How to Apply for a Student Loan

The phenomenon of studying abroad is very popular in today’s age and time. Lakhs of students visit foreign countries to pursue their higher studies because of the quality of education and exposure to new lifestyle and culture. Living in foreign countries not only expands your knowledge but also broadens your overall views about the world we live in. Students are enthusiastic to experience the foreign culture along with their opportunity to live and explore the parts of the country.

Living in a foreign country is an enriching experience. The educational stay is not only limited to obtaining knowledge related to the field of interest but also is an experience which develops an individual’s overall personality. International education is a beneficial experience and is popularly favoured by students in scope of growth, knowledge and development.

It is a fact that studying abroad is very expensive and because of financial resistance many students reconsider studying abroad. Even with the help of scholarship schemes, some students cannot afford studying abroad. Tuition fees, accommodation expenses, food expenses, travel expenses and other daily and university expenditure are some of the financial aspects of living abroad.

What Does the Student Loan Cover?

Banks in India are support to students who want to pursue higher studies abroad in financial aspects by sanctioning their student loans. Education loan in India for study abroad are offered by many reliable banks. Most of the banks in India sanction only 90% of the student loan for studying abroad. Rest of the 10% is expected to be organized by the applicant. Following are the expenses the student loan covers:

• Tuition fees of the university
• Accommodation charges
• Equippments like laptop or project expenses, if needed
• Books and stationery
• Examination fee
• Airfare expenses

Banks usually sanction all the basic and university requirements under education loans which give students the opportunity to experience living and studying abroad ethically.

How to choose the right bank for Student Loan? 

Many banks offer education loan for foreign studies, however choosing the right funder is very important. Opt for a bank that considers your priorities and is providing student loan that you can repay according to your terms, following points should be considered before approaching or choosing the bank:

Interest rate: Unfortunately, none of the banks in India offer education loan at 0% interest rate. Low interest education loan start from 8.45% up to 24% interest. One must check and also compare the interest rate of the loan of other banks and conclude which bank is convenient for you. 

Moratorium period: Banks provide students with moratorium period which basically means that during the loan term, the applicant is given a period of time where they do not need to repay the loan amount or can also be defined as a waiting period before the applicant has to pay their loan amount through EMI. They usually range from 6 months to 1 year until the applicant finds a resource to repay the loan.

Terms: Every bank that provides student loans has terms that discuss the bank policy, restrictions, repayment policy of the loan among other necessary rules. It is mandatory to go through the bank terms in order to be aware of the payment plan and expense provided by the bank.

EMIs: Applicant must be aware of the EMI plan he/she is considering to follow after the loan is sanctioned.  Check if at all you can consider paying your EMI in advance or whilst studying.

Pre-payment penalty: Prepayment penalty or part payment penalty is the fee that bank charges, if in case the applicant pays their loan off early. Ensure to ask your bank about the prepayment charges.

After thoroughly obtaining information about the bank, choose the bank that provides you with satisfactory and convenient service. It is important to be wholly aware of the bank therefore don’t rush through the process, learn and be explicit about the education loan.

Collaterals: Banks usually provide education loans based on the assurance of collateral. Collateral is a subordinate repayment security plan which basically is used as a guaranty for the loan. Applicant has to provide their owned property or something that is valued in the economy for collateral as an assurance of paying back the loan. If in case he/she fails to repay the student loan, the bank has the right to confiscate the collateral provided under the collateral agreement terms.

Education loan for abroad without collateral is provided in rare scenarios:

For instance if the student has great potential academically and the bank is sure that the applicant will repay the amount, only then the bank provides them education loan without collateral.

Education loan without security is offered by some banks in India. And is of course only provided if the student has a strong academic potential.

Post completing your education abroad, you must focus on repaying the student loan. There are three types of repayment plan that individuals can consider after completing higher education:

Standard Payment plan: Payment plans are fixed ensuring your loan is paid off in 10 years. (depending on the amount borrowed)

Extended Payment plan: Payment plans are initially fixed, once you have standard income the repayment plan eventually increases every 2 years.

Income driven payment plan: Payment plans depend on your income.

Graduated Payment plan: Payment plans are lower at first but eventually increase in 2 years of time ensuring your loan is paid off in 10 years.

Student loans are not provided to anyone or everyone, like any other bank education or student loans has an eligibility section. Only if you qualify in the eligibility criteria banks provide you with the loan. Students can apply loan for fulltime, part time courses at a recognised university. Ensure you are eligible for the education loan to study abroad.

Eligibility Criteria of Student Loan

The eligibility for applying a student loan is as follows:

• The applicant must be an Indian citizen
• The applicant must have good academic grades
• The co-applicant or guarantor must be above 21 years of age
• The age group of the applicant should be or in between 18-35 years
• The applicant must have the confirmation letter from the university

It is important to have all the documents organized during the application process for studying abroad. Documents that are required whilst applying for the student loan are as follows:

Completed Application Form of Student Loan

Proof of identity

• Aadhar Card
• Pan Card
• Voters ID card
• Passport
• Driving License
• Bank passbook

Proof of address/Residency proof

• Electricity bill/Telephone/Water bill not older than 3 months
• Passport with address
• Aadhar Card
• Bank statement with address

Academic certificates

• Mark sheet and leaving certificate of class 10^th or 12^th
• Mark sheet and leaving certificate of under graduation (if the student has completed UG)
• Scholarship document (if the student has received one in the past)
• Mark sheet of GRE, GMAT, TOEFL, IELTS, etc.
• Mark sheet of entrance exam
• Copy of admission confirmation from the university
• Passport sized photographs
• I-20 form that is issued by institution after confirming your admission. (USA)
• Documents that co-applicant is required to submit:
• Bank statements of at least 6-8 months
• Income proof of the co-applicant

Proof of identity

• Identity card issued by central or state government
• Aadhar Card
• Pan Card
• Driving license
• Passport
• Voters ID card

In case the co-applicant is a salaried employee

• Last 3 salary slips
• Income tax return slips of last 2 years or Last 2 year’s form 16 from the employer
• Proof of Office address

In case the co-applicant is self-employed

• Income tax return slips of last 2 years
• Last 2 year’s certified financial statements
• Proof of office
• Passport sized photographs

Collateral documents

• Property title deed
• Registered sale agreement along with society share certificate
• Allotment letter by the Municipal Corporation
• NOC for mortgage from society or builder
• Approved building plan

The applicant and the co-applicant must have all the documents ready for the student loan application and also ensure that the documents are self-attested.

Education Loan forms for Students

Most of the banks have provided education loan apply online service, where the applicants have to provide or fill up the form with accurate details. The applicant and the co-applicant have to fill up a form that requires them to provide with basic and personal details just like any other document related form. Along with personal details, applicant and co-applicant have to provide the bank with financial information. The form in general contains following sections:

Personal information

Present banker details – Name of your current, branch address, account type, liability, etc.

• Details of the course/program
• Cost of course
• Details of the security or collateral
• Preferred Payment of Interest
• General questions for the bank’s reference, e.g. if you have an existing account with the bank

List of documents required

• Declaration/Acceptance of the loan along with agreeing the terms and conditions
• References- The bank needs two referrals, you can either your neighbour or a friend for reference.
• If the applicant or co-applicant has doubts or issues regarding the form, without any hesitation they can approach the bank with queries as the bank employees are very supportive with loan application and sanctioning process.

Step-by-Step Process for Student Loan Application

Now that we are clear with what an education loan application form contains and the documents that one might require. We must proceed to learn about how to apply for an education loan meaning the step-by-step process of education loan.

Research and conclude a list of reliable banks that you think are capable to approach for acquiring education loan scheme details. Most of the banks have these details on their website however if one is not comfortable or clear about the education loan, it is recommended they discuss with that particular bank and acquire details of the loan. (period of time required – 5 days)

• Choose the bank you think is reliable and offers you with best student loan facilities. (period of time required – 1 day)
• List the documents required and gather and self attest them. Get them approved from the bank as well. (period of time required – 3 days)
• Fill up the education form and submit the application with university confirmation letter. (period of time required – 2 days)
• Communicate with the bank if and when required.
• Receive the Promissory Note from the bank once your education loan is sanctioned. You will have to sign the promissory note. (period of time required – in/ 3 days after loan is approved)
• You can apply for visa now that you have finance documents from the bank. (period of time required – 1 day or immediately after loan approval)
• For paying the tuition or institution fees the bank may either give you the amount or will pay it directly to the institution or university.

The process to get an education loan approved takes about 15 days to 1 month. It is important to choose an efficient and dependable bank as the education abroad has hefty expenses and needs a trustworthy bank to rely on.