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Educational loans

Educational loans






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    Educational loans Educational loans Presentation Transcript

    • What is an educational loan ?
      • Any financial institute or bank giving financial support which facilitates students for taking higher education.
      • Meant for people whose income is not high enough to attend educational instutions.
    • Procedure for applying for educational loans :
      • The loan process may vary from bank to bank , but some fundamental steps are as follows :
      • Fill in the loan application form.
      • It is very important to fill accurate details related to academics and conatact details.
    • Procedure (contd.)
      • Personal discussion.
      • Important to be lucid and clear about selection of course and its future potential of generating income.
      • Applicant may be asked questions on:
      • Selection of course
      • Academic performance
      • Selection of institute
    • Procedure (contd.)
      • Provide validated supporting documents.
      • Documents of the following regard are mandatory:
      • Documents relating to admissions.
      • Documents relating to property.
      • Collateral security papers, if the loan is above 4 lakhs and property is to be mortgaged.
    • Procedure (contd.)
      • Stage of loan approval or denial.
      • A guarantor is mandatory.
      • Bank can check the guarantor’s credit history.
      • Borrower’s signature on a promissory note.
      • On the sanctioning of the loan, the student has to sign a promissory note.
    • Procedure (contd.)
      • Disbursal of the loan.
      • A loan is disbursed only after completion of the formalities and evaluation of the information.
      • It may be disbursed directly to the concerned institute.
    • Repayment of loan
      • Repayment terms can be adjusted to suit individual needs.
      • However, total cost is a factor in considering adjustments.
      • Some repayment options are :
      • Standard Repayment : making equal monthly payments over a 10 year period.
    • Repayment (contd.)
      • Extended Repayment : depending on the amount of money borrowed , repayment period can be extended upto 30 years.
      • Graduated Repayment : payments gradually increase over a period of 2 years.
      • Income-contingent Repayment : this allows tying up of repayment amount to income and allows longer periods.
    • Interest rates of different banks
    • Interest rates of different bank
      • Loan upto 4 lakh can be borrowed by students without providing any security or margin.
      • Amounts worth or more then 7 lakhs are sanctioned against property, NSC certificates, fixed deposits.
      • As a result, a loan over the amount of rs. 4 lakh is charged one percent higher interest.
      • The R.B.I. prescribes specifics to banks, and government provides 2% subsidy.
    • Tax benefit
      • Repayment of educational loan is deductable under section 80E of income tax act.
      • Only loans taken for higher education can claim deduction upto rs. 40,000.
      • Deduction is available upto a maximum of 8 years.
    • Loan defaults
      • Under section 435 of the Higher Education Act, a Federal Family Educational Loan (FFEL) is considered to be in default once payment hasn't been received for 270 consecutive days.
      • It can be due to any reason, generally the banks issue a defaulter notice to the borrower if there is failure in paying the amount or the instalment in time.
    • Consequences of loan defaults
      • The paycheck can be Garnished
        • The government can take a limited portion of the wages of the student loan debtor, who is in default.
        • It can tke upto 15% of income.
    • Consequences of loan defaults
      • Legal action can be taken to get the borrower to repay the loan in full. Borrower can be sued indefinitely.
      • Credit reference agencies can be informed about the default. This can make it hard to get a credit card, mortgage and loan in future.
      • The department of treasury can take steps to offset federal and state income tax against student debt. This means no more tax rebates until the balance is fully cleared.
    • State Bank of India
      • Purpose : A loan can be taken for pursuing studies in recognised schools/colleges/institutions to meet:
      • Tuition and other fees.
      • Maintenance costs, books & equipments etc.
      • Cost of passage(for studies abroad).
      • Eligibility :
      • Should be an indian national.
    • S.B.I. (contd.)
      • Secured admission to professional/technical course through entrance test/selection.
      • Loan amount : Need based finance subject to the repaying capacity of the parents/ students with margin and the following ceilings:
      • Studies in India – maximum Rs. 7.50 lakhs
      • Studies abroad – maximum Rs. 15 lakhs
    • S.B.I. (contd.)
      • Margin –
      • Upto Rs. 4 lakh : no margin
      • Above Rs. 4 lakh : 5% , for studies in India
      • 15% , for studies abroad
      • Interest – lowest interest rates are offered by S.B.I.
      LOAN RATES INTEREST RATES Loans upto Rs. 4 lakh Presently 12% p.a. Loans over Rs. 4 lakh 1% above, 13% p.a. presently
    • S.B.I. (contd.)
      • Repayment of loan –
      • Prepayments permitted without any penalty.
      • It’s duration is course period + 1 year or 6 months , after getting a job, whichever is earlier.
      • The loan is to repaid in a period of 5-7 years after commencement of repayment.
    • I.C.I.C.I. Bank
      • It covers the course fee, other supplementary expenses set by the institute.
      • A letter or documents confirming the admission and the fees is mandatory.
      • ICICI bank requires a confirmation letter from ICICI Prudential life stating that the students will get absorbed under the payroll of the company.
    • I.C.I.C.I. (contd.)
      • The bank provides loans for graduation courses in India and abroad.
      • Purpose - Fee payable to College / Hostel, Examination / Library / Laboratory fee, Purchase of books / equipments / instruments, Caution Deposit / Building Fund, Travel Expenses / Passage, Purchase of computers.
    • I.C.I.C.I (contd.)
      • The loan amount can vary from Rs. 50,ooo to Rs. 4,00,000 , for both studies in India and abroad.
      • The bank however holds a difference in interest rates charged for courses in India and abroad.
      • It is 13% for studying abroad and 13.75% for studying in India.
    • What does one needs to look at in order to choose a loan?
      • Prefer a loan from a bank located at the place of study.
      • Make sure that repayment period starts from 6- 12 months after the beginning of working life.
      • Keep in mind that banks typically prefer to finance students who opt for traditional courses.
    • For What Professional Courses do Banks generally provide education loans ?
      • Management students areamong top choices for most of the banks.
      • The second preferance are technology, medical and engineering students from country’s premier institutions.
      • Banks dont provide loan where employment prospects are less such as a bachelor’s or master’s in arts.