After selecting what to study and where to study, the next and most challenging step that every aspirant faces is to arrange and manage the funds needed to study outside of India. In comparison to other financial assistance such as scholarships and grants, an education loan is an important component of managing funds to study abroad. Getting an education outside of your own country is expensive. According to a survey published by HSBC in 2013, Australia is the costliest place in the world to pursue higher education. In fact, the cost of study in Australia for overseas students is more than $38,000 per year when university fees and living expenses are added together.
The United States was the second most costly country, with a cost of $35,000 per year, while the United Kingdom was third, with a cost of $30,000 per year. According to the United Nations Educational, Scientific, and Cultural Organization (UNESCO), the United States and the United Kingdom attract three out of every ten overseas students. With over 3 million people pursuing higher education outside of their own country, it’s feasible to conclude that, despite the high cost of education, students are not deterred from studying abroad.
Now the question arises – Whether an education loan is a fair option to choose?
Scholarships and financial aid are the first things that come to mind when a student is thinking about funding his study abroad. However, given the fierce competition in international education, such advantages are not always possible to obtain. As a result, education loans for abroad study have become a more accessible source of funding. Previously, most parents used their wealth to fund their children’s education by liquidating assets such as gold, fixed deposits, and land. Nowadays, they have accepted the paradigm shift of using an education loan to pay for their children’s education. They have acknowledged the reality that taking out an education loan for study abroad is a safer way to fund the education because education loans can be used for a variety of purposes. Due to the multiple benefits of student loans, they assist the student in getting a step closer to his or her chosen career.
Reasons why one should go for an education loan for abroad studies:
- Education loans are one of the priority sectors for which the Reserve Bank of India requiresbanks to lend.
- Students who apply for an education loan to study abroad may be eligible for tax benefits under Section 80 (E) of the Income Tax Act of 1961. Some highlights of this Act are: a. A loan from a reputable financial institution should be obtained. b. The loan should be used for full-time graduate or postgraduate courses. c. A continuous term of eight years is permitted for deduction.
- Education loans often cover the following expenses: a. Institution fees, b. Hostel fees, c. Examination fees, d. Library and Laboratory fees, e. Book purchases, and f. Equipment and Instruments. g. Refundable Deposit or Caution. h. Money for travel to the host country.
- Most banks give candidates an average of 7 to 12 years to repay their college loans.
- For studying overseas, an aspirant can expect to be given at least 20 to 40 lakh rupees.
There are numerous commercial banks in India that offer education loans to students studying abroad. Here are a few examples:
• The State Bank of India: SBI, India’s largest bank, offers education loans up to Rs.30 lakhs for courses overseas. SBI offers a top-up loan or second loan within the total limit, which is an interesting feature. This is a significant benefit for students studying abroad who may face unexpected financial difficulties.
• HDFC Credila: HDFC has teamed with Credila, a company that specialises in education loans. Credila offers school loans at your doorstep with up to 100% financing. HDFC Credila provides loans to over 4000 institutes in 36 countries around the world. Its unique feature is that education loans can be approved even before the institute has given its approval.
• Indian Overseas Bank: The loan department of Indian Overseas Bank, known as Vidya Jyoti, provides loans up to Rs 40 lakhs for students studying overseas. It offers financing to students studying abroad in both professional and technical fields. The majority of Indian banks offer education loans for studies abroad. While most banks apply the same criterion, the maximum loan amount and associated interest rates vary.
Higher education advantages under the IBA
The Indian Bankers Association includes the following disciplines as eligible for a fund benefit in their model loan plan for education loans to study abroad, published in 2012.
• Graduation: For professional/technical courses offered by reputable colleges that are job-oriented.
• Post-graduation: MCA, MBA, MS, and many more
• Courses offered by CIMA in London, CPA in the United States, and others.
• Aeronautical, pilot training, shipping, and other degree/diploma programmes, provided they are recognised by competent regulatory agencies in India/abroad for the purpose of employment in India/abroad.
Even if a student is eligible for scholarships and funding, he or she might be evaluated for an education loan under the IBA programme, and such benefits may be used to compute the loan amount if necessary. Banks can also offer capacity certificates for students heading overseas for higher education under the new policy, as some foreign colleges require students to submit a certificate from their bankers certifying the sponsors’ solvency or financial competence. Education loans are appealing to students not only from low-income households, but also from middle- and high-income families, because they provide convenient repayment options and access to finances. The education loan industry has also benefited from the timely availability of loans. With the recent volatility in the global economy, education loans provide security to students whose personal cash may run out owing to unexpected difficulties. As a result, one of the most significant advantages of an education loan is that students studying abroad can spend their time pursuing their aspirations while leaving the cost of their dreams to the banks!