Things you will know after reading this article:

  • What is an educational loan?
  • Types of student loan
  • Benefits of student loan
  • Eligibility for availing a student loan

An Education loan, when very simply put is nothing but a sum of money borrowed by the bank by students for higher studies like post-graduation or any form of higher studies in India or overseas. The educational loan covers areas of expenditures like tuition fee, cost of living there, book supplies. The loan is mostly deferred during the span of education, however it may be extended at times for around the duration of six months, this too depends upon the lender. This duration is also known as grace period. When it comes to applying for an education loan, there are a number of factors to take into consideration. There are majorly four types of education loans available in India-

  1. Undergraduate student loan-

This student loan can be availed by a student who has completed their secondary education and wish to pursue a three-four year undergraduate programme for a degree. The courses that are eligible for an undergraduate loan are decided by the lender.

  • Graduate loan-

An undergraduate student who has completed their UG course can apply for a graduate loan. This is also known as a professional loan. This id for the students who wish to pursue higher education.

  • Parent loan-

This loan can be availed by parents or any adult relative who wish to educate their children, but are facing a shorthand in the funds. These loans are unsecured and cover the costs of tuition fee, book supplies, uniforms and other similar expenses.

  • Career credit loan-

Career credit loan can be availed by students who wish to attend oriented programs in trading and technology for shaping their careers and brighter job opportunities.

We know the types of loans a student or their guardian can avail for higher education. The question stands, WHY should one opt for an education loan?

  • Areas of coverage- one of the most practical benefits of an education loan is the vast list of expenses it covers, like tuition fee, library charges, book supplies, lab fees, living expenses, uniforms also travel tickets.
  • Protection of savings: by availing a loan specific loan for education leaves your savings untouched, because no amount of money will be spent on education from the life long savings. This means you can use your savings for other hefty expenditures and goals like buying a house, children’s marriage, post retirement life.
  • Tax benefit: Under Section 80E of the Income Tax Act., the entire interest you pay on education loan qualify for income tax deduction. This income tax deduction can be claimed for up to eight years. 
  • Moratorium Period: Moratorium period is like a grace period given to the borrower during the tenure of the loan. During this time they don’t have to repay the loan. In case of education loans, the borrower gets a moratorium period ranging from 6 months to 1 year from the date of completion of the course, this gives the borrower enough time to look for a good job that pays well and save enough to start repayment of the loan.
  • Credit history: Timely repayment of education loan will keep the credit score up which will help them to get a loan easily in the future, especially a personal loan. 

WHO is considered eligible for a student loan?

The criteria is as followed:

  • The candidate must be a citizen of India
  • The student must hold a confirmed admission in a recognised institute UGC/AICTE/Govt. etc.
  • The candidate must have a co-applicant, for example their parents, or parent-in-law for married candidates.
  • Age- the candidate must be of the age 18 years at least, legally an adult.
  • The candidate should hold a proven fair academic record.
  • The income source should be stable, parent’s income is considered as the source of income in some cases.
  • A collateral may be applied to the loan in some cases.
  • The candidate displays good prospect of future income.

There are a series of documents required (for the student), like:

  • Identity proof- Aadhar card, Driver’s licence, Voter ID card
  • Address proof- Gas booking, electricity bill, telephone bill

For income proof, the following documents are required. These may be presented by the parent or the co-applicant:

  • Form 16 of most recent salary slips of the parent
  • Documents stating the assets and liabilities of the borrower
  • 6 months of bank statement of the borrower or the copy of updated passbook.


Opting for an education loan is the smart thing to do as it lightens the burden on parents or local guardian and the life long savings stay protected. The loan covers a large area of expenses and the candidate also enjoys a grace period during which they are free from paying the loan, and look for a suitable job for repaying.

About the Author

BankReed Admin

Banking Professional with 16 Years of Experience. The idea to start this Blogging Site is to Create Awareness about the Banking and Financial Services.

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