Detailed presentation on education loan system in India- eligibility criteria, application process, rate of interest charged and repayment options. Advantages and disadvantages of borrowing loan.

1. EDUCATION LOAN
Presented by-
Priya Surwade 56
Dhruti Bhatia 62
Jarina Johnson 99
Kanchan Dhobley 70

2. Contents
■ Introduction
■ Education loan scheme study by IBA
■ Features of Education loan
■ Factors of education loan
■ Banks offering education loans in india
■ Comparative analysis of banks considered-SBI,
ICICI, HDFC
■ Advantages and disadvantages of education loan
■ Factors to be considered while applying for an
education loan

3. What are education loans?
■ Education is central to the Human Resources Development and
empowerment in any country. The scope of education has widened
both in India and abroad covering new courses in diversified areas.
■ Development of human capital is a national priority and it should be
the endeavor of all that no deserving student is denied opportunity to
pursue higher education for want of financial support.
■ An education loan is a type of loan designed to help students pay for
post-secondary education and the associated fees, such as tuition,
books and supplies, and living expenses.
■ It came into existence in 1995 started by SBI Bank and after that
many banks started offering student loan.

4. Education loan scheme study by IBA
■ The Finance Minister in a meeting with the Chief Executives of the public
sector banks on 13 June 2000 had highlighted the role of commercial
banks in facilitating pursuit of higher education by poor, but meritorious
students.
■ In pursuance thereof, the Indian Banks’Association constituted a Study
Group under the chairmanship of Shri R. J. Kamath, Chairman &
Managing Director of Canara Bank to examine the issue in detail.
■ Based on the recommendations of the Study Group, a comprehensive
model educational loan scheme was prepared by the Indian
Banks’Association for adoption by all banks.
■ The Scheme aims at providing financial support from the banking system
to meritorious students for pursuing higher education.
■ The scheme was announced in the Union Budget for 2001-2002 &
discussed in the meeting the Finance Minister had with the Chief
Executives of banks on 7 April 2001.

5. Features of education loans:
■ Any individual aged between 16 and 35 years can avail an education loan to
pursue studies at any approved university abroad.
■ Students can procure education loans for management courses, engineering
courses, medicine, and graduate and post graduate degrees, arts,
architecture, pure science, hotel management, etc.
Maximum loan limit –
■ Studies in India-Maximum Rs.10,00,000.
■ Studies abroad-Maximum Rs.20,00,000.
These are the ceilings fixed by RBI. But banks are free to re-consider this limit
if the course offers higher than these limits like IIM, ISB etc.
Margin requirements – It is a part of educational loan to be paid by the
applicant.
■ Up to Rs.4,00,000-Nil
■ Above Rs.4,00,000-Studies in India 5% and for studies abroad 15%.
This margin includes Scholarship/ assistantship. Margin may be brought-in on
year-to-year basis as and when disbursements are made on a pro-rata basis.

6. Security–
i. No security has to be submitted for education loans taken up to Rs. 4
lakhs.
ii. Up to Rs.4,00,000-parents need to be joint borrowers, but security is not
required.
iii. Above Rs.4,00,000 and below Rs.7,50,000-besides parent's joint
borrower condition, you need to bring collateral security in the form of
suitable third-party guarantee will be taken. But if banks satisfied with
financial condition of the borrower then they may waive the condition of
third-party collateral.
iv. Above Rs.7,50,000-parents as joint borrower and any tangible asset of
suitable value acceptable by banks and assignment of future income of
the student for repayment of installments.

7. Rate of Interest–
■ Interest rates will be charged at the rates linked to base rate of banks.
Simple rate of interest will be applicable till the period of study and
commencement of repayment.
■ Paying of interest during these period is optional. But after this period
while fixing EMI, this existing interest will be considered as principal. 1%
concession will be provided if interest is regularly paid during study period
and before commencement repayment.
■ The Central Government has also introduced an interest rate subsidy
scheme for repayments done during the moratorium period for the benefit
the weaker section of the society
■ Education loans can be repaid in monthly instalments through ECS or via
post-dated cheques to the bank.

8. Loan approval process–
■ You can apply either physically or through online mode. After receiving
the applications, banks will issue you the acknowledgement number. This
number includes the bank official contact person in case of delay or more
information.
■ Loans are either sanctioned or rejected within 15 days of submitting all the
documents with the duly filled form. Usually future financial generation of
the student will be considered for loan approval.
■ If loan is rejected, then banks need to provide the reasons for rejection.
You can apply for the loans in banks nearest to your stay or your institute.
But future transactions will be nearer to your educational institutes.
■ Loans will be usually disbursed in installments based on the educational
need.

9. Loan repayment–
■ Repayment will be after one year of course completion or 6 months after
getting job, whichever is earlier. Two years extension will be provided if the
courses not completed within the time period. But course is not completed
within this period then depending on banks own decision they may extend
this extension period. If student discontinue the course, then after consultation
with student and parent’s appropriate repayment will be fixed.
>Tenure of repayment of loan will be as below:
■ For loans up to Rs.7,50,000-Max 10 years.
■ For loans more than Rs.7,50,000-Max 15 years.
■ Usually earning capacity of person is low during the start of career. Hence to
make EMI smooth, banks provided stepping of EMI facility. In this facility
usually EMI will be lesser during the starting but will goes on increase as the
period passes.
■ No penalty on early repayment of loan.

10. ■ Processing Charges-Usually banksdo not charges any processing fees
for this type of loan. But banks may charge fee for abroad study loans, will
be refunded once student takes up the course.
■ Other Features–
■ Banks may issue financial capability certificate based on the financial
condition of the student, which is required while studying abroad.
■ Existence of education loan may affect other student’s loan availability
within the same family.
■ No age restriction to avail this loan.
■ Top up loan will be available if further study commence during
the moratorium period. Repayment will commence after completion of the
further study.
■ Usually parents or guardian will be joint borrower. But in case of married
student either spouse or parents/parents-in-law may be joint borrower.

11. What Happens When One Defaults In
Education Loan Repayment
■ The bank allows a moratorium period to start
education loan repayment of about 6 months from
getting a job or 1 year of completion of a course,
whichever is earlier. Upon continuous EMI defaults,
the bank may take serious action against the borrower.
However, before taking harsh action, it may allow the
borrower a chance to clear the outstanding balance.

12. What Steps Can One Take As A Borrower
■ Request Bank To Extend The Loan Tenure
If you have a genuine reason for not being able to payback, take your
bank’s branch manager into confidence and share the reason for not
paying the loan back. If the bank is convinced that it is an authentic
reason they may restructure your loan and allow you to pay the lower
EMI. The maximum loan repayment tenure can be increased up to 10
years for a loan amount lower than 7.5 lacs and 15 years for an amount
more than 7.5 lacs.
■ Option To Repay The Outstanding Loan In Part Payment
You can always ask for a deferment period. Deferments allow you to
stop making payments for a certain period of time if you have a genuine
reason that can show you qualify for the same. For instance, you may
be able to get a deferment if you can show economic hardship, are
returning to school, are unemployed, or looking for a job.

13. Impact Of Non-repayment of loan-
■ CIBIL score- CIBIL is the summary of your credit records. You cannot avail
a loan from any banks or NBFC or get a credit card with a low CIBIL score. An
unpaid loan can bring down your CIBIL score significantly, which decreases
your credit worthiness, which means you won’t be able to borrow from any
bank for the longest of time. Also, recovering a CIBIL score is a rather time-
consuming process and requires ton of efforts.
■ Collateral: If it is a secured loan the bank can liquidate your asset to recover its
losses. You will lose the rights over your property which can be auctioned by
the bank to pay the bad debt. Not a situation you’d want to be in.
■ Interest: The interest rate on the loan will keep increasing making the
repayment amount huge. Not to forget, the bank will add fines as well until you
pay.
■ Co-signer: If unfortunately you cannot repay the loan, the burden of repaying
the loan falls onto your co-borrower. Not just that, the CIBIL score of the co-
borrower will go down as well, thus jeopardising their future prospects as well.
■ Legal: You’ll be treated as an NPA (non-performing asset), and once
announced as one, frequent calls and emails from banks would follow. Owing
to the increasing number of NPAs, banks now have ‘collection companies’
whose only job is to get the money back. Once you make it to their list, legally,
you’ll be in a lot of trouble.

14. Rising NPA in education loan
According to the data released by the Indian Banks'Association (IBA)
revealed that-
■ In the educational loans segment, the default in repayment has risen
to 7.67 percent of the outstanding amount at March-end, 2017 from
5.7 percent two years ago. Further, the total outstanding education
loan at end of the fiscal 2016-17 was Rs 67,678.5 crore, of which Rs
5,191.72 crore could be categorised as NPA.
■ The data further revealed that the NPA in the aforementioned
segment compared to the percentage of total loan has been
constantly increasing. In 2014-15, the figures reported were 5.7
percent in 2014-15, 7.3 percent in the following fiscal and 7.67 percent
in the last financial year.
■ However, the government had earlier modified the IBA's Model
Education Loan Scheme to reduce the incidence of NPAs in the
segment by giving extension of repayment period to 15 years and
the launch of credit guarantee fund scheme for education loan
(CGFEL) for up to 7.5 lakh Rupees.

15. FACTORS OF EDUCATION LOAN

16. Eligibility criteria-
■ Indian resident, between 16 and 35 years of age
■ Co-applicant is mandatory for all full-time programs – co-
applicant could be parent/guardian, or spouse/parent in law
■ Student should have secured admission to a higher education
course in recognized institutions in India or Abroad through
Entrance Test/ Merit Based Selection process
■ Approved courses leading to graduate/ post graduate degree and
P G diplomas conducted by recognized colleges/ universities
recognized by UGC/ Government/ AICTE/ AIBMS/ ICMR etc.

17. Courses Eligible in India and
Abroad-
■ Studies Abroad
i. Graduation: Reputed universities.
ii. Post-graduation: MCA, MBA, MS and other courses as
shall be declared from time-to-time.
iii. Other courses such as CIMA - London, CPA in USA, CFA,
CISA, and other approved courses as shall be declared.
Degree/Diploma course like aeronautical, pilot training,
shipping, etc. provided these are recognized by competent
regulatory bodies abroad for the purpose of employment in
India/abroad.

18. ■ Studies in India
i. Post-Graduation Courses: Masters and Ph.D. from accredited institutions.
ii. Professional Courses: Engineering, Medical, Agriculture, Veterinary,
Law, Dental, Management and Computer Sciences.
iii. Other professional courses such as CA, ICWA, CS, and CFA.
iv. Masters and Diploma Management Programs.
v. Other courses leading to degree/diploma conducted by
colleges/universities approved by UGC / Govt. / AICTE / AIBMS /
ICMR, etc.
vi. Regular Degree/Diploma course like aeronautical, pilot training,
shipping, nursing or any other discipline approved by Directory General
of Civil Aviation / Shipping / Indian Nursing Council or any other
regulatory body as the case may be, if the course is pursued in India.
vii. Any other course as shall be declared from time-to-time.

19. Documents required-
■ Pre - Sanction

20. ■ Post-Sanction

21. Expenses covered
■ Fee payable at college/ school/ hostel
■ Examination/ library/ laboratory fee
■ Travel expenses/ passage money for studies overseas
■ Insurance premium for student borrower
■ Caution deposit, building fund/ refundable deposit supported by
institution bills/ receipts
■ Purchase of books/ equipment's/ uniforms/ instruments
■ Purchase of computer at reasonable cost if required for completion
of the course
■ Any other expense required to complete the course like study tour,
project work, thesis.
https://www.icicibank.com/Personal-Banking/loans/education-loan/courses-expenses-
covered.page?#toptitle

22. Banks offering education loans in
India-
■ State Bank of India
■ Punjab National Bank
■ Bank of Baroda
■ Allahabad Bank
■ Corporation Bank
■ Canara Bank
■ IDBI Bank
■ Union Bank of India
■ Vijaya Bank
■ Axis Bank
■ HDFC Bank
■ ICICI Bank
■ Avanse Financial services

23. Comparative analysis of banks considered-
Comparison factors SBI ICICI HDFC Credila
1. Rate of interest 8.65% to 10.70%* Starts at 11.5 %** 9.45% to 14.1%***
2. Processing fee Rs. 10,000 (payable
at the bank directly)
+ legal and
valuation charges
1 % of Loan Amount
+ GST
1% of the loan amount or
INR 1000 whichever is
higher.
3. Repayment
period
15 years maximum Up to 15 years Up to 15 years
4. Max. amount of
loan
Above Rs. 20 lacs &
Upto Rs 1.5 Cr
Rs.1 crore (With
Collateral)
Rs. 40 Lakhs
(Without Collateral)
NA (secured)
35lacs (unsecured)
*SBI-- depending upon the education loan and the loan amount you opt for. The bank also
offers concessions for girl students and to students availing SBI Rinn Raksha or any other
existing policy assigned in favor of SBI, as per the selected SBI education loan
**ICICI-- For loan amount above INR 4 Lacs, the RoI charged is 14.6%.
***HDFC– depending upon the loan amount

24. Analysis-
■ SBI is a public sector bank, public banks offer education loans at a lower rate
of interest but they need collateral and you have to pay a certain percentage
of the tuition fees that is margin money. The approval rate is low and the
approval process is too slow. They do not provide 100% coverage of all
living expense. With SBI, one is eligible for an education loan for various
courses in the house as well as overseas, as long as the student is an Indian
National.
■ ICICI Bank levies 11.5% interest rate on their education loans, wherein the
maximum loan amount that ICICI offers to its customers is Rs 50,00,000, for
domestic educational course whereas going up to Rs 1 crore for studies
abroad. The bank has a loan repayment tenure between 5-8 years+ 6 months,
subject to course duration. With collateral, however, the tenure stretches to
maximum of 15 years.

25. ■ HDFC Credila is an NBFC, NBFCs provide different better
services than banks but at a higher rate of interest. But they don’t
provide 100% coverage & the interest rates are higher among
NBFCs.
This private bank benefits its customers with education loans up
to Rs 10,00,000 for courses in India. To be eligible for an education
loan with HDFC bank, one needs to fall between the ages of 16 to 35
years and be a resident Indian. HDFC Bank charges its customers an
interest rate of an average of 11.93%. The processing fee that one
has to pay to avail the education loan from HDFC Bank is 1% of the
loan amount + GST. The repayment period is maximum of 10 years
for loans below Rs 7.50 lakhs and 15 years for loan amount above
Rs 7.50 lakhs according to HDFC Ban

26. Advantages of Education loan
■ Makes education accessible
■ Repayment moratorium
■ Interest rate benefit
■ 80 E Tax Benefit
■ Self Independence/ Parent rescued from burdens

27. Disadvantages of Education Loan
■ Repayment pressure
■ Inability to change course
■ Getting into debt at early age
■ Poor credit scores
■ Other criteria

28. Factors to be considered while
choosing education loan
■ Collateral and co-applicants
■ Down payment
■ Interest rate
■ What it should cover?
■ Repayment period

29. THANK YOU!