Major Indian banks provide educational loans to assist students in pursuing their academic goals. These loans, which can extend repayment over a period of up to 20 years, come with an initial interest rate of 7.00% per annum. These loans can be utilized for both domestic and international higher education endeavors.
Eligibility for an educational loan is subject to approval by the lender, which determines the courses that qualify for such financing. Education loans can be secured for programs starting as early as Nursery. Whether you are pursuing full-time or part-time courses, or if you’re a working professional seeking higher education, there are loan options available to accommodate your educational aspirations.
Top Education Loans for Students 2023
| Name of Bank | Interest Rate (p.a.) | Processing Fees |
| SBI | 8.15% to 11.15% |
|
| Central Bank of India | 8.10% to 10.60% | Nil for studies in India |
| PNB | 8.50% onwards | Contact the bank |
| Canara Bank | 9.25% onwards for women borrowers
8.60% onwards for other borrowers |
0.50% of the loan amount up to Rs.10,000 (for collateral security coverage of 100% and above) |
| IDFC FIRST Bank | 9% to 15% | Contact the bank |
| IDBI Bank | 10.60% to 11.10% | 1% of the loan amount (Maximum: Rs.5,000) |
| Bank of Baroda | 8.55% onwards | No processing charges up to Rs.7.50 lakh1% of loan amount up to Rs.10,000 |
| Bank of India | 10.95% to 11.75% | No processing fee for studies in India |
| ICICI Bank | 9.85% onwards | Up to 2% + GST |
| Bank of Maharashtra | 9.45% to 11.30% | Contact the bank |
| Axis Bank | 13.70% to 15.20% | 2.00% of the loan plus GST |
| HDFC Bank | 9.50% Preferential rates as per the college or the university | As per the criteria of the bank |
| Kotak Mahindra Bank | Up to 16% | Nil |
| Federal Bank | 12.55% onwards | Contact the bank |
| DCB Bank | 9.65% per annum |
|
| Tamilnad Mercantile bank |
|
1% of the sanctioned loan amount |
Note: These interest rates are effective as of September 2023 and are subject to change as per the bank’s rules and regulations.
Education Loan Eligibility
Nationality:
- Indian citizens
- Non-Indian Residents (NRIs)
- Overseas Citizens of India (OCI)
- Persons of Indian Origin (PIOs)
- Students born to Indian parents abroad and wish to study in India
Courses:
- Undergraduate programs
- Postgraduate programs
- Doctoral courses and PhDs
- Certificate courses of 6 months or longer duration
- Job-oriented courses
- Technical/diploma/professional courses
- Recognized institutions and government colleges
- Private institutes aided by government
- Professional institutions
- International colleges and universities
Collateral:
- Collateral-free loans up to Rs.7.5 lakh from leading lenders
- Collateral-free loans up to Rs.40 lakh for select courses / institutions from select lenders
- Acceptable collateral: Residential or commercial property or plot, fixed deposits, insurance
- Loan amount: Up to Rs.1 crore
List of Courses that are Covered under an Education loan
- Nursery to class 12.
- Graduation and Post-Graduation courses (technical/professional/diploma) conducted by approved universities or colleges under UGC/IMC/AICTE/government.
- Regular degree/diploma courses administered by autonomous institutions such as IIM/IIT, etc.
- Regular degree or diploma courses such as pilot training, aeronautical, shipping, and more approved by the Director General of Civil Aviation/Shipping/other regulatory authority.
- Job oriented courses (professional/technical) for Graduation/Post Graduation/Diploma such as MBA/MCA/MS offered by reputed educational institutions, courses conducted by the Chartered Institute of Management Accountants (CIMA) – London or Certified Public Accountant (CPA) – USA.
- Loans for skill development.
Abroad
- Job oriented courses (professional/technical) for Graduation/Post Graduation/Diploma such as MBA/MCA/MS, etc. offered by reputable institutions.
- Courses conducted by CIMA and CPA.
List of Expenses Covered in Education Loan
Here’s what the loan amount will cover:
- Tuition fees
- Hostel fees
- Travel expenses passage money for students studying abroad
- Insurance premium
- Cost of books/equipment/instruments/uniform
- Examination/laboratory/library fees
- Cost of a computer/laptop required for course completion
- Caution deposit, building fund/refundable deposit supported by institution bills/receipts
- Any other expenses required to complete the course such as study tours/thesis/project work
Features & Benefits of Study Loan
- Loan financing up to Rs.1 crore available.
- Loan repayment tenure up to 15 years.
- Get Education loans for studies in India and abroad.
- Some lenders offer loan disbursal before applying for a Visa.
- Door-step service to collect required documents.
- Children of the bank’s employees enjoy preferential rates at several banks.
- Certain banks offer concessional interest rates to female students.
- Enjoy a moratorium period of up to 1 year after course completion. During this period, you do not have to make payments on the loan.
- Enjoy tax benefits up to 8 years on the interest paid.
Tax Benefits on Education Loan
The interest you pay on your student loan can be deducted under Section 80E of the Income Tax Act of 1961. This advantage is only available to individual borrowers and is only offered for the purpose of higher education. The deduction is available to all fields of study, both domestically and internationally. It includes both vocational and academic courses.
It’s important to remember that the tax deduction only applies to the interest portion of the EMI, not the principle. There is, however, no limit to how many times you can claim this benefit. You’ll need a certificate from your bank or financial institution that separates the principal and interest components of your EMIs to qualify for this benefit.
This benefit is accessible for 8 years from the day you started repaying your loan or until the interest component is paid off, whichever comes first.
Course covered under an educational loan
- Undergraduate degrees
- Postgraduate degrees
- Undergraduate diplomas
- Postgraduate diplomas
- Vocational training courses
- Skill development courses
- Doctoral programmes
List of Documents Required for Education Loan
Here is an indicative list of documents that most lenders ask:
- Admission letter from the educational institution
- Marksheets (previous education – school/college)
- Age proof
- ID proof
- Address proof
- Signature proof
- Salary slips
- Recent bank account statements
- ITR with income computation
- Audited balance sheet
- Recent bank statements
- Proof of turnover (service tax return/sales receipt)
- Completed application form with signature
- Latest passport size photographs
- Appropriate Visa for studies abroad
How to Apply for an Education Loan
To apply for an education loan through the official bank website, follow these steps:
Step 1: Access the bank’s official website.
Step 2: Locate the education loan product page.
Step 3: Complete the application-cum-consent form by entering your personal and contact information.
Step 4: Provide your academic and financial details when contacted by the bank.
Step 5: Choose between the doorstep service option for a study loan or visit the bank in person to finalize the loan approval process.
How to Apply for an Education Loan via Vidya Lakshmi Portal
Vidya Lakshmi is an online platform developed with guidance from the Department of Financial Services (Ministry of Finance), the Department of Higher Education (Ministry of Education), and the Indian Banks Association (IBA). Managed by Protean eGov Technologies Limited, it empowers students to access, apply for, and monitor their education loan applications with banks conveniently, from anywhere.
Here are the steps for registering and applying for an education loan on Vidya Lakshmi:
Step 1: Registration
- Click on the ‘Register Now’ option if you are a new user.
- Provide your email address, which will serve as your login ID.
- Create a strong password following the portal’s requirements.
- Enter the characters shown in the captcha to confirm you are not a robot.
- Click the ‘Submit’ or ‘Register’ button to complete your registration.
Step 2: Fill Out a Single Form
- Once registered, log in to your Vidya Lakshmi account.
- Access the single, comprehensive application form provided on the platform.
- Complete this form with all necessary information, including your educational goals, financial requirements, and personal details.
- Review the form for accuracy and completeness.
Step 3: Apply to Multiple Banks
- After filling out the single application form, choose from a list of participating banks to which you want to apply.
- Vidya Lakshmi will automatically send your application to the selected banks simultaneously.
- Banks will review your application and respond accordingly.
- Monitor your application status through your Vidya Lakshmi account to track responses from the banks.
How to Apply for an Education Loan Offline
You can apply for an education loan offline by following the steps given below:
Step 1: Visit your chosen bank branch.
Step 2: Request a student loan application form.
Step 3: Fill out the form with personal, academic, and financial details.
Step 4: Confirm loan terms with a bank official.
Step 5: Submit the completed application form and documents.
Step 6: Receive a formal student loan agreement once approved.
Education Loan Repayment Process
The loan repayment period normally starts 12 months after completion of the course or 6 months after employment, whichever comes first. Applicants are given varied moratorium periods by different lenders when it comes to repaying their loans. You will be required to repay your loan in EMIs.
Here are the different modes of repayments usually available:
- Internet Banking – Pay online through the lender’s website or mobile app.
- Cheque – Drop a cheque at any of the branches.
- Direct debit – Set up recurring payments for your EMI to be directly debited from your bank account on the payment due date.
- Demand Draft – Pay through a DD.
The preferred method of repayment varies between lenders. Therefore, it is advisable to check with your lender when taking the loan.
Discussed below are a few important details in regard to the education loan repayment process:
Moratorium period: In the case of education loans, the beneficiaries will be able to start paying off the loan after the completion of the educational course or after successful employment.
Part-payment of education loans: The beneficiaries of education loans will be allowed to make part payments towards their loans. As an applicant, you can pay back a lump sum amount to make part repayment of the loan.
Pre-payment of education loan: If an applicant is able to manage the funds for the pre-payment of the loan amount, he or she will be able to do the same. However, it should be kept in mind that this might incur a processing fee.
If money is the only thing standing between you and your professional goals, consider taking out an education or student loan to help you achieve them. You can receive collateral-free goals, which means you won’t have to provide the lender with any security and your payments won’t start right after graduation.
What do the Lenders Consider to Approve the Loan?
Lenders consider the following factors when approving a loan:
- The course and institute you choose
- The amount you need
- Your academic performance
- Repayment capacity of your family
- Family assets
- Annual income
Expenses Covered by Education Loans
Some of the additional expenses covered by education loans are:
- Hostel fees
- Exam fees, laboratory and library fees
- Cost of books, uniforms, projects, etc.
- Travel expenses for overseas education
- Deposits required by the educational institute
FAQs on Education Loan
- Is the RBI moratorium on loans due to the Covid-19 pandemic applicable for education loans too?Yes, the Reserve Bank of India‘s moratorium on retail loans, due to people undergoing financial challenges due to the Covid-19 pandemic, is applicable to education loans as well. The moratorium on Equated Monthly Instalments (EMIs) could be availed from March 2020 to August 2020.
- Do banks offer education loans without interest?No, an interest rate will be levied by banks on education loans.
- Will I get the same amount of money on my education loan for the same level course in India and abroad?No, usually education loans for courses in India do not offer the same amount as for comparable level courses abroad. Education loans offer higher amounts for courses abroad as fees and other expenses may be higher there than for courses in India (which also depends on the educational institution).
- Is it possible to get an education loan without offering a collateral?Almost all education loans from banks and other lenders require a collateral which can be fixed deposits, property, shares, bonds, etc. However, you can still avail an education loan without having to give any collateral. This can be achieved through the Credit Guarantee Fund for Education Loan (CGFEL) Schemes which covers a collateral-free loan of up to Rs.7.5 lakh. This is only for education loans dispersed under of the Model Education Loan Scheme of Indian Banks’ Association (IBA). To avail this, you have to apply for an education loan under this scheme through a scheduled commercial bank. You don’t need to provide security or collateral for amounts of up to Rs.7.5 lakh but anything above that will require collateral.
- For courses abroad, is the loan offered in the currency of that particular country?For courses abroad, education loans are typically paid directly to the educational institution in the local currency of that country.
- Will the moratorium on education loan get extended if I choose to take a sabbatical from my course?The moratorium period on education loans differs from lender to lender. However, it is usually until the borrower gets employed or for up to 1 year of the course being completed, whichever is earlier. If you choose to take a sabbatical and want an extension of your moratorium, it would depend on the bank whether to grant it or not, so it is best to have a discussion about this with the lender.
- Are NRIs eligible for education loans from banks in India?One of the eligibility criteria for education loans that are offered by banks and other financial institutions in India is that the individual should be an Indian national. This means that any student who is a citizen of India can apply for and avail an education loan from a lender in the country. Collateral or documents which can be taken as security should be those that are enforceable in India.
- What happens if I discontinue the course and get an employment within the grace period?In case you choose to discontinue the course mid-way, you must start repaying the loan immediately after getting a job.
- Can I port my education loan to another bank with lower interest rates?Yes, you can move your education loan from one bank to another. However, your current bank might charge a refinance fees. Therefore, it is important to consider all factors of the existing bank and the new bank before moving the loan.
- Do all education loans cover 100% of the education expenses?Yes, education loans cover 100% of the education expenses. However, full coverage may only be provided for expenses under a certain limit. Lenders have a margin if the expenses go above the limit.