Explore How Presidential Candidates Stand on Student Loan Debt

While the race for the Democratic and Republican presidential nominations remains an early and crowded one, the Student Loan Ranger thought it might be a good time to start getting an idea of where some of the candidates stand on student debt.

We're glad to see that so many candidates are making student debt a priority this early in the race, because it is usually an issue that candidates don't take a public position on until the general election. Since there are almost too many hopefuls to count right now, we'll just focus on the current top two from each party. 

Hillary Clinton

Democratic candidate Hillary Clinton rolled out her higher education plan, called The New College Compact, this past August. The plan can be summed up by a quote from a speech she gave in New Hampshire the day it was officially released: "No family and no student should have to borrow to pay tuition at a public college or university," Clinton said. "And everyone who has student debt should be able to finance it at lower rates." 

The plan isn't so much about new ideas, but about picking and choosing from policy proposals currently being batted around by both sides of the aisle. Therefore, it seems to hit some liberal as well as conservative notes.

To reduce future student debt, Clinton proposes offering grants to states that reinvest in and work with their public colleges to allow students to attend with a minimal, wage-based contribution and no debt. Community colleges would be completely tuition free.

Existing student loans would see a significant decrease in interest rates and simplification of the current myriad of income-driven repayment options. The plan would also encourage higher college completion rates, require college creditors to require more flexible and robust education methods and require colleges whose students are unable to reasonably repay their loans to contribute to a program that supports schools that serve low-income students.

The $350 billion price tag may prove to be one of the most controversial parts of the plan. Clinton proposes this be paid for with tax adjustments for the wealthy.

Ben Carson

While Clinton's proposals focus on increasing funds for higher education assistance, Republican candidate Dr. Ben Carson has somewhat of an opposite view. His solution for paying for college comes in the form of existing Pell Grant funding and, as he noted during a 2014 interview, "there is a four letter word that works extremely well, it's called w-o-r-k, work."

In a more recent interview, he expands his position to say that while student loans are OK, their interest rates are not. He says that schools should carry part of the responsibility of student loan debt by paying for the interest on the loans for the students they enroll.

In a more official statement on education, Carson criticizes the federal Department of Education, but unlike other Republican candidates who have called for it to be eliminated, Carson would like to use the department to "monitor our institutions of higher education for extreme political bias and deny federal funding if it exists."

Source: (https://educationloansinindia.wordpress.com/2015/10/30/explore-how-presidential-candidates-stand-on-student-loan-debt/)

Education Loan: A financial boon for students

Education is one of the most planned investments in India. Every parent wishes a bright future for their child.  In consideration to liberalization in monetary policy, onset of education loans has facilitated students to pursue higher studies in India or take up studies abroad. It helps the deserving bright students to follow their choice of career without worrying about funding. It has become a boon for both parents as well as students.

Nowadays, educational loan facility is offered by all the banks as financial institutions in seeking school and college admission. These financial institutions have scrutinized the scope and needs of education sector and have accordingly, formed alliances with recognized educational institutions to ease the burden of candidate. Moreover, parents and students can easily get education loan as well as Student Loans In India while they are applying for online school admission and online college admission.  The question that arises in our mind is which bank is giving the loan at cheaper interest rates?

Let’s discuss the points to look at before applying for education loan for school or university admission.

Rate of Interest :

The foremost point of consideration before choosing the bank is the offered rate of interest. It depends on three things I.e. Loan amount, Tenure of loan, Educational institution. The obvious option would be the bank with a cheaper rate.

Eligibility Criterion:

Each Bank or Financial Institution (FI) has fixed its eligibility criterion based on which the loan is granted to the applicant student, for instance, student’s academic track record, Type of institute I.e. whether it is approved by central or state government or any foreign institution, viability of the borrower, nature of the course or the repute of the institute etc.

Repayment Method:

Every bank or FI has its own repayment criterion i.e. some fix it up to 5-7 years or some start after the completion of course or as the student get placed and start working.

Collateral/Margin/Third Party Guarantee :

 It is a must for all the banks provided the loan amount is above Rs.4 Lakhs. One can choose a bank/FI depending on the kind of security the applicant can give to the bank or FI.

 

Amount of Loan: This is generally fixed for all the banks i.e. Rs.10-15Lakhs for higher studies in India and Rs.20-25 lakhs for studies in abroad. 

Source : http://www.blog.epravesh.com/how-to-get-education-loan-in-cheaper-rate-in-india/

Education loan : Clarifications On Education Loan Interest Subsidy Scheme from Rahul Singh

How To Stay On Top Of Your Student Loans

For most people, student loans represent their first encounter with the world of credit and finance. They can open a world of opportunity to young people who might otherwise not be able to pay to continue their education. More than 60% of American students (that’s almost 12 million in total) will borrow money annually to help pay for college. It’s likely that this is where you’ll begin to build your credit score: a little number with huge consequences. It can be intimidating, but there’s really no reason to stress out. Staying in control of your student debt is easier than it sounds. When dealing with loans, you should

Know the nitty-gritty details of your loans and your lenders

Ignorance is not bliss when it comes to dealing with educational loans. The first and most important step to staying on top of your loans is getting up close and personal with all the details. Not all student loans are created equal, and students may use a combination of different types of federal and private loans to make up their financial package. Each type of loan carries its own terms, and you should be familiar with the specifics of every loan you take out. Make sure that you know exactly how much you owe, what your interest rates are, and what minimum monthly payment you’ll be expected to make. Many loans come with grace periods, which are amounts of time after graduation you can wait before beginning repayment. Grace periods can vary greatly between loans, so it’s vital that you keep an eye on what will need to be paid when. Keep careful record of the contact information for all of your lenders (loans are often sold between institutions, so they are subject to change), and keep in touch with them. If you find yourself unable to make the monthly payments, they should be your first call. There are many options out there to deal with repayment issues, but if you don’t let them know what’s happening, they can’t help. It’s common to move around a lot during and after college, so be sure to update your lenders on any changes in address to avoid missing statements.

Be strategic about your repayment plan

Deciding when and what to pay can make a real difference when figuring out your student loan repayment plan. If you can manage it, pay off the highest-interest loans first, regardless of their grace periods. This is actually a great financial tip for all kinds of debt. Subsidized federal loans don’t accrue interest while you’re in school, but most other loans will. If you can budget to pay even just the accruing interest while you’re in school and through your grace period, you’ll make a real dent in the final figures. If you can make payments on the principal, this is even better. Many lenders will allow you to pay early without penalty, and chipping away at the main loan is the most effective way to get out of debt early. After school, if you’re struggling to make payments, deferment or forbearance are options, and certainly better than just missing payments or defaulting. But remember that both of these options may increase what you pay over the term of the loan, because interest continues to accrue each day. They should be considered a last resort, and you should fight hard to resume payments as quickly as you can.

Sign up for automatic debit

If you miss a payment on your student loan, you’re looking at late fees and adding to the amount of interest that accrues. You don’t want to add to the amount you have to pay, so you should do everything in your power to minimize the chances of paying late or skipping a payment altogether. Setting up an automatic payment may be a great first step. This may simplify things for you, and you might even be able to take advantage of other benefits. Some lenders offer special deals to borrowers who can consistently make their payments on time. By signing up for automatic payments, you may be able to qualify for reductions in your interest rate or principal, which can save you a lot of money in the long run.

The truth is, borrowing money for college is a fact of life for many people, and with a bit of education (see what we did there?) it’s totally possible to take the fear out of the equation and use your Educational Loans to build a solid financial future for yourself.

Source : https://blog.creditkarma.com/debt/loans/how-to-stay-on-top-of-your-student-loans/

Education Loan and Alternative Funding Information for Indian MBAs

There are many options to consider when looking at how to fund your postgraduate studies. You can apply for an education loan, exclusive MBA scholarships for Indian students, and also alternative subsidizations. Often, however, not all of these choices are readily visible with a broad Google search and the process can be time consuming.

Depending on the program, the price of studying for a MBA can easily reach between US$50,000-US$60,000 per annum – if not more. And, despite the fact that an MBA will provide you with better career prospects and therefore a good chance of paying off your student debt quickly, it is very valuable to know your options when it comes to initially covering this cost. There are many different types of funding for each individual situation; choose the right one and there’s a chance you could end up saving hundreds of dollars. You might even gain a scholarship or fellowship into your chosen school and end up not having to spend very much money at all.

MBA scholarships for Indian students.

A number of top business schools around the world offer Education loan for MBA which are available to browse on their respective websites. Like undergrad scholarships, MBA scholarships are given on the basis of need or merit and can either provide either full or partial living expenses. A partial scholarship would require the student to find additional funds.

The downsides to scholarships are that they are often restrictive in terms of eligibility criteria, and are few and very competitive. Also, in order to be considered, you must apply early and within certain deadlines. You should also bear in mind that often students can only apply to receive a scholarship once they have been accepted to their chosen school.

Flexibility of repayment terms.

What should be kept in mind here is the date you are required to start your repayments and the timeframe you have to repay it. Often for Indian banks repayment begins six months after the completion of the program or one month after the borrower gets a job, whichever is sooner. Often the maximum tenure of repayment is 15 years, beginning from the day you receive your first loan payment.

Prepayment penalty.

A prepayment penalty may sound illogical to someone who considers faster payment better, but it is implemented to protect the bank from losing out on the money it would have received in interest if you had taken the full term to repay your loan. Often the penalty is based on the rate of a certain number of months of interest. If you are planning on paying off your loan with a lump sum, you may want to find out exact figures from your chosen loan provider.

Collateral requirement.

Indian banks tend to ask for collateral on your loan. Specific information is available from their respective websites but generally this is what they ask for;

·         Loans of up to approximately US$6,500 – No collateral required.

·         Loans of above US$6,500 – Requirement of a guarantor (e.g. a parent to sign a contract should you waiver your payments)

·         Loans of above US$12,000 – Requirement of a guarantor along with an assessment of future income. In some cases this includes proof of assets such as a house, shares or an insurance policy up to 200% of the overall loan amount.

 Source: (http://www.topmba.com/india/education-loan-and-alternative-funding-information-indian-mbas)

How to get an Education Loan in India

Many of us are used to the idea that our parents are going to pay for our education. However, this may be difficult in many cases if you are opting for super expensive professional studies. A model has emerged now under which students go to expensive colleges that lead to good recruitment, making it easy to pay for the educational loan when the student is finally employed.

Education has been commoditized and studying from the top-notch B-school or law school adds to the professional skills in your portfolio and gets you a placement for a good desk job. But often such placement-guaranteed education comes at a great price. The only option when you don’t have the moolah then is to take an education loan, with the hope that you shall be in a position to pay it back from your earnings after graduation.

Understanding Education Loan

An education loan is a form of credit advanced to scholars and students; it is designed to help students pay for college tuition, books, laptops, hostel fees and other living expenses. It differs from other types of loans in that the interest rate is often substantially lower than most other loans and the repayment schedule is deferred while the student is still in school. It is priority sector lending for bank and also often relatively profitable – so most banks offer educational loans in large numbers.

An educational loan looks like a noble endeavour, but banks cannot afford to grant you the loan without assessing risks involved. Since you aren’t going to start repaying the loan for at least 3 years (5-6 years in case of law students) from the issuance date, the bank is investing in something that isn’t going to start repayment for quite some-time in the future. So, they will be cautious and extra careful when someone asks them for an education loan.

And still, getting an education loan should be a piece of cake compared to the effort you shall put into getting through a good college, B-school or law school. It can be a blessing for those who want to study and achieve their goals but do not have the money to pay.

Where does it come from?

Good question indeed.

Not everyone can offer a credit which you are going to return after n number of years. Here in India almost all the Public Sector banks offer Education Loan.

Some of the nationalised banks such as SBI group have special programmes, some of them are:

• Lower interest rates for girls, SC, ST, disabled.
• Lower interest rates for toppers, etc.

Taking education loans from government bans like SBI, Corporation Bank or UCO Bank is advisable because private banks impose stricter and more difficult conditions for educational loans.

Requirements:

Some banks have restrictions like:

The student or the guarantor should have a valid bank account for at least 6 months,

or the residence must be within 2 km from the bank branch, and so on.

The documents required may change from bank to bank, time to time. Usually the following will be asked for:

• Mark sheets of your last qualifying exam
• Proof of admission into the college
• Schedule of expenses for the course
• Photographs (Usually passport size)
• Bank Account Statement of the Borrower for the last six months (If Applicable)
• Income tax Assessment statement of the guardian (Parents or Guardians)
• Statement of Assets & Liabilities of the co-borrower (Parents or Guardians)
• Proof of Income of the Guardian
• Identity Proof like Driving License, Passport or Voters ID for both the student and the Guardian
• Address Proof like Ration Card or Electricity Bill etc

The list above is not exhaustive but it covers most of the documents that may be required to get an education loan. So, it is your responsibility to perform the entire requisite due diligence to ensure that you know what the bank will ask for when you go to them for the loan.

Important Do’s and Don’ts for Education Loans

An education loan is a long term financial commitment, certain things are important and you need to remember them. They are:

• Do thorough research while applying for an education loan.
• See if your requirements match with the requirements of the bank.
• Read all documents carefully, never assume anything.
• Try to understand all the terms and conditions properly.
• Don’t involve any middle agents or brokers. It is better to deal with the bank directly.
• Preferably opt for a bank that is near your home where you or your parents have a bank account for a few years and have a good reputation.
• Make sure you submit all the relevant documents.
• Do not forge any documents in an attempt to fast-track your case.
• Do not attempt to bribe anyone.
• Make sure you follow-up with bank officials regularly.

Courses eligible for loan

There are many courses that are eligible for an education loan. Here are some of them:

Courses in India

• Graduation courses like BA, B.Com, B.Sc etc
• Post Graduation courses like M.Sc, M.Com, PhD etc.
• Professional Courses like Engineering, Medicine, Law, Veterinary, Management etc
• Courses like ICWA, CA, CFA etc

Courses Abroad

• Post Graduation Courses like MCA, MBA, MS etc
• Graduation courses offered by reputed universities

Please note that, this is not an exhaustive list. It is just an indicative list that shows you the kind of courses which are eligible to get an education loan.

Repayment

Repaying a student loan is different. In most cases, payment can be deferred on the principal and the interest until the student is out of school. It can b postponed to 1 year after graduation as well, though not very advisable as the interest piles up. The best course of action is to keep paying down the interest throughout the loan period so that interest is not compounded – but this is a question of means. Also note that there is a income tax deduction available for interest paid on educational loans.

 Repayment typically begins anywhere from six to twelve months after you leave school, regardless of whether or not you complete your degree program. In some cases, repayment begins if course load drops to half time or less, so it is important to check the exact terms and conditions of any student loan.

The student may have multiple options for extending the repayment period, although an extension of the loan term will likely reduce the monthly payment, it will also increase the amount of total interest paid on the principle balance during the life of the loan. Extension options include extended payment periods offered by the original lender and federal loan consolidation. There are also other extension options including income sensitive repayment plans and hardship deferments. Extensions and consolidation will also add to the principle, many times the unpaid interest and penalties becomes capitalized.

Try to ensure that there would not be any prepayment charges on your education loan. This means if you pay down the loan ahead of schedule, thereby saving on interest payment, you will not be penalized with a prepayment fee (most private banks charge prepayment fee) – this is a great way to reduce interest costs.

Cost of Loan

Cost of Loan is the extra amount of money you pay in repayment that is actually the rate of interest and the processing fee if any.

In India it’s good that the rate of interest offered is almost constant across all banks with a 0.5 to 1% difference at max. Interest rate of 13% with no processing fee is obviously cheaper than a 12% rate of interest loan with a 2% processing fee so look out for these nasty fine prints. a 1% interest rate can mean difference of tens of thousands of rupees or more over a 5-10 years that you may take to pay the loan back – so be very careful.

Repayment period

Repayment period depends upon the duration of the educational course, some might be 2 years and some might even be 6years, it basically depends upon the agreement between you and the Financial Institution.

In some cases Repayment starts right from the time when the course ends, some may give a moratorium of 6 months or 1 year after graduating from the school.

Tax benefits

Repayment of any type of scholar loan is eligible for tax rebate under Section 80E of the Indian Income Tax Laws covering the entire sum of money combined with interest and fines if any.

Source : http://blog.ipleaders.in/how-to-get-an-education-loan-in-india/

Get to Know Private Student Loan Repayment Options, Restrictions

Back in May, Sen. Elizabeth Warren, D-Mass., introduced the Bank on Students Emergency Loan Refinancing Act, a bill that would have allowed borrowers to refinance their private student loans into the federal loan program, under existing federal loan interest rates. These loans would then be eligible for many of the lower payment and forgiveness benefits available to federal loan borrowers.

Despite a companion bill in the House, extensive media coverage and a respectable number of co-sponsors, the bill failed to move to a vote. However, it gave many private loan borrowers struggling with their payments some hope. After all, as those of you with private student loans know, they can be almost impossible to negotiate if you cannot afford your payments.

If you're wondering why private loan lenders are so inflexible, it's because in many cases they have to be. Here's a look at why.

The Rules for Retail Credit

Private student loans fall under a category called retail credit, and all its associated rules and multiple state and federal regulators. With very few exceptions, lenders of retail credit are not allowed to offer any programs or alternatives to a loan that would substantially alter the terms of the loan.

In general, this has been understood to mean that any relief, whether it be interest-only payments or forbearance, can’t be offered for more than six months total, or 12 months in extreme circumstances. While this can be useful if you’re unemployed for a few months, it will only prolong the inevitable if you simply have a high debt and a low income.

Ironically, lenders have a lot more freedom once the loan defaults. In the world of private student loans, the loan is considered in default or charged off after it becomes 120 days past due.

A charged-off loan is deemed severely past due or uncollectable on the books, but that doesn’t mean the borrower still doesn’t owe the debt. What it does mean is that altering the terms of the loan won’t run the lender afoul of its regulators’ accounting requirements and the retail credit rules.

Unfortunately, a severely delinquent loan is also an expensive loan to manage, so it may be more cost-effective for a lender to sell charged-off loans to a collection agency at a discount than to spend the time working out an alternative payment plan with a borrower who may or may not fulfill their side of the agreement. So, don’t intentionally go past due in the hopes of altering the terms or getting more repayment options on your loan.

Options for Private Loan Borrowers

There are a few things a borrower who is struggling with private loans can do.

First, take a long, hard look at your budget and sort out the wants from the needs. Second, if you have federal loans as well, get that payment down as low as you possibly can via the lower payment options or even deferment. If you can do either of these, put that extra money toward your private loans.

Also, check to see if you can get a lower interest rate and maybe extend your payment term via consolidation. There are quite a few private loan consolidation products out there now.

If you do default on your private loan, it’s worth trying to talk to the lender as soon as possible to attempt to work out an alternative payment plan. If you aren’t successful, it’s not a bad idea to send as much as you can per month, every month. Unfortunately, a defaulted private loan is ripe for litigation, but that tactic can be very expensive and a collection agency is less likely to take that action on a borrower who is making a good-faith effort to pay.

Finally, if you have a problem with your private student loan, you can file a complaint with the Consumer Financial Protection Bureau.

It’s important to understand the terms and conditions of your Education Loan Private before signing on the dotted line. The first bill is not the time to figure out that your loan payments are not affordable, especially when the alternatives are so few.

Source: (https://educationloansinindia.wordpress.com/2015/10/26/get-to-know-private-student-loan-repayment-options-restrictions/)

Admission season special: A students' guide on how to get an education loan

Is education an 'essential item'? It may not be included in the list of such items, but the fact is it is an essential item. As all other items in the list, this too has been bitten by inflation and quality education is almost out of bounds for many because of the cost factors.

Consider this: The same engineering and medical degrees, which used to cost you Rs 2-3 lakh per semester earlier, now cost Rs 4-5 lakh. MBA costs more than Rs 25 lakh in premium colleges.

And, even if the student has managed to secure the coveted seat in a course of her choice, the cost of higher education has risen over the years and how. If you are a parent or a student looking for an education loan, this admission season, here are five things you better keep in mind.

Who can get a loan: Only Indian citizens can avail an education loan. It can be availed by the student with parents/guardians as co-applicants, or by the parent for a child for studies in India or abroad.

Loan options for courses and institutions: Most banks will give you an education loan, only if you meet certain criteria’s. This means, you can get loan if you are planning to study in a recognized institute, especially for courses which are in demand like MBA, medical studies and engineering and other vocational courses. If you are planning for an admission in a less reputable college or an offbeat course, it makes sense to get a loan from a cooperative bank or financial services institutes like Avanse. Institutes like these are more open to such courses compared to approaching a public sector bank.

Loan sizes vary: The size of the loan you can take will depend where you plan to study. For most courses in India, you can get a bank loan of up to Rs 10 lakh. For a course in a university abroad, the loan amount could go up to Rs 20 lakh. Other financial institutes which offer education loans like Credila and Avanse offer a higher amount of education loan. While some lenders may offer you 100 percent finance. There are those who ask you to set aside 5-15 percent of the loan amount as margin money. Almost all banks ask for a collateral or co-application in case of a higher loan amount, which is between Rs 4 lakh to Rs 7.5 lakh, depending on the lender. Any immovable property like your house, fixed deposits, insurance policies, National Savings Certificates and alike are accepted as collateral.

Fees and cost: If you are a female candidate, one way to reduce the cost of your loan is to take it from a public sector bank. They usually give a 50- 100 basis point discount on interest rate. The rate of interest varies amongst lenders and is usually in the range of 11 to 16 percent per annum. The processing fee is around 2 percent, but if you have secured admission in a premium course at a premium college where your future earning potential is high, you can also bargain with the lender to decrease or waive off the processing fees.

Loan repayment criteria: Study loan comes with a moratorium. This simply means the period during which you don’t need to repay the loan. This starts while you are studying the course and extends up to a year after the course is completed. If you get a job immediately after this period, the moratorium ends within six months of being employed. Once the moratorium period is over, you get seven years to repay the loan. But, we suggest that instead of utilizing the moratorium period, it's better to start making payments even during the duration of the course. Reason being, with some lenders if you pay off the interest component of the loan during the course, you can get an interest waiver of up to 1 percent for the moratorium period.

Source: (https://educationloansinindia.wordpress.com/2015/10/24/admission-season-special-a-students-guide-on-how-to-get-an-education-loan/)

MS in the US : What you need to know about Educational Loans

A college loan covers cost of tuition, living costs and insurance, flight costs, and other incidentals. Given the wide variety of choices available today, by putting in some effort, it is possible to find the best deal for your needs. Taking an education loan is also a smart move as you don’t need to break your savings and you get hefty tax benefits.

Who should take a loan and why

All students pursuing higher education should take a loan for funding their education. This includes people who already have sufficient funds, i.e. those who have either saved substantially or have considerable backing from family or guardians because, Indian taxation laws allow for a favorable benefit of tax deduction for the repayment of the loans. A total of up to Rs 40,000 is allowed as annual deduction from taxable income under Sec 80E of the IT Act.

Eligibility

Students pursuing full time higher education, in graduate, or post graduate studies, professional education, pure and applied science courses are allowed to claim this deduction. This includes students pursuing overseas education. Most lenders require that students show proof of admission to the graduate or PG program; however, there are some institutions.who allow you to secure a loan before securing admission. There are no minimum or maximum age restrictions, although students are usually above 16 years of age or have completed at least the 10th or 12th grade.

How much loan can you get & when and how do you repay?

Students going abroad can get a loan for up to Rs 20 lakhs from banks and Rs 25-30 lakhs from financial institutions. There are slight variations in regard to application process, documentation, interest rates, guarantees etc. Loan repayments begin one year after the end of your course or six months after you secure your first job, whichever is earlier. Most lenders also allow for additional time for course completion in case the student is not able to finish the course on schedule. Loan repayments are spread over 5-7 years, and include options for closing early.

Interest, margin money, guarantors & collateral

·        As with all loans, borrowers need to repay the principal (actual amount borrowed) with interest, which is a price you pay for usage of the loan facility. This is a floating percentage, which may be revised as per RBI guidelines and at the lender’s own discretion. For educational loans, the interest rates are in the range of 11-14% for most Nationalised banks and financial institutions. Girls generally get a 0.5% concession. Click here, to see a quick summary.

·        There is also the all important factor of “margin money”! What this means is that most lenders will not loan you the entire cost of education – they also expect you to pay part of it. In other words if, for example, your education costs are Rs. 10 lakh in all, and there is a margin of 15%, then, the bank will lend you Rs. 8.5 lakh, and you will have to put up the remaining Rs 1.5 lakhs. The idea is to ensure that the loan seeker has the ability to bring money in and demonstrates responsibility in doing so. This gives some assurance that the borrower will make sure that it is used wisely. Not all lending institutions insist on the margin money

·        A guarantor is a third party (different from the applicant), who agrees to undertake responsibility for the repayment of the loan in case the original borrower is unable to repay it. Besides this undertaking, lenders generally also ask for collateral in the form of fixed deposit receipts, residential or other property deeds, or other security, which is then kept in the lender’s possession until the loan is repaid. This is done to safeguard the bank or lender against a bad debt. The lender may waive the guarantee if the borrower’s previous repayment track record or financial history is very sound. Typically, loans up to Rs 4 lakh need neither collaterals nor margin money. Besides, students securing a scholarship could have the margin waived on account of the scholarship grant.

·        If payments are defaulted on i.e. not made on time or, there are provisions for penalties/late payment fees in the loan contract. Besides, defaulters also stand the risk of being ‘black listed’ which severely limits their future credit options. However, most bankers or institutions are receptive to negotiation and, in case there are genuine difficulties, do allow for extensions on payment tenure, or reduction of EMI’s.

So, look around and see what your options are – A Education Loan in India good loan deal can be a big asset in helping you achieve your dream.

Source : http://www.dilipoakacademy.com/blog/2013/04/04/ms-in-the-us-what-you-need-to-know-about-educational-loans/

Understanding Education Loans

Education is expensive and Higher education is all the more expensive especially foreign education. Hence the need for education loan, which is a  financial aid given to meritorious but needy students for meeting the expenses of their higher education in India or abroad. In this article we shall explain education loan, what it is, process of getting education loan, repayment, tax benefits under section 80E.

How expensive is higher education?

Education has become very expensive and Higher education is all the more expensive . Our article Rising Education costs ! covers survey which shows school education for a child in 2011 costed Rs. 94,000 annually for single child. Example of fees of higher education is given below .

What is education loan?

Educational loans are available for the purpose of higher education. Higher education means any course of study pursued after passing the Senior Secondary Examination or its equivalent from any school, board or university recognised by the Central Government or State Government or local authority or by any other authority authorised by the Central Government or State Government or local authority to do so.

·         The course should necessarily be full time.

·         It can be graduate or post-graduate course in technology, engineering, architecture, medicine, management and applied or pure sciences, including mathematics and statistics etc.

·                  It can be pursued in India or abroad.

·               One gets tax deduction for education loan taken.

Who gives out education loans?

Most of the financial institutions and banks give out educational loans. As the Reserve Bank of India (RBI) has included education loans as part of the priority sector lending of banks, the public sector banks are at the forefront of such loans.

What is covered under the loan?

Education loans take care of all expenses incurred such as :

·         Admission, tuition, examination and library fees

·         Cost of purchasing books, computers and other equipment.

·         Some banks like State Bank of India also offers loan for two-wheeler if hostel and college are far.

If the loan is being taken for studies overseas, travel expense is also included in the loan amount. As medical expenses are high in countries such as the US, the loan also accounts for health insurance. Although the bank is in India, the student gets his amount in dollars for studies overseas, and the amount is paid directly to the institution abroad. The banks charge students a fee for this service, strictly as per RBI norms.

What is eligibility criteria for an educational loan ?

Eligibility criteria varies from bank to bank. Some common criteria are:

·         The institution must be recognized

·         Confirmed Admission Letter from college or institute

·         Age of the student must be 16-26 (for some banks 16-35 years)

·         Student should have good academic record

·         Regular income of parent/co-applicant

What is the maximum amount lent by the bank?

Under the education loan scheme, one can avail of a loan up to Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad.

What is the interest applicable on Educational loans?

The interest rates vary from bank to bank and depends on the amount of the loan taken.

Education loans are usually on floating rates where the interest rates may change. Some banks such as Bank of Baroda, offer a fixed rate of interest, which is usually 2-2.5% above the bank’s base rate. Special concessions on interest rates of 0.5/1 percent are available for women students.Typically, interest rates on educational loans range between 9% to 14%. Rate may vary depending on the course, college/institute and university. Banks usually offer concessions to students who have secured admission to premier institutions. For instance, if someone joins an IIT or IIM, one’s loan might be cheaper by half a percentage point.

One can compare the rates at Deals4loans compare educational loans , RupeeTalk Education Loan. Verify it with the bank. (Note: We have no affiliation with any of the sites mentioned here, We are not recommending them. It is for informational purpose only)

Where can the loan be availed from ?

Loans can be availed usually from the native place of the student because of the KYC (Know Your Customer) requirements.

Does one need to provide a guarantor or any other kind of security?

Every education loan  requires co-applicant or joint borrowers such as parent, spouse, siblings, in-laws . For smaller amounts of loans (amounts upto Rs. 4 lakh) banks do not ask for any guarantor or security. However, most banks ask for either a guarantor or for some kind of security such government securities,gold, shares, fixed deposits,  LIC policies and real estate other investments etc.  At times banks ask for Third party guarantee . It means one’s uncle,  father’s friend or any of the relatives can make this third party guarantee. (First being applicant, second being co-applicant). This is to ensure if the first/second guaranteed person is unable to to pay then 3rd party person have to bear the loan.

·         For a loan up to Rs 4 lakh, co-obligation of parents is required

·         For loans above Rs 4 lakh and up to Rs 7.5 lakh, co-obligation of parents together with third party guarantee is required.

·      For loans above Rs 7.5 lakh, co-obligation of parents together with tangible collateral security of suitable value.

Are there any other fees applicable while taking this loan?

Banks may charge fees for approving the loan and doing  the paperwork called as the Processing fees. These fees range between 2.25% and 2.50%. Usually, the banks(especially public sector banks) do not charge any processing fees for education loan.

A student may need to bear the margin amount. A margin amount is the amount that the applicant bears himself/herself.  For example if a Bank offers a education loan  and the margin is 10 per cent. Then 90 per cent of the cost of the course will be borne by the bank and the balance 10 per cent has to be borne by the student/applicant. Normally, banks do not approve the loan that would cover the entire cost of your education. Margins are usually required for loans more than Rs 4 lakh and 5 percent and 15 percent respectively for study in India and abroad on loan above Rs. 4 lakhs.

What are the documents required while applying for the loan?

The required list of documents may vary from bank to bank. The most common documents are:

·         Proof of admission . Educational loan cannot be applied without proof that admission has been secured in the selected institution,

·         Schedule of fees from the institution

·         Mark sheet of the last qualifying examination

·         Photographs

If the applicant is earning then:

·         Bank account statement

·         Income tax assessment order of last 2 years

·         Proof of income

·         Brief statement of assets/liabilities

When the loan is required for studies abroad, one also need to have passport and visa ready along with the admission letter.

How much time does it take for education loan to be sanctioned?

Loan applications are received either directly at bank branches or through online. Sanction or rejection of a loan is supposed to be communicated within 15 days of receipt of duly completed application. Students can demand reasons for rejection of loan application in writing from banks.

How is the loan amount disbursed?

Disbursement of the educational loan is made directly to the institute or college to which the student has applied for admission. In the case of mess and hostel charges, the relevant amounts are given to the concerned authorities.  Initially, while applying for a loan, the bank will verify the tenure of the course, and determine the cost of the entire course, as applicable at that point of time. Then, each year, the applicant is required to submit a form available from the bank that gives the details of the money required, and then the bank directly disburses the loan to the college/institute.

In the case of air fare, which is also available for studies overseas, the amount is given directly to the airlines. Some banks do give the students themselves a certain amount on a monthly or quarterly basis for purchasing books, equipments and other related material associated with the course. This, again, depends on the discretion of the bank.

However, if a student has already taken admission and incurred expenses, banks reimburse these if the original receipts are produced within one month for studies in India and six weeks if the applicant is going overseas.

What is the process of education loan?

When does the repayment of the loan starts?

Normally, the repayment begins after the loan is disbursed and the payments(Equated Monthly Installments (EMI)) have to be made each month. But for Education Loans Repayment usually starts six months after the course completion or the starting of a job, whichever is earlier. The period during which  borrower is not required to make any repayment is called holiday period or moratorium period.

·         Interest calculations start as and when amounts are disbursed  and not on the entire loan amount at once.

·         During the moratorium period, on an education loan the bank will calculate interest on your loan on simple interest basis. This interest will be accumulated until the end of the moratorium period.

For example, if a loan amount of Rs 1 lakh is released at the start and interest rate is 11% per annum, a total interest of Rs 11,000 per annum or Rs 33,000 for a three-year moratorium period will be accumulated. At the end of moratorium, Rs 1,33,000 will be the amount on the basis of which future interest and EMI will be calculated.

There are some banks that offer a concessional interest rate (of 1%) if one agrees to pay the interest portion of the loan during the moratorium period.

Are there any tax benefits for educational loans?

The tax benefit on education loan is available under the Income Tax Section 80E.

·         Deduction is only on the interest component. One can deduct the entire interest paid (without any limit)

·         There is no deduction available for repayment of principal

·         Anyone who has taken education loan for self, spouse or children, is eligible to claim tax deduction.

·         The education loan should only be taken from approved charitable trust or a financial institution. In case you have taken loan from your relatives, friends or employer that amount would not qualify.

·         The deduction is applicable for the year you start paying your interest called as the Initial Assessment year.

·         The deduction is available in respect of the initial assessment year and seven assessment years immediately succeeding the initial assessment year or until the interest is paid  in full, whichever is earlier.

·         The deduction is available for individual only and not for other type of assessee such as Hindu Undivided Family .

Interest certificate from the bank can be submitted to Employer in which case Form 16 will show the tax benefit. Else one can claim it while filing Income Tax return. In any case one needs to show it in Income Tax return

Source : http://www.bemoneyaware.com/blog/education-loans/.