at the real picture" width="" />In today's competitive world, funding higher education is a significant challenge. From stringent eligibility criteria to varying interest rates, many obstacles need to be overcome. This guide helps navigate the complex process of securing education loans in India, addressing issues like stringent eligibility criteria and high interest rates.
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In today’s competitive world, higher education is essential for a rewarding career. However, pursuing higher education, whether in India or abroad, comes with many challenges, one of the most significant being funding. While education loans are a viable solution, the process of accessing these loans is fraught with difficulties. According to Reserve Bank of India (RBI) data from 2023, the demand for education loans in India has seen a steady increase, with the total outstanding education loans amounting to approximately INR 90,000 crores.
Despite this growth, the percentage of students successfully availing of these loans remains relatively low. A report by the Ministry of Human Resource Development (MHRD) in 2022 highlighted that only about 4% of the total higher education student population in India benefits from education loans.
From stringent eligibility criteria to varying interest rates, many obstacles need to be overcome. This guide will help you navigate the process of obtaining an education loan in India for those who wish to pursue higher education domestically.
Obtaining an education loan involves several steps, and these steps are not as simple as they may seem. However, with the right approach, you can secure a loan more easily.
Eligibility Criteria: For many students, the race to get an education loan finishes even before it begins. One of the primary challenges students face is meeting the stringent eligibility criteria set by banks. Requirements often include a high credit score, a co-signer with a strong financial background, and the college or institution being categorized as eligible for the loan. These conditions can be particularly challenging for students from economically weaker sections. Even if a student manages to meet these criteria, there are instances where banks refuse to provide loans for institutions that are not government-affiliated or top private institutions.
Cumbersome Application Process: Students who meet the eligibility criteria face another hurdle: the application process. The application form varies from bank to bank, but common elements required by every bank include two passport-size photographs, graduation certificates, secondary school certificates or high school mark sheets, voter ID, PAN card, Aadhaar card for address and age proof, and details regarding parents' income. This process often involves multiple bank visits and long waiting periods for approval.
The Perils of High Interest: The fear of high-interest rates is something that every student and their parents or guardians face. Interest rates vary from bank to bank, typically ranging from 9% to 14%. The interest rate also depends on the loan amount. For example, the State Bank of India offers an interest rate of 11.15% for loans below or above 7.5 lakhs. In the case of Axis Bank, the effective ROI is 15.20% for loans up to 4 lakhs, 14.70% for loans above 4 lakhs and up to 7.5 lakhs, and 13.70% for loans above 7.5 lakhs.
Lack of Awareness: There is a considerable lack of awareness among students and their families regarding the availability of education loans and the specific terms and conditions associated with them. Many are unaware of the various schemes and subsidies provided by the government to make education loans more accessible.
Above, we discussed the difficulties faced while getting an education loan. However, here we are providing some ways that can make the process of obtaining an education loan more accessible:
The process of obtaining an education loan can be made more accessible through several measures:
Many people are still unaware of such government schemes. The Central Government can promote and spread awareness about these schemes to the general public so that more students can pursue higher education without the financial burden falling on their parents.
