Any financial institute or bank giving financial support which
facilitates students for taking higher education.
Meant for people whose income is not high enough to attend
educational instutions.
3. Procedure for applying for educational loans :
The loan process may vary from bank to bank , but some
fundamental steps are as follows :
Fill in the loan application form.
It is very important to fill accurate details related to
academics and conatact details.
4. Procedure (contd.)
Personal discussion.
Important to be lucid and clear about selection of course and
its future potential of generating income.
Applicant may be asked questions on:
Selection of course
Academic performance
Selection of institute
5. Procedure (contd.)
Provide validated supporting documents.
Documents of the following regard are mandatory:
Documents relating to admissions.
Documents relating to property.
Collateral security papers, if the loan is above 4 lakhs and
property is to be mortgaged.
6. Procedure (contd.)
Stage of loan approval or denial.
A guarantor is mandatory.
Bank can check the guarantors credit history.
Borrowers signature on a promissory note.
On the sanctioning of the loan, the student has to sign a
promissory note.
7. Procedure (contd.)
Disbursal of the loan.
A loan is disbursed only after completion of the formalities
and evaluation of the information.
It may be disbursed directly to the concerned institute.
8. Repayment of loan
Repayment terms can be adjusted to suit individual needs.
However, total cost is a factor in considering
adjustments.
Some repayment options are :
Standard Repayment: making equal monthly payments over a 10
year period.
9. Repayment (contd.)
Extended Repayment: depending on the amount of money borrowed ,
repayment period can be extended upto 30 years.
Graduated Repayment: payments gradually increase over a period
of 2 years.
Income-contingent Repayment: this allows tying up of repayment
amount to income and allows longer periods.
10. Interest rates of different banks 11. Interest rates of
different bank
Loan upto 4 lakh can be borrowed by students without providing
any security or margin.
Amounts worth or more then 7 lakhs are sanctioned against
property, NSC certificates, fixed deposits.
As a result, a loan over the amount of rs. 4 lakh is charged
one percent higher interest.
The R.B.I. prescribes specifics to banks, and government
provides 2% subsidy.
12. Tax benefit
Repayment of educational loan is deductable under section 80E
of income tax act.
Only loans taken for higher education can claim deduction upto
rs. 40,000.
Deduction is available upto a maximum of 8 years.
13. Loan defaults
Under section 435 of the Higher Education Act, a Federal Family
Educational Loan (FFEL) is considered to be in default once payment
hasn't been received for 270 consecutive days.
It can be due to any reason, generally the banks issue a
defaulter notice to the borrower if there is failure in paying the
amount or the instalment in time.
14. Consequences of loan defaults
The paycheck can be Garnished
The government can take a limited portion of the wages of the
student loan debtor, who is in default.
It can tke upto 15% of income.
15. Consequences of loan defaults
Legal action can be taken to get the borrower to repay the loan
in full. Borrower can be sued indefinitely.
Credit reference agencies can be informed about the default.
This can make it hard to get a credit card, mortgage and loan in
future.
The department of treasury can take steps to offset federal and
state income tax against student debt. This means no more tax
rebates until the balance is fully cleared.
16. State Bank of India
Purpose: A loan can be taken for pursuing studies in recognised
schools/colleges/institutions to meet:
Tuition and other fees.
Maintenance costs, books & equipments etc.
Cost of passage(for studies abroad).
Eligibility :
Should be an indian national.
17. S.B.I. (contd.)
Secured admission to professional/technical course through
entrance test/selection.
Loan amount : Need based finance subject to the repaying
capacity of the parents/ students with margin and the following
ceilings:
Studies in India maximum Rs. 7.50 lakhs
Studies abroad maximum Rs. 15 lakhs
18. S.B.I. (contd.)
Margin
Upto Rs. 4 lakh : no margin
Above Rs. 4 lakh : 5% , for studies in India
15% , for studiesabroad
Interest lowest interest rates are offered by S.B.I.
