What are student loans?
In banking terms, a student loan is called an education loan. When a student takes a loan from a bank to finance their studies, it is known as an education loan or student loan. This scheme has been introduced by the banking sector to support students who are unable to complete their higher education due to financial constraints.
A student loan helps you study now and repay later, usually after completing your education and getting a job.
Key features (India) of Student Loan
- Eligibility: Indian students admitted to recognized courses in India or abroad
Indian students who are pursuing higher studies are eligible for this loan.
- Loan amount:
- Up to ₹10–20 lakh for studies in India (varies by bank)
For studies within India, that is, for any university or college in India, a student can receive an education loan of up to a maximum of ₹20 lakh. However, this limit may vary depending on the banking system. Some banks may offer an even higher loan amount based on the student’s career prospects and eligibility.
- Higher amounts for studies abroad
If a student prefers to pursue higher studies abroad, the bank approves the loan amount based on the course fees of the foreign institute, because the cost of education abroad is generally higher compared to India
- Interest rate: Generally lower than personal loans
Compared to a personal loan, the interest rate on a student loan is always lower. In a student loan, interest usually starts after the completion of studies, whereas in a personal loan, interest starts accruing from the moment the loan is taken.
- Moratorium period:
After completing their studies, it usually takes a student up to 6 to 12 months to get a job, as securing employment immediately after graduation is a challenge in today’s time. Therefore, this scheme has an important merit: the student is required to start repayment 12 months after completing their studies, in the form of EMIs. Once the student gets a job, the total loan amount, along with interest, is converted into EMIs based on their salary, and the student repays it on a monthly basis.
- Repayment tenure:
The repayment period of a student loan is generally 10 to 15 years. In some cases, students may get a repayment tenure of up to 20 years. Students with a higher loan amount are usually offered the option to repay the loan over a longer period of up to 20 years.
Expenses covered in Student Loan
This loan covers all the education-related expenses required by the university, meaning all study-related costs are included. Students do not need to pay any money from their own pocket for these expenses. They only need to take money from their family for personal expenses, while all other educational costs are covered under this loan.
- Tuition & exam fees
- Hostel/accommodation
- Books, laptop, study materials
- Travel (for overseas studies)
- Insurance & other related costs
Security / collateral
- Up to ₹7.5 lakh: Often no collateral (government-backed schemes)
- Above ₹7.5 lakh: Collateral or co-applicant may be required
Popular student loan providers in India
At present, almost every bank offers student loans. In India, except for a few banks, nearly all banks provide student loans so that students do not face any issues in continuing their education. Nowadays, under the student loan scheme, even local and regional banks in some states have started offering student loans.
- Public banks: SBI, Bank of Baroda, PNB, Indian Bank, Canara Bank, Union bank,Bank of India
- Private banks: HDFC Bank, Axis Bank, ICICI Bank, Indus land Bank
- NBFCs: HDFC Credila, Avanse
- Government schemes: Vidya Lakshmi Portal, Central Sector Interest Subsidy Scheme
Pros & cons
Pros
- Makes higher education affordable
- Lower interest rates
- Tax benefit under Section 80E
Cons
- Long-term repayment responsibility
- Interest adds up if course/employment is delayed
A student loan helps students pay for higher education and is usually repaid after studies are completed.
At present, in India, no student is deprived of higher education due to financial constraints because student loans help support higher studies. Under this loan scheme, a student’s background does not create any difficulty in availing an education loan.
