There are a few options for you to explore when it comes to funding your child's education abroad. The Government of India in consultation with Reserve Bank of India (RBI) and Indian Banker's Association (IBA) has framed a Comprehensive Educational Loan Scheme. The scheme covers a loan of up to Rupees 15 lakhs for studies abroad. These figures are flexible. State Bank of India's upper limit for such loans is Rupees 20 lakhs and recently the India bank has upgraded its maximum permissible loan up to Rupees 25 lakhs for studies abroad. So, the limits may vary with the change in the schemes and of course, time.
However, to avail a loan of any amount, satisfying the eligibility criteria of the bank is a prerequisite. You are eligible to obtain an educational loan from any Indian bank if:
- You are an Indian national
- You have secured a confirmed admission to professional/ technical courses through entrance test/ selection process at a foreign university.
Here are a few more details pertaining to educational loans:
- Margin
- Up to INR 4 lacks, nil for both studies in India and abroad
- Above INR 4 lacks, 5% for inland studies and 15% for studies abroad
- Security
The requirements differ from bank to bank so please make sure you have a clear understanding of what is required. Here is a guide to what is generally expected:
| Loan up to INR 4 lacks. |
No collateral security. |
| Loan above INR 4 lacs and up to INR 7.5 lacks. |
Security in the form of satisfactory third party guarantee. |
| Loan above INR 7.5 lacks. |
(a) Collateral security of suitable value.
(b) Co-obligation of parents/ guardians/ third party along with assignment of future income of the student for payment of installments. |
- Rate of interest
The rate of interest is 10.75% up to INR 4 lacks and it does not exceed the Prime Lending Rates (PLR). For a loan above INR 4 lacks, the interest rate is 11.75% and it will not exceed PLR plus 1 percent. However, the rate of interest is subject to changes as per the specifications of RBI or the concerned bank.
- Repayment holiday/ Moratorium
Loans are repayable in 5 to 7 years. Repayment of both principal and interest will start after one year after completion of the course or six months after getting employment, whichever is earlier. Interest will be charged on simple basis during the period of study / moratorium period. At the commencement of repayment, the accrued interest is added to the principal amount and Equated Monthly Installments (EMI's) fixed on total outstanding amount. After commencement of repayment, the benefit of simple interest would be discontinued.
- Processing fee
Most of the Indian banks do not charge any processing fee or upfront charges. The State Bank of India accepts a deposit of INR 5000 for education loan for studies abroad, which is adjusted in the margin money.
- Disbursement
- In the normal course, while appraising the loan, the student's future income prospect is looked into. However, where required, the means of the parent/ guardian can also be taken into account to evaluate re-payment capability.
- The loan is sanctioned as per delegation of powers preferably by the Branch nearest to the place of domicile. No application for educational loan received is rejected without the concurrence of the next higher authority.
- The loan is disbursed in stages as per the requirement/demand directly to the Institutions/ Vendors of books/ equipments/ instruments to the extent possible.
- Follow up
The bank from which you have availed the loan can contact the college/ university authorities to send your progress reports, at regular intervals.
- Capability Certificate
Some foreign universities require you to submit a certificate from your bankers about the sponsors' solvency/ financial capability with a view to ensure that your sponsors are capable of meeting the expenses till completion of studies. Accordingly branches can also issue the capability certificate. For this financial and other supporting documents may be obtained from you, if required.
- Documents
You need to keep the following documents in place before applying for an educational loan:
- Mark sheets of the last qualifying examination for school and graduate studies in India.
- Proof of admission to the course.
- Schedule of expenses for the course.
- Copies of letter confirming scholarship.
- Copies of foreign exchange permit, if applicable.
- Two passport size photographs.
- Statement of bank account for the last six months of borrower.
- Income tax assessment order not more than two years old.
- Brief statement of assets and liabilities of borrower.
- If you are not an existing bank customer you would need to establish your identity and give proof of residence.
