Educational Loan Scheme
Education is central to the human resources development and empowerment in any country.
National and State level policies are framed to ensure that this basic need of the population is met through appropriate public and private sector initiatives.
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Eligibility
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Eligibility
Student eligibility
The student should be an Indian National
Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/ Merit Based Selection process after completion of HSC(10 plus 2 or equivalent). However, entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, banks will have to adopt appropriate criteria based on employability and reputation of the institution concerned
Courses Eligiblea. Studies in India: (Indicative list)
- Approved courses leading to graduate/ post graduate degree and P G diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
- Courses like ICWA, CA, CFA etc.
- Courses conducted by IIMs, IITs, IISc, XLRI. NIFT,NID etc.
- Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India.
- Approved courses offered in India by reputed foreign universities.
Note: The above list is indicative in nature. Banks may approve other job oriented courses leading to technical/ professional degrees, post graduate degrees/diplomas offered by recognized institutions under this scheme.
Courses other than the above offered by reputed institutions may also be considered on the basis of employability.
Reference : www.ugc.ac.in, www.education.nic.in, www.aicte.org.inb. Studies abroad
Graduation : For job oriented professional/ technical courses offered by reputed universities.
Post graduation: MCA, MBA, MS, etc.
Courses conducted by CIMA- London, CPA in USA etc.
Degree/diploma courses like aeronautical, pilot training, shipping etc provided these are recognized by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.
Reference: www.webometrics.info (indicative only) -
Expenses
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Expenses considered for loan
- Fee payable to college/ school/ hostel*
- Examination/ Library/ Laboratory fee
- Travel expenses/ passage money for studies abroad
- Insurance premium for student borrower, if applicable
- Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts. **
- Purchase of books/ equipments/ instruments/ uniforms***
- Purchase of computer at reasonable cost, if required for completion of the course***
- Any other expense required to complete the course – like study tours, project work, thesis, etc***
- While computing loan required, scholarships, fee waiver etc., if any available to the student borrower may be taken into account.
Notes:
- Reasonable lodging and boarding charges will be considered in case the student chooses / is required to opt for outside accommodation.
- These expenses could be considered subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course.
- It is likely that expenditure under Item Nos. vi, vii & viii above may not be available in the schedule of fees and charges prescribed by the college authorities. Therefore, a realistic assessment may be made of the requirement under these heads. However, the maximum expenses included under vi, vii & viii may be capped at 20% of the total tuition fees payable for completion of the course.
Quantum of Finance
Need based finance to meet the expenses worked out as per para 4.3 above will be considered taking in to account margins as per para 6 subject to the following ceilings:
Studies in India – Maximum upto ₹ 10 lakhs.
Studies Abroad – Maximum upto ₹ 20 lakhs.Note: The ceilings fixed for studies in India and Abroad correspond to the limits fixed by the RBI for treatment as priority sector lending. Banks may consider higher quantum of loan on course to course basis (eg: courses in IIMs, ISB etc). It may also be noted that even loans in excess of ₹ 10 lakhs qualify for interest subsidy under Central Sector Interest Subsidy Scheme for loans up to ₹ 10 lakhs.
Margin
Upto ₹ 4 lakhs – Nil
Above ₹ 4 lakhs Studies in India – 5%
Studies Abroad – 15%- Scholarship/ assistantship to be included in margin.
- Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis.
Security
Upto ₹ 4 lakhs – Parents to be joint borrower(s). No security
Above ₹ 4 lakhs and upto ₹ 7.5 lakhs – Besides the parent(s) executing the documents as joint borrower(s) , collateral security in the form of suitable third party guarantee will be taken. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as joint borrower(s).
Above ₹ 7.5 lakhs – Parent(s) to be joint borrower(s) Tangible collateral security of suitable value acceptable to bank, along with the assignment of future income of the student for payment of instalments.
Note:
- The loan documents should be executed by both the student and the parent/ guardian as joint-borrower.
- The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, shares/mutual fund units/debentures, bank deposit in the name of student/ parent/ guardian / any other third party or any other tangible security acceptable to the bank with suitable margin.
- Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount
Rate of Intrest
Interest to be charged at rates linked to the Base rate as decided by individual banks
Simple interest to be charged during the study period and up to commencement of repayment.
Note: Servicing of interest during study period and the moratorium period till commencement of repayment is optional for students. Accrued interest will be added to the principal amount borrowed while fixing EMI for repayment.
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Repayment
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Repayment
Repayment holiday/Moratorium Course period + 1 year or 6 months after getting job, whichever is earlier. If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course. In case the student discontinues the course midway, appropriate repayment schedule will be worked out by the bank in consultation with the student/parent
- The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed.
- 1% interest concession may be provided by the bank, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment. Repayment of the loan will be in equated monthly instalments for periods as under:
For loans upto ₹ 7.5 lakhs – upto 10 years
For loans above ₹ 7.5 lakhs – upto 15 years - While EMI based repayment is the generally accepted practice, many times the salary levels at the start of the career may not facilitate comfortable payment of EMI in certain cases (e.g. professionals like Doctors). Telescoping of repayment with stepped up instalments with passage of time may be considered in such cases.
Note: No prepayment penalty will be levied for prepayment of loan any time during the repayment period.
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More charges
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Insurance
Banks may, with the consent of the student, arrange for life insurance policy on the students availing Education Loan. Individual Banks may work out the modalities with insurance companies.
Follow Up/Monitoring
Banks to contact college / university authorities to obtain progress report on the student at regular intervals in respect of those who have availed loans. In case of studies abroad, bank may obtain the SSN/Unique Identification Number (UIN)/Identity Card and note the same in the bank’s records. The UID number issued by UIDIA may also be captured in bank’s system as and when available. Banks to enter into Memorandum of Understanding (MoU) with the educational institutions to provide the educational loans to the students. There should be an annual review of the asset quality of educational loans between banks and educational institution.
Processing Charges
No processing / upfront charges may be levied on loans sanctioned under the scheme. (Banks may charge processing fee for considering loans for studies abroad. The fee would however, be refunded upon the student taking up the course)
Capability Certificate
Banks can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtained from applicant, if required.
(Some of the foreign universities require the students to submit a certificate from their bankers about the sponsors’ solvency/ financial capability, with a view to ensure that the sponsors of the students going abroad for higher studies are capable of meeting the expenses till completion of studies.)
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Other Conditions
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Other Conditions
Sanction of loan to more than one child from the same family
Existence of an earlier education loan to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious student from the same family obtaining education loan as per this scheme from the bank.Minimum Age
There is no specific restriction with regard to the age of the student to be eligible for education loan. However, if the student was a minor while the parent executed documents for the loan, the bank will obtain a letter of ratification from him/her upon attaining majority.Top up loans
Banks may consider top up loans to students pursuing further studies within the overall eligibility limit, if such further studies are commenced during the moratorium period of the first loan. The repayment of the loan will commence after the completion of the second course and further moratorium period, as provided under the scheme.Joint Borrower
The joint borrower should normally be parent(s)/guardian of the student borrower. In case of a married person, joint borrower can be either spouse or the parent(s)/parents-in-law.No Due Certificate
No due certificate will not be insisted upon as a pre-condition for considering education loan. However, banks may obtain a declaration/ an affidavit confirming that no loans are availed from other banks.
Disposal of loan application
Loan applications have to be disposed of in the normal course within a period of 15 days to 1 month, but not exceeding the time norms stipulated for disposing of loan applications under priority sector lending.
Eligibility
Student eligibility
The student should be an Indian National
Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/ Merit Based Selection process after completion of HSC(10 plus 2 or equivalent). However, entrance test or selection purely based on marks obtained in qualifying examination may not be the criterion for admission to some of the post graduate courses or research programmes. In such cases, banks will have to adopt appropriate criteria based on employability and reputation of the institution concerned
Courses Eligible
a. Studies in India: (Indicative list)
- Approved courses leading to graduate/ post graduate degree and P G diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
- Courses like ICWA, CA, CFA etc.
- Courses conducted by IIMs, IITs, IISc, XLRI. NIFT,NID etc.
- Regular Degree/Diploma courses like Aeronautical, pilot training, shipping etc., approved by Director General of Civil Aviation/Shipping, if the course is pursued in India.
- Approved courses offered in India by reputed foreign universities.
Note: The above list is indicative in nature. Banks may approve other job oriented courses leading to technical/ professional degrees, post graduate degrees/diplomas offered by recognized institutions under this scheme.
Courses other than the above offered by reputed institutions may also be considered on the basis of employability.
Reference : www.ugc.ac.in, www.education.nic.in, www.aicte.org.in
b. Studies abroad
Graduation : For job oriented professional/ technical courses offered by reputed universities.
Post graduation: MCA, MBA, MS, etc.
Courses conducted by CIMA- London, CPA in USA etc.
Degree/diploma courses like aeronautical, pilot training, shipping etc provided these are recognized by competent regulatory bodies in India/abroad for the purpose of employment in India/abroad.
Reference: www.webometrics.info (indicative only)
Expenses considered for loan
- Fee payable to college/ school/ hostel*
- Examination/ Library/ Laboratory fee
- Travel expenses/ passage money for studies abroad
- Insurance premium for student borrower, if applicable
- Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts. **
- Purchase of books/ equipments/ instruments/ uniforms***
- Purchase of computer at reasonable cost, if required for completion of the course***
- Any other expense required to complete the course – like study tours, project work, thesis, etc***
- While computing loan required, scholarships, fee waiver etc., if any available to the student borrower may be taken into account.
Notes:
- Reasonable lodging and boarding charges will be considered in case the student chooses / is required to opt for outside accommodation.
- These expenses could be considered subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course.
- It is likely that expenditure under Item Nos. vi, vii & viii above may not be available in the schedule of fees and charges prescribed by the college authorities. Therefore, a realistic assessment may be made of the requirement under these heads. However, the maximum expenses included under vi, vii & viii may be capped at 20% of the total tuition fees payable for completion of the course.
Quantum of Finance
Need based finance to meet the expenses worked out as per para 4.3 above will be considered taking in to account margins as per para 6 subject to the following ceilings:
Studies in India – Maximum upto ₹ 10 lakhs.
Studies Abroad – Maximum upto ₹ 20 lakhs.
Note: The ceilings fixed for studies in India and Abroad correspond to the limits fixed by the RBI for treatment as priority sector lending. Banks may consider higher quantum of loan on course to course basis (eg: courses in IIMs, ISB etc). It may also be noted that even loans in excess of ₹ 10 lakhs qualify for interest subsidy under Central Sector Interest Subsidy Scheme for loans up to ₹ 10 lakhs.
Margin
Upto ₹ 4 lakhs – Nil
Above ₹ 4 lakhs Studies in India – 5%
Studies Abroad – 15%
- Scholarship/ assistantship to be included in margin.
- Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis.
Security
Upto ₹ 4 lakhs – Parents to be joint borrower(s). No security
Above ₹ 4 lakhs and upto ₹ 7.5 lakhs – Besides the parent(s) executing the documents as joint borrower(s) , collateral security in the form of suitable third party guarantee will be taken. The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as joint borrower(s).
Above ₹ 7.5 lakhs – Parent(s) to be joint borrower(s) Tangible collateral security of suitable value acceptable to bank, along with the assignment of future income of the student for payment of instalments.
Note:
- The loan documents should be executed by both the student and the parent/ guardian as joint-borrower.
- The security can be in the form of land/ building/ Govt. securities/ Public Sector Bonds/Units of UTI, NSC, KVP, life policy, gold, shares/mutual fund units/debentures, bank deposit in the name of student/ parent/ guardian / any other third party or any other tangible security acceptable to the bank with suitable margin.
- Wherever the land/ building is already mortgaged, the unencumbered portion can be taken as security on second charge basis provided it covers the required loan amount
Rate of Intrest
Interest to be charged at rates linked to the Base rate as decided by individual banks
Simple interest to be charged during the study period and up to commencement of repayment.
Note: Servicing of interest during study period and the moratorium period till commencement of repayment is optional for students. Accrued interest will be added to the principal amount borrowed while fixing EMI for repayment.
Repayment
| Repayment holiday/Moratorium | Course period + 1 year or 6 months after getting job, whichever is earlier. |
If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years. If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course. In case the student discontinues the course midway, appropriate repayment schedule will be worked out by the bank in consultation with the student/parent
- The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed.
- 1% interest concession may be provided by the bank, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment. Repayment of the loan will be in equated monthly instalments for periods as under:
For loans upto ₹ 7.5 lakhs – upto 10 years
For loans above ₹ 7.5 lakhs – upto 15 years - While EMI based repayment is the generally accepted practice, many times the salary levels at the start of the career may not facilitate comfortable payment of EMI in certain cases (e.g. professionals like Doctors). Telescoping of repayment with stepped up instalments with passage of time may be considered in such cases.
Note: No prepayment penalty will be levied for prepayment of loan any time during the repayment period.
Insurance
Banks may, with the consent of the student, arrange for life insurance policy on the students availing Education Loan. Individual Banks may work out the modalities with insurance companies.
Follow Up/Monitoring
Banks to contact college / university authorities to obtain progress report on the student at regular intervals in respect of those who have availed loans. In case of studies abroad, bank may obtain the SSN/Unique Identification Number (UIN)/Identity Card and note the same in the bank’s records. The UID number issued by UIDIA may also be captured in bank’s system as and when available. Banks to enter into Memorandum of Understanding (MoU) with the educational institutions to provide the educational loans to the students. There should be an annual review of the asset quality of educational loans between banks and educational institution.
Processing Charges
No processing / upfront charges may be levied on loans sanctioned under the scheme. (Banks may charge processing fee for considering loans for studies abroad. The fee would however, be refunded upon the student taking up the course)
Capability Certificate
Banks can also issue the capability certificate for students going abroad for higher studies. For this purpose financial and other supporting documents may be obtained from applicant, if required.
(Some of the foreign universities require the students to submit a certificate from their bankers about the sponsors’ solvency/ financial capability, with a view to ensure that the sponsors of the students going abroad for higher studies are capable of meeting the expenses till completion of studies.)
Other Conditions
Sanction of loan to more than one child from the same family
Existence of an earlier education loan to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious student from the same family obtaining education loan as per this scheme from the bank.
Minimum Age
There is no specific restriction with regard to the age of the student to be eligible for education loan. However, if the student was a minor while the parent executed documents for the loan, the bank will obtain a letter of ratification from him/her upon attaining majority.
Top up loans
Banks may consider top up loans to students pursuing further studies within the overall eligibility limit, if such further studies are commenced during the moratorium period of the first loan. The repayment of the loan will commence after the completion of the second course and further moratorium period, as provided under the scheme.
Joint Borrower
The joint borrower should normally be parent(s)/guardian of the student borrower. In case of a married person, joint borrower can be either spouse or the parent(s)/parents-in-law.
No Due Certificate
No due certificate will not be insisted upon as a pre-condition for considering education loan. However, banks may obtain a declaration/ an affidavit confirming that no loans are availed from other banks.
Disposal of loan application
Loan applications have to be disposed of in the normal course within a period of 15 days to 1 month, but not exceeding the time norms stipulated for disposing of loan applications under priority sector lending.
