for students studying abroad
- Exam and project fees
Student loan ensures that you can focus on your studies without worrying about the additional finances related to your academics.
Education Loans Have Lower Interest Rates
Unlike personal loans or home loans, student loans come with lower interest rates. Banks, Non-Banking Financial Companies (NBFC’s) and government providers offer education loans at special rates to promote higher education and make it affordable for every student who aspires to pursue a career. Furthermore, many banks provide subsidised interest rates for students belonging to economically weaker sections, making education accessible to all.
Tax Benefits Under Section 80E of the Income Tax Act
Did you know that you can also avail education loan tax benefits? In India, under Section 80E of the Income Tax Act, deduction on the interest rates can be claimed on your education loan for up to 8 years. This makes the student loan a more affordable option to students. The tax benefits help them in reducing the overall cost of the loan.
These education loan benefits are not only applicable for students to study in India, it is also applicable to student loans for international students.
Flexible Repayment Options
Based on your financial conditions, an education loan comes with flexible repayment options. This includes:
- EMI-based repayment (fixed monthly installments)
- Step-up repayment plans (lower EMIs initially, increasing later as income rises)
- Lump sum repayment options (pay early if you can)
These flexible repayment options ensure that repaying a student loan should not become a burden to you.
No Collateral on Smaller Loan Amounts
Many banks and lending institutions offer student loans without collateral up to a certain loan amount, usually ₹7.5 lakhs in India. It means you don’t have to give something as guarantee, such as property, jewellery, or land to avail the education loan. It makes the loan process easy and more accessible.
Also Read: Dos and Don’ts to Avoid Educational Loan Application Rejection
Repay Only After Completing Studies
One of the prominent benefits of an education loan is a moratorium period. It refers to the grace period where you don’t have to repay the amount immediately. Usually, this period extends up to 6 months to 1 year. This feature allows you to find a job and get financial stability before you start with the repayment of a student loan. Be it a student loan without collateral or a secured loan, you can pay when you are able to.
Helps to Build a Strong Credit Score
Availing an education loan and repaying it timely helps you to improve your credit score. A good credit score helps in getting loans easily in future and enhances financial credibility for job applications as some employers check credit scores. You can set a strong foundation for your future by responsibly managing your student loan.
Government Schemes and Subsidies
There are various government-backed subsidies to support students by offering education loans at lower interest rates. For instance Central Sector Interest Subsidy Scheme (CSIS) and Pradhan Mantri Vidya Lakshmi Karyakram. Such initiatives make education loans more affordable to students who are in need of finances to pursue education.
Also Read: Top Education Loan Subsidy Schemes in India
Encourages Financial Discipline and Independence
Applying for a student loan teaches students financial responsibility at an early age. You learn how to manage debt efficiently, prioritise savings and investments and plan your finances better. This experience prepares you for real-world financial challenges, making you more independent and financially savvy.
Frequently Asked Questions (FAQs)
Do education loans cover all expenses related to my studies?
Yes, most education loans cover tuition fees, accommodation, books, travel, and other essential study-related expenses to ensure that a student focuses on academics without financial worries.
Can an education loan help me study abroad?
Yes, many banks and financial institutions offer customized student loans for international studies that cover tuition, living expenses, and travel costs to study abroad.
Are there any special schemes or subsidies for education loans?
Yes, many governments offer interest subsidies and loan repayment assistance for students from economically weaker sections, to make higher education more accessible.
Can I get an education loan without collateral?
Yes, several banks and NBFCs offer student loans without collateral, up to a certain limit based on the student's academic performance and the institute’s reputation.
How flexible is the repayment of an education loan?
Most education loans offer a moratorium period or grace period where repayment starts only after course completion. It gives students time to secure a job and repay comfortably and with ease.
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