Education Loan Interest Rates
In India, there are a plethora of private and public sector financial institutions offering education loans to aspiring students wishing to continue their studies in premier institutions within the country or abroad. Here is a comparative table on the interest rates provided by lenders in India:
Public Sector Banks
| Bank | Interest Rate |
| State Bank of India | 8.30% p.a. to 10.70% p.a. |
| Bank of Baroda | 8.50% p.a. to 11.05% p.a. |
| United Bank of India | 10.75% p.a. to 10.80% p.a. |
| Central Bank of India | 9.80% p.a. to 10.30% p.a. |
| Bank of Maharashtra | 10.15 p.a. to 10.65% p.a. |
| Canara Bank | 8.50% p.a. to 11.50% p.a. |
| Dena Bank | 8.25% p.a. to 10.25% p.a. |
| Indian Overseas Bank | 8.60% p.a. to 11.40% p.a. |
| Punjab National Bank | 8.25 p.a. – 10.75% p.a. |
Other Financial Institutions
| Banks | Interest Rate |
| Avanse Financial Services | 12.75% p.a. |
| Credilla | 11.75% – 12.50% p.a. |
| Axis Bank | 10.5% – 12.5% (Till 31 March 2018) |
| HDFC Bank | 11.97% p.a. |
| IDBI Bank | 8.40% p.a. – 10% p.a. |
| ICICI Bank | 11.00% p.a. and above |
Concession on Education Loan Interest Rates
The candidate can enjoy some concession on the interest rate of an education loan on the following grounds:
- Banks might allow 1% concession on the interest rate of the loan if the interest is serviced regularly every month during the moratorium period. However, the concession is allowed only during the moratorium period and not after that.
- For the girl students, 0.50% to 1% of concession is allowed by the banks on the interest rates of education loan.
- Some of the banks give 0.25% of concession on the interest rate if the candidate is their existing housing loan borrower or if the student is getting admitted in top-rated institutes enlisted by them or for providing an additional guarantor.
How to Lower the Education Loan Interest Rates?
You can get lower interest rate on education loan by opting for the following ways:
- Discuss with your college or university whether there is any specific lender who will negotiate on the loan terms. In case they don’t have any lender, enquire about pre-approved loan process to get flexible loan terms and low interest rates.
- If you plan to pursue studies in any educational institute abroad, you will get better interest rates on the loan as the basic rates of interest in UK and US is currently low compared to India. Moreover, you can also apply to get a loan on campus from your institution after registering for the course.
- In case you or any of your family members have good terms with the bank’s branch manager you can expect to get better loan terms. You can ask for loans at lower interest rates in such cases.
- Some of the financial organisations charge high interest rate in case of unsecured educational loan above Rs.4 lakh. In such cases, you can lower the rate of interest rate by offering a security against the loan amount.
Features and Benefits of Education Loans
Listed below are some of the key features and benefits of any education loan offered in India:
Loan approval- Usually, banks take around 15 days to approve an education loan. The time is calculated from the official receipt date of the application as the receipt confirms proper completion of the application in every aspect.
Processing fees: Most banks do not charge any processing fee when a student avails an education loan. Though some lenders might levy a processing fee of 1% or an upfront fee, depending on the type of loan availed.
Moratorium Period: Generally, all lending institutions give a moratorium or holiday period ranging from 6 months to 1-1/2 years after the completion of the course. Repayment of the principal amount for the availed education loan can start after this period or after the borrower has secured a job.
Margin: For loan amounts below Rs.4 lakhs, borrowers do not have to put in any amount and the lender will mostly sanction the entire amount. But for loan amounts higher than that, the applicant will be required to bring in a loan margin amount ranging between 5% and 15% depending on the location of the course study.
Quantum of Loan: The maximum loan amount sanctioned by banks is generally Rs.10 lakhs for education within India and up to Rs.20 lakhs for studies abroad. The minimum loan amount varies across different lending institutions.
Security Collateral: Most banks do not request for any security collateral to be provided for education loans taken for an amount below Rs.4 lakhs. Third party guarantee or any other form of security has to be provided by the borrower only for amounts higher than that.
Repayment Tenure: The repayment tenure starts after the moratorium period and can usually go up to 10 years, depending on the bank from where the education loan has been availed.
Type of educational course: The sanctioning of the education loan also depends on the type of course and the institution opted by the student. Education loans given out by most banks cover specific institution types, course types and also countries. Most banks sanctions loans only for approved courses from recognized Indian and foreign institutions.
Tax Benefits: Education loan borrowers can also enjoy tax rebates for the interest they would be paying under Section 80-E of the Income Tax Act, 1961. As per this section, tax is exempted on the education loan interest rate for eight years since the time when the loan bearer has taken the amount or since when he/she has started repaying the interest, whichever is more.
Insurance: Some banks also offer life insurance cover to the student availing the education loan. This facility however might not be available with all banks and might vary from lender to lender. Applicants can enquire with their lending banks to check if the insurance benefit is available, when they procure the education loan.
Pre-payment charges: The prepayment charges vary for education loans across different lending institutions. Some banks do not charge any pre-closure fees, while some might impose a prepayment penalty of up to 4%, depending on the time period during which the loan is being closed.
Other fees and charges: Banks might also levy other charges like administration fees and documentation costs, while the education loan application is being made.
Courses Covered under Education Loan
- Diploma/Degree/Graduation/Post-graduation/Degree/Diploma courses from recognised colleges or universities affiliated under UGC/ AICTE/IMC/Govt. etc.
- Regular Diploma or Degree courses offered by top autonomous educational institutes in India like IIM, IIT etc.
- Pure Science, Fine Arts, Engineering, Medicine, Management, Computer science, Agriculture, Architecture, Hotels and hospitality, Design and several other educational disciplines.
- Vocational and other technical training courses such as teacher training, nursing, aviation, shipping, air-hostess etc.
