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Education Loan Subsidy and Benefits

Education Loan Subsidy in India Jul 2021

Last Updated 31st Jul 2021

  • Compare and get lowest education loan interest rates starting @ 8.40%
  • Get maximum loan in India upto ₹ 10 Lakh, for abroad studies upto ₹ 30 Lakh
  • Maximum loan tenure range 5 to 7 years after course completion
  • Collateral or guarantor required as security depending upon applied loan amount
  • Compare and get best offers from various banks
  • Flexi loans but prepayment charges are applicable

Subsidized Student loan

  • Educational loans are loans offered to students to enable them to meet the costs of professional/vocational studies and repay them after the student completes his course nd/or becomes financially independent.
  • High cost of education is making it hard for students to chase their dreams for higher studies in reputed colleges, both in India and in foreign universities.
  • Further due to high inflation, tuition fees and other education related expenses are continuously on a rise and have emerged as big deterrents for students in achieving their aspirations. If high cost of education has been a concern for aspiring students and their parents, then one should evaluate the option of availing an education loan which is currently offered by all reputed banks and NBFCs in India.

Education loan Interest Subsidy

In order to make educational loans affordable for each and every student, many tax benefits and an attractive government interest subsidy scheme are available in India. Some of the key benefits are:

  • Interest paid on education loan for study can be claimed as deduction under Section 80E of the Income Tax Act, 1961. Interest paid on education loan for study can be claimed as deduction under Section 80E of the Income Tax Act, 1961. The entire interest paid (without any limit) on the education loan is tax-deductible under Section 80E of the Income Tax Act. Tax deduction reduces the effective rate of interest on education loan by almost 250-400 basis point, thus bringing the effective interest rate to as low as 9.5 % .

Key benefits and advantages on student loans

Indian Banking Association (IBA) has issued a model Educational Scheme which provides an outline of education loan schemes that banks in India can follow. Based on governments directive most of the public sector banks in India, offer the model educational loan scheme. The model scheme provides guidelines to the banks on determining the eligibility of student borrowers, educational courses to be covered, cost heads that can be financed under education loan, moratorium period, repayment and prepayment terms, margin requirements, limits for margin requirements and collateral free loans or loans based on third party guarantees. Most of the public sector banks or government banks follow the model scheme. However, a few of the leading banks such as State Bank of India (SBI), HDFC Credila and Avanse DHFL have introduced several other customer friendly features such as collateral free loans of higher amount, lesser margin requirements and flexible EMI schemes.

  • Education loan can be availed at attractive interest rates of as low as 11.25 %, with effective interest rate of as low as 9.5 % (taking into account the impact of tax benefit available on education loan) .
  • Educational loan comes with a moratorium period of typically one year after the course is completed or when the student joins a job, whichever is earlier. EMI payment begins only after completing the educational program. Hence, this means low financial burden for the student and his/her family for the period when the student is studying and is unemployed and non-earning.
  • Female students get additional benefits as they are eligible for upto 0.50% rebate on rate of interest on education loan compared to male students.
  • Many banks do not ask for a collateral security for loans of up to a particular amount, thus further reducing the pressure on student borrowers to mortgage a property. Some large banks such as SBI and HDFC Credila are even willing to lend up to ₹ 30 Lakh without any collateral for admissions to reputed institutions such as IITs/IIMs etc.

FAQs

What is the interest rate for education loan subsidy?

Under Section 80E the entire interest amount of education loan is deductible. The interest rate is as low as 7.95% .

Which bank is best for education loan?

Bank of Baroda is best for education loan because it offers education loan at lowest interest which will technically lower down the EMI.

Can I get education loan for ₹ 50 Lakh?

In India, you can avail education loan from ₹ 1 Lakh to ₹ 50 Lakh. However, if you want to avail loan for more than ₹ 4 Lakh then you have to keep a collateral or need a third party guarantee.


Education Loan News - Jul 2021
  • 2021-07-16 : Amalgamation of Bank of Baroda, erstwhile Vijaya Bank and erstwhile Dena Bank
    Bank of Baroda, on its website, stated that the IFSC codes of the erstwhile Vijaya Bank and Dena Bank were discontinued on March 1, 2021. Customers have been asked to apply for cheque books with the new MICR code at the earliest.
  • 2021-07-16 : UBI update on change in IFSC code for merged banks - Andhra Bank and Corporation Bank
    Union Bank of India (UBI) on Friday said the IFSC codes of the erstwhile e-Andhra Bank and e-Corporation Bank branches will change with effect from July 1, 2021. Customers of the erstwhile banks will have to get new cheque books with changed IFSC and MICR codes
  • 2021-07-16 : Bandhan Bank total loans rise 8% to ₹80,128 crore in Q1, deposits up 28%
    Bandhan Bank witnessed an 8% rise in its loans and advances to ₹80,128 crores in the June quarter this fiscal. The loans and advances during the same period of 2020 stood at ₹74,331 crore. Compared sequentially, it was down by 8% from ₹87,043 crores in the March quarter. Total deposits grew by 28% year-on-year to ₹77,336 crores, while the CASA (current account and savings account) deposits jumped by 48% to ₹33,197 crores in the first quarter of 2021-22.
  • 2021-07-15 : Indian Bank merger with Allahabad Bank - Change in IFSC
    The Indian Bank, which has merged with the Allahabad Bank, carried out a software migration over the weekend. As the merger got completed, new rules had been issued by the bank with regard to its services. Existing customers were asked on July 1 to get a new IFSC code to carry out online transactions smoothly.
  • 2021-07-15 : OBC & UBI merged with PNB
    After the merger of OBC and UBI with PNB in April 2020, PNB has now updated the IFSC codes of all the branches of PNB and UBI. New IFSC codes have come into effect from July 1, 2021.
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