Student Loan Application Process for Students Pursuing Higher Education
Education is the only measuring scale of human intellect, and nothing replaces knowledge. Education makes life complete in every way because it shows the way forward in a matured and disciplined way. There were times when getting admission into top schools and colleges was not everyone’s cup of tea. However, things have changed now and if you have talent, you need to scale high in your life. However, this is easier said than done. One thing that concerns all parents and students is the rising cost of education, especially the cost of higher education. Even if an applicant passes a difficult entrance test to gain admission into a respective college, the college tuition is so high that students are left in a no man’s land.
The fact of expensive education pushes parents to opt for investment plans, and still face shortage of funds when it comes to paying school fees. In such a situation, the student loan proves to be a saving element. Seeing the rapidly increasing fees of MBA and other professional colleges, banks have started providing education loans to students so that they can pursue their studies without any type of hassle.
Education loan package
A typical education loan includes basic course fees as well as other expenses such as accommodation and exam fees.
Education Loan Application Eligibility
It is the student who has been admitted to an approved college who can apply for an education loan. Additionally, parents, siblings or spouse can also apply on behalf of the student as co-applicants. The loan is particularly offered to the student who wishes to pursue higher education in India or abroad. The amount and interest rate of domestic and international student loans vary from bank to bank.
Courses eligible for study loans
Education loans can be used for full-time, part-time, graduation and post-graduation courses in the fields of management, engineering, medicine, hospitality and many others.
Types of documents required
The candidate applying for an education loan must be an Indian citizen and admitted in a college recognized by a reliable government or authority. It is also compulsory for the applicant to have successfully completed upper secondary education when applying for the study loan. Depending on the reputation of the college, some banks also offer the student loan well before the admission date. There is no restriction in the upper age limit for applying for the education loan as per the RBI guidelines. However, some banks have also set the age limit. Documents such as college admission letter, class 10and and 12and score sheet are mandatory. In addition, pay slips and tax returns of co-applicants are also required.
Need for debt financing
Depending on the amount (tuition fees), banks can finance up to 100% of the loan. As of now, no margin is required for a loan up to Rs. 4 Lakh. However, in India, 5% of the total amount must be funded by the applicant himself. For study abroad loans, the margin exceeds up to 15%. The bank does not need any third party collateral or collateral to avail a loan up to Rs. 4,000,000. Nevertheless, third party collateral is required for student loans above 4 lakh and up to 7.5 lakh. A guarantee is requested for an amount exceeding Rs. 7.5 million. As soon as the loan is finalized, the amount is directly transferred to the college by the bank concerned.
Interest rate calculation
To set the interest rate on student loans, banks use the lending rate based on the marginal cost of funds plus an additional margin. Currently, the additional spread is between 1.35% and 3%.
The loan must be repaid by the student. The refund cycle begins once the course is completed. However, some banks give a relaxation period of 6 months or a year after securing a job and completing studies respectively. The repayment period is usually between 5 and 7 years, but it can also be extended in special cases. During this time, the bank charges simple interest on the loan amount during the course period, which must be taken into consideration.
Important: Please note that when applying for a loan; be sure to check prepayment bank charges and late payment EMIs.
I hope this guide will help you get a student loan without any kind of hassle. In case you have something to say, feel free to give your opinion in the comment box below. Moreover, you can also share this article with your circle to let your friends know about the process of getting a student loan.