The ever-increasing education costs do not deter students from achieving their academic aspirations. Interestingly, they do not wish to use their family savings to finance their education. Instead, they choose to finance their higher education independently by opting for study loans. Also known as student loans, education loans cover higher education-related expenses for studying in India or abroad.

Types of loans for students

In India, education loans are classified into three categories based on location, course and collateral. Let’s discuss them one by one:

Location-based loans

• Domestic study loans: Students interested in pursuing education from top-notch Indian education institutions can apply for domestic education loans. Moreover, it is necessary to secure admission to a college or university recognised by the lender before applying for the loan. So it is advisable to get in touch with your education loan provider to understand if they cover your preferred course/university.
• Study abroad loans: These loans are designed to help students realise their dream of studying abroad in a reputed foreign institution or university. Just like domestic loans, you must have secured admission to an institute recognised by the lender to apply for an overseas education loan.

Course-based loans

Different types of student loans are offered based on the course. The most popular ones are:

• Higher education: The loans for higher education help you to pursue and complete higher education degrees like a postgraduate degree program, usually a 2-year course in India and a 1-2 year program abroad. You must have completed the undergraduate degree and got admission to a postgraduate program of a recognised university or college to obtain a loan for higher education.
• Professional education: Many lending institutions offer executive education loans to students or professionals interested in pursuing professional courses (like Executive MBA and PhD) and training either in India or abroad to improve their career prospects. Such study programs may vary from certification to vocational courses.

Collateral-based loans

• Secured loan: Students obtain a secured loan for financing their higher education after pledging intangible or tangible assets like non-agricultural land, house, and fixed deposit, to name a few, as collateral to the lenders.
• Unsecured loan: The financial institutions offer unsecured loans if the student doesn’t want to provide any collateral. It is always best to check if your financier offers unsecured loans.

List of expenses covered in education loans

Education loans cover expenses such as:

• Tuition fee payable to an education institution
• Examination/laboratory/library fee
• Travelling expenses
• Purchase of books/equipment/instruments
• Hostel or accommodation fees

Different lending institutions cover different expenses in a study loan. Therefore, do not forget to check with your lender about the expenses. Also, get to know the education loan rate of interest, eligibility criteria and other aspects before applying for it.

Repayment of education loans

The tenure of an education loan varies from one financial institution to another, and so does the repayment period. Usually, the repayment period starts as soon as the course ends. The financial institutions offer a moratorium period, in which borrowers may choose not to make any education loan EMI payment. However, it is not an interest-free period. Therefore, Avanse Financial Services encourages students to pay the interest either in the form of simple or partial interest during the moratorium period to reduce the overall cost of education loans.

What to remember before applying to education loans for students?

Make the most of your study loan by keeping the following things into consideration:

• Choose a well-ranked university to increase the chances of getting student loans easily.
• Do not forget to research the universities placement opportunities and the earning potential of your course.
• Always aim for a feasible loan amount so you can repay it easily. Use an Education Loan EMI Calculator for calculating the EMI for a particular loan amount you wish to obtain.

Avanse Financial Services can become your trusted partner if you are looking for student loans. We offer customised education loans to deserving students both for studying in India and abroad. Flexible and multiple repayment options and a hassle-free loan application process are some of the fantastic benefits we offer to our students. So, connect with us to obtain information about the education loan rate of interest, eligibility criteria and more.