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Page 1 of 4 EDUCATION LOANS
 Along with growing awareness about the importance of education to succeed in the knowledge economy, the cost of quality education too is growing fast. Parents too are willing to bear that extra cost to fund their child’s higher education. Education loan is the most cost effective means to fund your education if you are unable to get a full scholarship or do not have a generous aunt or uncle willing to sponsor your education.
Though most banks do provide education loan, it is the public sector banks that are in the forefront in providing education loans.
In recent years, a large number of students, especially those pursuing professional courses in India or abroad, are availing of education loans.
According to latest data from the Reserve Bank of India, education loans disbursed by Indian banks rose 51% to Rs 15,000 crore for the financial year ending March 2007 from Rs. 9,962 crore at the end of March 2006.
Following are a few points you need to check while applying for an education loan.
Repayment Options
Like for all other loans, you have to pay interest on education loan too. But unlike other loans, education loan provides the option of a moratorium period or a ‘repayment holiday’, which means, the borrower can suspend repayment of the loan till the education course for which the loan was taken is completed.
An education loan typically has three repayment options:
Education loan with repayment moratorium. Many banks stipulate repayment within 1 year after completing the course or 6 months after getting a job, which ever is earlier.
Interest alone is paid during the period of course. After the course completion, you start paying the actual EMI (principle and interest)
You start repaying the loan through EMI immediately after loan disbursement, in which case you could get the loan at an interest rate lower by about 1 per cent.
The repayment conditions vary from bank to bank. So, talk with as many banks as possible to get the repayment option that suits your requirements.
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