Everyone strives for quality education, for an experience in studying at a prestigious institution, right? Whether in India or overseas, whether for business or a job, specialized courses are highly needed.
However, they come at a cost. A large one, literally. Education is getting more expensive every passing year and it is usually the parents who suffer. Despite investing large sums, they fall short of funds.
In a case like this, student loans don’t sound that bad here, do they?
Loans are often frowned upon, and with good reason. But if there is one worth taking, it is a student loan. Most banks today have a very convenient and affordable plan to help you repay the borrowed amount with ease.
So what exactly is a student loan?
Student loans are borrowed money to pay for school, college, or university. In India, student loans are available for most courses starting with graduation. Meaning that loans for students below 18 years of age fall under the parent/guardian’s obligation.
After you graduate or complete the course (could be a postgraduate degree or diploma, or a Ph.D.), you, the borrower, must start repaying the amount borrowed with interest.
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How does it work?
The student intending to pursue a particular course is considered to be the main borrower. This means it would be the student’s responsibility to repay the amount once the course is completed.
The parents or guardians are the co-borrowers of a student loan. Only if the student is unable to pay, the co-borrowers will be liable.
Most banks usually need an acceptance letter before going ahead with the sanction. However, nowadays, a few banks have started working on pre-admission sanctions too.
The amount that you receive in hand, the tenure, the repayment structure, and other terms and conditions differ from bank to bank.
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Now, what does a student loan cover?
This is an important question to answer. Most student loans cover:
- The academic fees payable to the college
- The accommodation charges payable to the hostel, if any
- Examination fees, library charges, lab fees, etc.
- Traveling expenses
Be conscious in choosing the bank lending to you. While borrowing such a huge amount, make sure you are borrowing to fulfill all your academic utilities, applicable as per the list here.
The sum you are borrowing should justify the use. It does not make sense to borrow a sum and pay for its interest while expending on other academic needs too. Find out which bank’s offering works the most for you.
What are the documents required to apply for a student loan?
- The acceptance letter from the college
- Grade 10th and 12th mark sheets, your degree certificate/mark sheet from the last semester of graduation.
- Income statements of applications.
How do you repay a student loan?
Every student loan gives you a year to build an income stream for yourself. This means that once you complete the course you have borrowed the money for, you have a year at hand to start repaying the debt. This is what you call a moratorium period.
And how long does the repayment go on? Well, the number of years differs from person to person, but the maximum time that any Indian bank can give you is 15 years.
Student loans are a great way to fuel your dreams and they have proven to be a wonderful decision for many. However, before you go ahead and sign those papers, make sure you are taking care of a few things. Like –
- Paying earlier than you must
While every student loan comes with a moratorium, the interest continues to accumulate. So if you think you’re in a position to repay and do wish to pay off the debt quicker, repay some bit in that moratorium.
- Don’t borrow more than you can afford
There is no maximum limit to a student loan, and you can have multiple expenses covered under it. But as you raise the bar, your EMI expenses are rising in the future. Decide on an amount by thinking about your future affordability.
- Negotiate with your banker
If you do not get a job even after a year of completing the course, due to economic conditions, you can request the bank to extend the moratorium period a little.
- Tax benefits
Remember, under the Income Tax Act, the interest paid on student loans is eligible for deduction from your income up to 8 years of the loan.
The last word:
Student loans are a brilliant way. Education may be expensive, but it should not be out of anyone’s reach! It is easy to benefit from it, provided you have planned well beforehand and are disciplined in your expenditures when you finally start earning.
Planning on taking on more debt? Check out this article on the types of loans you can borrow.