Higher education is desired by everyone. .Despite inherent advantages of superior education, a growing number of students find themselves stonewalled due to lack of finances. Shortage of funds to pursue higher studies usually occurs due to economic stature of a student’s family.

Relatively affluent families may lack spare income to pay exorbitant fees demanded by reputed colleges and universities. Educational loans are lifesavers for such students. Yet, a wrong move can land a family in financial doldrums and spell doom for a chosen career .(HR Certification Course) 

Educational loan is offered by banks and other established lenders. It covers annual fees payable, entrance and exam fees to the educational institute for duration of the course. Banks offer an educational loan based upon academic record of a student. They verify if the student is brilliant and has an aptitude for the chosen study course. An education loan is exclusively for higher studies. 

Who should avail an education loan?

A loan is money spent before earning. Education loan is no different. It is an amount of money borrowed by a student. Parents are co-borrowers or guarantors. The loan is repaid with an interest, which makes the repaid amount higher.

• Students whose parents can easily afford the EMI.

• Parents who can offer ‘tangible’ collateral specified by the bank such as land or house that are not mortgaged to any other entity and gold, among others.

• Students hopeful of earning monthly income in excess of EMI.

Costs covered under Education Loan:

1. TUITION

The majority of students who take out student loans use the funds to cover their college tuition each semester. 

2. ROOM AND BOARD

Commuter students, or those who live off campus, may have a portion of their living expenses covered through student loans, as well. This may include rent, utilities and food expenses.

3. FEES

Along with tuition, most students will need to cover fees for student services on campus. Some common fees include: activities, athletics, health and counseling, technology, transportation and student union fees.

4. BOOKS AND SUPPLIES

According to College Board, students will spend an average of $1,298 a year on textbooks. In addition, they may also need to purchase other supplies, including: notepads, paper, writing implements, folders and other items necessary to complete assignments.

5. EQUIPMENT

Equipment typically includes computers, printers, scientific calculators and other materials required for classes, but may also cover microwaves, refrigerators, lamps and other dormitory necessities.

6. TRAVEL

Students who live off campus may use student loans to cover the expense of travel to and from campus, including gas and maintenance on their personal vehicles. 

7. MISCELLANEOUS

Additional expenses that may be covered by student loans include study abroad trips (through the student’s home university/college), child care for dependent children, clothing and even cell phone plans.

 

Advantages of Education Loan:

 Protects savings: A student loan would obviate the need to disturb your own investment portfolio and help preserve your financial goals, including retirement plans . 

 Contingency: If unprecedented events prolong the course’s duration, your funds can be a back-up to safeguard your child’s education schedule. 

 Tax deduction on interest: Under Section 80E of the Income tax Act, you can claim unlimited tax deduction on interest paid for 8 years. There’s no tax benefit on principal repayments. 

 Moratorium on repayments: EMIs can be scheduled to commence 6-12 months after completion of the course. That can be a relief for young professionals.

 Build credit history: Timely loan repayments build the child’s credit history and enhance her ability to access credit facilities in years to come. (HR Consulting Firm)

 Teach responsibility: Managing loan repayments will impart financial discipline in the child.

 Alternate options: Education loan approvals are not a cakewalk. Student loan (unsecured) portfolios have not been performing as envisaged.

 

Disadvantages of Education Loan:

 

 Students get trapped in the web of unsuitable education loans due to lack of proper knowledge and understanding about the loan procedures and banks’ terms and conditions . 

 Applicants are not fully acquainted with the schemes and risks involved in availing the credit. Hence, when re-payment process starts, borrowers have to deal with unexpected problems which leave them helpless.

 In case a candidate is not able to repay the loan as per schedule due to some unavoidable situations, he has to suffer great hassles owing to the bank’s mounting pressure for repayments.

 Generally in the beginning banks, do not inform adequately about workout and cancellation procedures and later start putting late fee, and other charges for delayed payments, further increasing the overall cost of loan. 

 

Undoubtedly, today, when higher education is costlier than ever, education loans are the most welcomed antidote by aspiring candidates. Certainly, these loans are the best answer to financial shortage for a successful career if chosen wisely; else, they become a burden and lead the borrower to a disastrous situation.

You can get good guidance while selecting your education loan from Top Overseas Consultants In Mumbai who help students selecting loans according to their needs.