Educational loans


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Educational loans

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