What is an Education Loan?
An education loan is financial assistance provided to students to cover tuition fees, living expenses, books, and other educational costs. It can be used for domestic or international studies and typically has a moratorium period during which no EMI is paid.
What is a moratorium period?
The moratorium period is a grace period (usually course duration + 6-12 months) during which you don't need to pay EMI. However, interest continues to accrue during this period and is added to the principal amount.
What are the tax benefits on education loans?
Under Section 80E of Income Tax Act, the entire interest paid on education loan is deductible from your taxable income. There's no upper limit on the deduction, and it's available for 8 years from the year you start repaying.
What is the maximum loan amount for education?
For studies in India, loans up to ₹10 lakhs are available without collateral. For studies abroad, loans can go up to ₹1.5 crore with collateral. The amount depends on course fees, institution, and your co-applicant's income.
Who can be a co-applicant?
Parents, spouse, siblings, or parents-in-law can be co-applicants. For loans above ₹7.5 lakhs, a co-applicant with a regular income source is mandatory. The co-applicant is equally responsible for loan repayment.
What expenses are covered under education loans?
Education loans cover tuition fees, hostel/accommodation charges, examination fees, library fees, lab fees, purchase of books/equipment/instruments, travel expenses for studies abroad, and insurance premiums if any.
Can I prepay my education loan?
Yes, most banks allow prepayment of education loans without any penalty. Prepaying reduces your principal amount and overall interest burden. It's advisable to prepay once you start earning a steady income.
What is the typical interest rate for education loans?
Interest rates for education loans typically range from 8.5% to 15% per annum. Rates are usually lower for premier institutions and higher for private/management courses. Female students and merit scholars often get 0.5-1% concession.