123ArticleOnline Logo
Welcome to 123ArticleOnline.com!
ALL >> Investing---Finance >> View Article

How Does An Education Loan Work?

Profile Picture
By Author: Neha Sharma
Total Articles: 241
Comment this article
Facebook ShareTwitter ShareGoogle+ ShareTwitter Share

An education loan or student loans is a loan given out to meet the cost of education for a student. In most cases, these types of loans finance post graduate education both in India and abroad, but lenders also give out loans for undergraduate and schooling expenses.

An education loan typically covers:

• Cost of tuition
• Cost of books and stationery
• Living expenses such as dorm charges or other accommodation
• Lab fees
• Library fees
• Cost of buying a laptop
• Other miscellaneous expenses

The number and amount of these expenses covered depends on each loan application. This amount is directly paid to the educational institution.

Student loans eligibility:

The eligibility criteria depends on:

• Course
• College or university
• Student’s merit
• Income of the student and co-applicant
• Any security or collateral

Although lenders do not generally require collateral, they may ask for some sort of security in case of a higher loan amount. Loans taken below Rs. 4 lakh don’t require any collaterals.

When does repayment begin?

An education loan generally works on a moratorium basis. This means that the installments are not immediately due after the loan is taken. The installments start getting payable a few months after the completion of education by the student. During the course period, the bank may charge simple interest on the principal outstanding, but this depends on case to case. Some lenders start proper repayment after the end of the course.

Student loans are given out for tenures between 5 to 7 years. The lender may extend this period on case to case basis. Most lenders don’t charge pre-payment fees in case of part payments during the loan tenure.

Conditions for an education loan:

Student loans are given out only when the student has a confirmed admission in an educational institution. Proof of admittance and the breakup of fees and other costs has to be submitted to the lender for processing the education loan.

The student has to apply for this loan. However, to increase the loan amount given, the student can have a co-applicant, usually the parent. This ensures a higher income that translates into a higher loan amount sanctioned.

These loans do not distinguish between the type of courses that the loan is taken for. This could be taken for a vocational course, a post-graduate masters, a diploma and in any field.

The lender does not finance the entire cost of education. Some amount has to be paid by the applicants from their own sources. The amount that the lender finances depends on each individual loan application and the lender.

Income Tax benefit:

Interest paid on an education loan gets a benefit under Section 80E of the Income Tax Act, 1961. This deduction is for the entire amount of interest paid during the year to the lender without any limits. The section does not restrict the deduction amount. It also does not distinguish between the course and whether the funds have been taken for education in India or abroad. This deduction for student loans interest is available for 8 years from the time the first installment is paid.

Total Views: 35Word Count: 497See All articles From Author

Add Comment

Investing / Finance Articles

1. Online Paystub Or Excel Sheet? Choose The Best For Your Business
Author: MR MAX

2. Market Prediction Today As Nifty Stages A Downside Reversal
Author: Marketsmith India

3. How To Make More Consumer Proposal In Ontario, And Learn Credit Debt Counselling
Author: Daniel Stewart

4. Daily Big Picture: Fmcg, Pharma ,metal Stocks Gained Up 4-5%
Author: Marketsmith India

5. Gain Lucrative Bonus Points By Joining Aussie Digital Ico
Author: Aussie Digital

6. First Option Recovery Successfully Recovers More Than 19 Million Dollars
Author: First Option Recovery

7. Daily Big Picture: Nifty At An Intraday High Of 8,576; As Lupin Receives A Nod From Usfda
Author: Marketsmith India

8. Paystubs For Work-at-home Professionals: Dos And Don’ts
Author: Mr.Max wilson

9. Why Does A Business Need Asset Management And Wealth Management Firms?
Author: Avendus Group

10. Do We Have Any Classes For Share Market For Beginners?
Author: STOCKPRO

11. What Is The Share Market? How Can I Learn Everything About Share Markets And Shares?
Author: STOCKPRO

12. How Can I Do A Share Market Course?
Author: STOCKPRO

13. Poonawalla Finance Is A Prominent Nbfc (non-banking Financial Company) That Presents Fast Unsecured
Author: reeta menon

14. Taxes 2020
Author: futufan

15. How To Eat Healthy On A Budget
Author: John Mike

Login To Account
Login Email:
Password:
Forgot Password?
New User?
Sign Up Newsletter
Email Address: