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More About Education Loan

Education Loan Overview

The most important dream of all parents is that their children get a quality education so that they can lead a bright and successful life. Parents are finding it very difficult to self-finance their children's education due to the increasing cost of higher education. For example, for engineering courses, the fees is around Rs 5-10 lakh, for any medical course at a private college, the fees is appox. in the range of Rs. 40 lakh and Rs. 50 lakh and for professional courses like MBA etc, fees could be around Rs 4-5 lakh. Here comes into picture the importance of Education Loan to cover these education expenses.

Students from various disciplines can now take their first step on the path to success and fuel their dreams for professional or technical education in India or abroad with financial assistance in the form of Education Loan offered by banks so that nothing can hinder their progress.

Education Loan provides financial aid to deserving and meritorious students to pursue higher studies in India and abroad. It helps students to pay their tuition fees, examination, library, books, laboratory and hostel while studying. It also covers travel expenses for studying abroad, study tours, project work, refundable deposit, etc.

Almost all banks in India offer education loans on attractive interest rate and easy repayment options and hence there is a huge demand for loans to cover education expenses.

Benefits of Education Loan

  1. Provides financial assistance to fulfil the dream of higher education of deserving and meritorious students.
  2. Loans for a variety of courses are available on attractive rates of interest.
  3. Female students are often offered discounts or lower interest rates when it comes to education loans.
  4. Government sponsors subsidy schemes to help students from the economically backward sections of society avail the benefits of education loan.
  5. Education loans below Rs.4 lakh usually are offered by banks without any security or guarantor.
  6. The interest paid on the education loan can be claimed as deduction without any upper limit under Section 80E of the Income Tax Act of India, 1961.

Eligibility

  • Student must be a Resident Indian. If the applicant is a Non-Resident Indian (NRI), he/she must hold a valid Indian Passport
  • Student should be in the age bracket defined by the respective bank
  • All education loans must have a co-applicant, usually student's parents or guardian, and the co-applicant must have a regular income to repay the loan.
  • Student must have a confirmed admission to the Academic Institution
  • A good credit history of the co-applicant or guarantor helps in availing loan easily
  • Insurance is compulsory for foreign courses

Loan Amount

Banks offer loans of up to Rs 10 lakh for courses in Indian colleges and up to Rs 20 lakh for studies abroad as per Indian Banks' Association norms. The quantum of a loan depends upon the course and the institution offering this course.

Margin

  • Up to Rs.4 lakhs - Nil.
  • Above Rs. 4 lakhs 5% for Studies in India and 15% for Studies abroad.

Education Loan Tax Benefit: Deduction under section 80E of the Income Tax Act

The interest paid on the education loan can be claimed as deduction without any upper limit under Section 80E of the Income Tax Act of India, 1961. One can get tax benefit on full amount of interest paid but not the principal amount. This is available on education loan taken for self, spouse and children or someone for whom the individual is a legal guardian. Loans taken from family, friends and relatives for education purpose do not qualify for any tax deduction.

Eligible Person for Claiming Deduction

This tax benefit can be claimed either by the parent or by the child i.e. the person who repays the education loan can claim this deduction which means that the deduction is allowed to the individual who has taken the loan and if repayment is made through income chargeable to tax.

Let's understand it with the help of an example:

Suppose the father takes an education loan for his son and he (father) repays it, so the tax deduction can be claimed by the father. After completing the education, suppose the son starts repaying the loan through the EMIs from his own salary then neither father nor son is allowed to claim deduction because the loan is in the name of the father (who is not repaying the loan) and the loan repayment is being done by the son (who has not taken the education loan in his name).

Permissible Amount for Claiming Deduction

Further, the available deduction under section 80E cannot exceed the taxable income which the maximum amount available for deduction can be upto taxable income only. Education loan taken for higher education in India as well as in abroad, both qualifies for claiming deduction under Section 80E of the Income Tax Act, 1961.

This deduction is available for courses, recognised by the government or local authority in India or abroad, for which you can apply after completing your senior secondary education. It is also necessary to take the education loan from a financial institution (bank or non-banking financial company) or an approved charitable institution (under Section 10(23C) or 80G (2) (a) of the Income Tax Act, 1961).

Permissible Period for Claiming Deduction

The maximum period allowed to claim deduction is up to 8 years starting the year in which the borrower starts repaying the interest on the loan or till the time interest is paid fully, whichever is less.

Find Banks Education Loan Interest Rates

Abhyudaya Cooperative Bank LimitedAhmedabad Mercantile Cooperative Bank
Akola Urban Coop Bank Allahabad Bank
Allahabad Up Gramin BankAmanath Cooperative Bank Ltd. Bangalore
Andhra BankAndhra Pradesh Grameena Vikas Bank
Andhra Pragathi Grameena BankApna Sahakari Bank Limited
Arunachal Pradesh Rural BankAssam Gramin Vikash Bank
Au Small Finance Bank LimitedAxis Bank
Bandhan Bank LimitedBangiya Gramin Vikash Bank
Bank Of BarodaBank Of India
Bank Of MaharashtraBaroda Gujarat Gramin Bank
Baroda Rajasthan Kshetriya Gramin BankBaroda Up Gramin Bank
Bassein Catholic Cooperative Bank LimitedBharat Cooperative Bank (mumbai) Ltd., Mumbai
Bharati Sahakari BankBharatiya Mahila Bank Limited
Bihar Gramin BankBombay Mercantile Co Op Bank Ltd
Canara BankCapital Small Finance Bank Limited
Catholic Syrian Bank LimitedCentral Bank Of India
Central Madhya Pradesh Gramin BankChaitanya Godavari Grameena Bank
Chhattisgarh Rajya Gramin BankCitizen Credit Cooperative Bank Limited
City Union Bank LimitedCorporation Bank
Dcb Bank LimitedDena Bank
Dena Gujarat Gramin BankDhanalakshmi Bank
Dombivli Nagari Sahakari Bank LimitedEllaquai Dehati Bank
Equitas Small Finance Bank LimitedEsaf Small Finance Bank Limited
Export Import Bank Of IndiaFederal Bank
Fincare Small Finance Bank LtdG P Parsik Bank
Gramin Bank Of AryavartHdfc Bank
Himachal Pradesh Gramin BankIcici Bank Limited
Idbi BankIdfc Bank Limited
Indian BankIndian Mercantile Cooperative Bank Ltd.
Indian Overseas BankIndusind Bank
Jalgaon Janata Sahakari Bank LimitedJammu And Kashmir Bank Limited
Jammu And Kashmir Grameen BankJanakalyan Sahakari Bank Limited
Janalaxmi Coop Bank Janata Sahakari Bank Ltd
Jharkhand Gramin BankKallappanna Awade Ichalkaranji Janata Sahakari Bank Limited
Kalupur Commercial Cooperative BankKalyan Janata Sahakari Bank
Kapol Cooperative Bank LimitedKarnataka Bank Limited
Karnataka Vikas Grameena BankKarur Vysya Bank
Kashi Gomti Samyut Gramin BankKaveri Grameena Bank
Kerala Gramin BankKhamgaon Urban Co Op Bank Ltd
Kotak Mahindra Bank LimitedLangpi Dehangi Rural Bank
Laxmi Vilas BankMadhya Bihar Gramin Bank
Madhyanchal Gramin BankMahanagar Cooperative Bank
Maharashtra Gramin BankMalwa Gramin Bank
Manipur Rural BankMeghalaya Rural Bank
Mizoram Rural BankNagaland Rural Bank
Nagar Urban Co Operative BankNagpur Nagarik Sahakari Bank Limited
Narmada Jhabua Gramin BankNasik Merchants Cooperative Bank Ltd.
New India Cooperative Bank LimitedNkgsb Cooperative Bank Limited
North East Small Finance Bank LimitedNutan Sahakari Bank Ltd
Odisha Gramya BankOriental Bank Of Commerce
Pallavan Grama BankPandyan Grama Bank
Paschim Banga Gramin BankPragathi Krishna Gramin Bank
Prathama BankPravara Sahakari Bank Ltd
Puduvai Bharathiar Grama BankPunjab And Maharshtra Cooperative Bank
Punjab And Sind BankPunjab Gramin Bank
Punjab National BankPurvanchal Gramin Bank
Rajarambapu Sahakari Bank LtdRajasthan Marudhara Gramin Bank
Rajkot Nagrik Sahakari Bank LimitedRbl Bank Limited
Rupee Cooperative Bank Ltd.Sangli Urban Co Op Bank Ltd Sangli
Saptagiri Grameena BankSaraswat Cooperative Bank Limited
Sardar Bhiladwala Pardi Pepls Co BkSarva Haryana Gramin Bank
Sarva Up Gramin BankSaurashtra Gramin Bank
Shikshak Sahakari Bank LimitedSolapur Janata Sahakari Bank Limited
South Indian BankState Bank Of Bikaner And Jaipur
State Bank Of HyderabadState Bank Of India
State Bank Of MysoreState Bank Of Patiala
State Bank Of TravancoreSuryoday Small Finance Bank
Sutlej Kshetriya Gramin BankSyndicate Bank
Tamilnad Mercantile Bank LimitedTelangana Grameena Bank
The A.p. Mahesh Cooperative Urban Bank LimitedThe Akola Janata Commercial Cooperative Bank Ltd., Akola.
The Cosmos Co Operative Bank LimitedThe Goa Urban Co Op Bank Ltd
The Greater Bombay Cooperative Bank LimitedThe Jalgaon Peopels Cooperative Bank Limited
The Kapol Cooperative Bank LimitedThe Karad Urban Cooperative Bank Limited
The Mapusa Urban Coop Bank Of Goa LtdThe Mehsana Urban Cooperative Bank
The Nainital Bank LimitedThe Shamrao Vithal Cooperative Bank
The Surath Peoples Cooperative Bank LimitedThe Thane Bharat Sahakari Bank Limited
The Zoroastrian Cooperative Bank LimitedTjsb Sahakari Bank Ltd
Tripura Gramin BankUco Bank
Ujjivan Small Finance Bank LimitedUnion Bank Of India
United Bank Of IndiaUtkal Grameen Bank
Utkarsh Small Finance BankUttar Banga Kshetriya Gramin Bank
Uttar Bihar Gramin BankUttarakhand Gramin Bank
Vananchal Gramin BankVidharbha Konkan Gramin Bank
Vijaya BankYes Bank
Zila Sahakari Bank Ltd