Student Education Loan

What Is a Student Education Loan?

An education loan is a sum of money borrowed to pay for post-secondary education or expenses associated with higher education. Education loans are designed to pay the costs of tuition, books, and supplies, as well as living expenses while a student is pursuing a degree. Payments are frequently deferred while students are in college, and depending on the lender, they may be extended for another six months after graduation. A “grace period” is a term used to describe this period.

An education loan is a loan that students take out to help them meet the financial obligations of their studies. Many Indian banks and non-banking financial companies (NBFCs) offer low-interest education loans to help educate the next generation of innovators and leaders.

Parents who wish to provide their children with the greatest education possible invest their money in mutual funds (MFs), fixed deposits (FDs), unit-linked insurance plans (ULIPs), and other long-term investments with this in mind.

However, despite all of this, there may be a financial shortfall. In such a situation, an education loan plays a critical function in bridging the gap between the shortage and the required amount. According to surveys, education costs are rising at a rate of 15% each year on average.

In 15 years, the cost of an MBA is expected to rise from Rs 2.5 lakh to Rs 20 lakh. So, if a couple saves Rs 2,000 per month for 15 years at a rate of 12%, they will have saved almost Rs 9.5 lakh.

What Are Student Loans and How Do They Work?

Filling out the Free Application for Federal Student Aid (FAFSA) is how people acquire federal student loans (FAFSA). Students and their parents fill out a form with their financial information, which is then forwarded to the student’s top schools. Each school’s financial aid office crunches the figures to determine how much (if any) money the student is eligible for, and then sends them an “award letter” detailing their financial aid package.

Note that this financial assistance could come in the form of student loans, scholarships, or grants. As a result, I still advocate filling out the FAFSA—just make sure you accept only the free money. People, this is a no-loan zone. Students apply directly to the lender for private student loans. Regardless of whether the loan is federal or private, the student must sign a promissory note (frightening, right?).

This is a legal document in which the student promises to repay the loan plus interest as well as all of the loan’s terms and conditions. It’s like signing away your liberty. I’m joking, but it’s not true.

Eligibility for Student Loans

1. Only Indian citizens/citizens of the country applying are eligible.

2. Obtaining admission/invitation to a degree/diploma program at a recognized university/college.

3. Education: For an undergraduate course, you must have finished 10+2 (12th grade) and a degree for a postgraduate course.

4. Approved courses leading to graduate/post-graduate degrees and PG certificates were offered by UGC/Govt/AICTE/AIBMS/CMR-accredited colleges/universities.

5. Courses such as ICWA, CA, CFA, and others.

6. IIMs, IITs, IISc, XLRI, NIFT, and NID offer courses.

7. Aeronautical, pilot training, and shipping are examples of regular degree/diploma courses.

8. A nursing degree or diploma, or any other discipline approved by the Director-General of Civil Aviation, is required.

If the course is taken in India, the Aviation/Shipping/Indian Nursing Council, or any other regulating agency, as the case may be.


How does interest on student loans work?

When a new student loan is issued, the borrower is required to sign a promissory note that describes the loan’s terms. This agreement must be read and understood in its entirety, as it affects how much you owe and when your payments are due. This also applies to parents’ PLUS loans and interest.

The following are the most crucial terms to keep an eye out for:

1. Disbursement date: When monies are received and interest begins to accrue.

2. Total loan amount: The total loan amount for each loan.

3. Interest rate: The amount you must pay to borrow money.

4. How interest is levied: Is it charged daily or monthly?

5. When interest is capitalized (or added) to your principal balance, it is called capitalization.

6. Due date: The day on which you must make your first loan payment.

7. Payment schedule: The number of installments you must make.

Lenders recognize that the majority of full-time students do not have a source of income, and if they do, it is insufficient to sustain payments while they are enrolled. As a result, it’s common to be able to delay paying bills while in school. The government provides subsidized direct loans to students who demonstrate financial necessity. If you qualify, the government will pay your interest while you’re in school, preventing your debt from growing.

However, once you graduate, you are responsible for your interest. Unsubsidized loans, on the other hand, begin charging interest the day the loan is disbursed. Because you are not obligated to make payments, interest will accumulate and you will graduate with a loan balance that is higher than when you started.

Do parent PLUS loans have the same interest rate as regular loans?

Unfortunately, no subsidized loans are available for parents. In addition, after the loan has been fully issued, regular payments begin (unless you request a deferment). Each month, your needed loan payment will be the same.

When you make a payment, however, interest is paid first, followed by principal reduction. Your remaining payment will be added to your principal balance.

To calculate your “interest rate factor,” divide your interest rate by the number of days in the year. The loan sum is then multiplied by the interest rate factor, which is then multiplied by the number of days since your previous payment. The amount of interest you’ll be charged for that period is the result.

Your balance and the amount of interest you pay on your student loan will decrease as you make payments. More of your payments are applied to your principle when interest rates are lower. Your monthly interest payment will decrease during the life of your loan, accelerating your principal payoff.

That’s how student loan amortization works, which is just a fancy way of saying “paying down the principal on a loan. Remember that your payment is applied first to interest and any outstanding fees, then to your principal. If you have an unsubsidized loan or have passed the subsidy period, you must make the same minimum payment each month until your loan is paid off.

Interest continues to accrue if you’re on a payment plan or have postponed payments. This sum is applied to your principal, increasing the amount owed on your student loan. It may make sense to pay at least the interest each month if you are able.

If you don’t, your loan balance will grow, and you’ll be charged interest on the interest you didn’t pay in the past months. Making interest payments while you’re in school can save you money in the long run if you have the means. Sallie Mae’s accumulated interest calculator was used to make these calculations, which presume the current federal rate on parent PLUS loans will remain unchanged for the next four years.

It also anticipates that you will continue to accrue interest on your child’s freshman year loan for four years, three years on the sophomore loan, two years on the junior year loan, and 12 months on the final loan. As you can see, you borrowed $20,000, but if you wait until your child graduates from college to pay it back, your loan balance will rise to $23,500.


Different Kinds of Education Loans

1. Federal Student Loans

Federal education loans account for the majority of education loans in the United States. The federal government is usually the first source of funding for school loan borrowers. Depending on the applicant’s position, different types of information are necessary to simplify the application process.

The loan amount is normally determined by the borrower’s state of residency, family income, parental reliance, as well as tuition and living expenses. The application process does not require a credit check. Direct subsidized loans, direct unsubsidized loans, and direct consolidation loans are the three types of federal education loans.

-Only undergraduate students are eligible for direct subsidized loans.

-To be considered, applicants must demonstrate a financial need.

-Unsubsidized Direct loans are available to undergraduate and graduate students without the need to demonstrate financial need. Both forms of loans can be combined into a single loan.

-Direct consolidation loans enable borrowers to consolidate several federal college debts into a single loan.

It charges interest at a rate determined by the average rate of each loan.

2. Student Loans for Private Education

A regular application process is often followed by private education loan lenders. They also want interest rates that are higher than those offered by the federal government. As a result, students frequently turn to private school loans only after exhausting their government loan options.

State-affiliated non-profit lenders and institutional lenders, such as colleges, are among the private education loan providers. As part of the application procedure, a credit check is normally necessary. If a loan application is granted, the cash will be sent to the borrower’s school first to satisfy any outstanding obligations. The borrower will then receive the remaining cash.

3. IBR Plan (Income-Based Repayment)

Borrowers can make payments based on their income under the income-based repayment (IBR) plan. The federal government offers the IBR program as a loan settlement option. It is not available for private education loans, so students who take out federal loans benefit more.

Repayments under the IBR scheme are limited to 10% of the borrower’s income. If the amount of interest due surpasses 10% of the borrower’s income, the amount due will be postponed and added to the debt outstanding. The remaining balance of the education loan will be forgiven if it cannot be fully returned after a set length of time. Borrowers in the public sector have a ten-year repayment period, while those in the private sector have a 25-year repayment period.

4. Objections to Educational Loans

For many people, the college loan system in the United States is still a contentious issue. The interest rate on federal student loans is not changed for credit concerns without a credit check. It leads to inefficient resource allocation in higher education and high default rates. Furthermore, the debt level has been significant and continues to rise.

Almost always, the amounts outstanding on students’ college loans exceed the amounts owed on their credit cards. Taxpayers are burdened by the combination of high debt levels and high default rates. Moral hazard and adverse selection are cited as reasons for the IBR plan’s failure, as it pushes borrowers to borrow as much as possible with the longest loan periods feasible.

The program is most useful to those with the largest debt-to-income ratio, which increases the risk of default dramatically.


Benefits of taking out a student loan

With ever-increasing competition and growing inflation, most students who wish to study abroad must take out an education loan. Previously, most parents used their wealth to fund their children’s education by liquidating assets such as gold, fixed deposits, and land.

Nowadays, parents have accepted the paradigm shift of using an education loan to pay for their children’s education. They have acknowledged the reality that taking out an education loan for study abroad is a safer way to fund your education because education loans can be used for a variety of purposes. Due to the multiple benefits of student loans, they will assist the student in getting a step closer to his or her chosen career.

This post will go through all of the benefits of taking out an education loan to study abroad.

1. Lower Interest rates

Interest rates for any loan, such as a home loan, a car loan, a personal loan, and so on, are often greater than on school loans. Study loans have a lower interest rate. In addition, all Government banks offer a 0.5 percent discount to female borrowers.

2. Pay after your schooling with a moratorium holiday.

One of the most major advantages of an education loan is this. The moratorium period, often known as the repayment holiday, is the period during which the student is not required to make any payments to the lender or until the EMIs begin. In most cases, the moratorium period includes the term of the course plus 6 months/1 years so that students can focus on their academics.

3. Coverage of a wide variety of expenses

Tuition costs, transport (tickets), housing rent, university fees, food expenditures, living expenses, laptops, or any other gear required for your education are all covered by an education loan for abroad studies.

4. Increase your CIBIL score.

The credit information report, or CIBIL, is a summary of your credit history to date. The CIBIL score ranges from 300 to 900, with 750 being considered a respectable grade. Your CIBIL will benefit from an education loan because timely EMI repayment will help you establish the required score and make it easier to secure a loan in the future.

5. There is no need to sell valuable assets.

Typically, parents liquidate significant assets to cover college costs, which disrupts long-term financial plans such as purchasing a home or a flat, children’s marriage, and so on. When you take out an education loan, banks hold your liquid assets as security, such as FDs, insurance, and government bonds, and issue you a loan based on that security.

As a result, the school loan you take out will not get in the way of your long-term financial goals. Section 80E of the Internal Revenue Code provides a tax benefit. The education loan income tax exemption is available under Section 80E of the Income Tax Act of 1961 for the loan applicant or co-applicant.

In basic terms, the loan applicant or co-applicant can deduct a specific proportion of the interest paid on their student loan from their overall income.

7. Financial self-sufficiency to repay the debt

When students take out an education loan, they are responsible for repaying the amount to the lenders once they have completed their studies. This ensures that the student is dedicating 100% of his time to his academics and career.

8. Relieving your parents of their debt load

Taking out an education loan can relieve parents of all financial obligations because the student is responsible for repaying the loan after completing his studies and the moratorium period has passed. These are some of the advantages of taking out an education loan. Borrowing an education loan will assist you in meeting your entire study abroad fees.



1. Get an Early Start

When you receive confirmation of acceptance along with the information of the fees you must pay, this is the moment of truth. Being aware of all available financial assistance will assist you in determining how much you will need to organize on your own. You must determine whether you have sufficient finances or whether you require an education loan.

Find out about scholarship or grant alternatives now that you know the cost of education. A look at your savings or assets will also give you an indication of how much money you’ll need for an education loan. Consider utilizing your loan assets if you have enough of them.

“I’ve seen people take out student loans even though they have enough money in taxable debt instruments like fixed deposits and postal plans. This is a terrible concept. If parents have a lot of money invested in debt instruments, they should see a professional before taking out an education loan “A certified financial advisor, Pankaj Maalde, adds. You can go to public sector banks for the rest.

If the admission is to a foreign institution, the situation becomes much more problematic. Most banks require confirmation of admission before giving a loan, and most colleges prefer students who have secured funding.

If the study is at a foreign institute, Rohit Sethi, Director, ESS Global-Study Abroad Consultant, recommends that parents begin planning for funding at least four to five months ahead of time. “Acceptance or rejection of an application takes at least 3-4 weeks at most colleges.

If accepted, banks take another month to process all of the necessary paperwork before approving the loan. Then there’s the big one: applying for a visa. It’ll take another month or two for that to happen “he declares A specialist education loan lender, HDFC Credila Financial Services, can provide loans without a college admission letter. “We provide students and parents advance notice of their loan eligibility,” explains Arijit Sanyal, the company’s Managing Director, and CEO.

2. Choosing a Loan Amount

Is it possible to borrow the entire college cost from a bank?

While some banks have a necessary margin requirement of up to 5% for Indian students and up to 15% for international students, others finance the entire fee. In 2015, Rohit Mascarenhas, a Vodafone Global strategic account manager, received the complete Rs 22 lakh college cost (with collateral) for an MBA from the Indian School of Business, Hyderabad.

Union Bank of India provided him a ten-year loan with a ten percent interest rate and his father as a guarantor. When looking for student loans, online portals are a fantastic place to start. One such portal is the Vidyalakshmi education loan portal, which is run by NSDL e-Governance Infrastructure.

You can apply to three banks at the same time. The Vidyasaarthi portal contains information about government and corporate scholarships and subsidies. “Depending on their income, educational background, and job choice, students can apply for business scholarships. They can also apply for scholarships provided by the government “NSDL e-Governance Infrastructure’s MD and CEO, Gagan Rai, states.

Apart from the loan amount, look into the moratorium duration, interest rates, processing costs, and the best terms for repaying the loan when choosing a bank. SBI and Indian Bank, for example, do not impose any processing fees. Also, look for early repayment options.

Some banks demand a prepayment fee, although they cannot charge a prepayment fee or foreclosure charges if the loan is on a floating rate. Many colleges have partnered with a variety of banks. The process is easier if you approach these institutions, but you should look into other lenders as well because they may provide additional benefits.

Compare banks using loan aggregator websites like BankBazaar and Myloancare.

What if your loan application is turned down by a bank?

“Assess the reasons for rejection before approaching any other lender, as they may apply to other loan applications. Personal loans from banks, NBFCs (non-bank financial organizations), and regulated lenders are other options. Please keep in mind that the interest rate will almost certainly be greater than an education loan, and there will be no moratorium period “Adhil Shetty, CEO of BankBazaar, agrees. Unconventional subjects including sports engineering, music, theatre, dance, and acting have grown in popularity in recent years. “Banks may not lend for such courses, but NBFCs can,” says C.S. Sudheer, a personal finance counselor at

3. Recognize Your Repayment Options Throughout the Moratorium

Parents may take the first loan offer that comes their way owing to a lack of understanding of time, oblivious to other possibilities that may better suit their needs. Most banks promote their loan offerings by emphasizing the lengthier moratorium period. Banks provide a ‘holiday period,’ known as a moratorium, that encompasses the study period and often one year or six months after you start working.

This is the time when you are not compelled to return either the interest or the principal. Keep in mind that simple interest begins to accrue during the study period and continues until the moratorium expires. You must plan ahead of time to keep paying interest while studying and during the moratorium period before repayment begins. The loan load increases if you do not pay it.

Saibal Das Mahapatra, an Accenture consultant in India, borrowed Rs 18 lakh (without collateral; for a Rs 25 lakh course price) to complete a one-year MBA program at a reputable university. Andhra Bank offered him a 10-year loan at a rate of 10.25 percent. “Even though I began repaying six months after finishing the course, I was unaware that if I had paid the interest during the moratorium period, my total loan burden would have been smaller,” he adds.

Paying interest during a moratorium can help you save money on your loan’s total cost. According to the Model Education Loan Scheme of the Indian Banks’ Association (IBA), all scheduled commercial banks must give a 1% interest rate reduction if interest is paid throughout the study term and the ensuing moratorium period before repayment begins.

If your bank refuses to provide you with this information, you should request it. What if you took out a loan to pay for a Bachelor’s degree, but your child instead chooses to pursue a Masters’ degree rather than work?

“The moratorium period will be prolonged until the completion of the Master’s program,” says Virendra Sethi, Bank of Baroda’s Head of Mortgages and Other Retail Assets.

4. Government Subsidies and Assistance

The Ministry of Human Resource Development has created the Central Sector Interest Subsidy Scheme, which provides interest subsidies on education loans without any collateral or third-party guarantee during the moratorium period. This is true in India for technical and professional education.

Other requirements include: students’ yearly gross parental or family income must not exceed Rs 4.5 lakh, the loan amount must not exceed Rs 7.5 lakh, and the interest subsidies must not exceed Rs 2 lakh. Padho Pardesh is a scheme for kids from minority populations who have a family income of less than Rs 6 lakh.

“During the moratorium period, the government pays an interest subsidy of up to Rs 75,000 per quarter,” explains Sethi of Bank of Baroda. Students from the Other Backward Classes and Economically Backward Classes who have a household income of less than Rs 8 lakh and Rs 2.5 lakh, respectively, are eligible for the Dr. Ambedkar Central Scheme of Interest Subsidy. During the moratorium, the interest subsidy is up to Rs 75,000 every quarter. The Tata Scholarship, the BHEL-FAEA Scholarship, and the IOCL Scholarship are among the most well-known corporate scholarships.

5. Make Repayment Arrangements in Advance

Taking out a loan to pay for college isn’t enough. After all, one must repay the loan. As a result, do your homework on the college’s reputation, placement record, and pay levels of previous students. The loan amount should not be so large that the anticipated earnings are insufficient to cover the EMIs.

“When a student first starts working, her total monthly debt payments should be no more than 40% of her take-home earnings.

Going above this limit could put you in a financial bind “Bankbazaar’s Shetty adds If the college is located outside of the United States, learn about the country’s accrediting system and whether the college is a part of it.

“To determine whether you will be able to service your loans while still saving money, consider the employability of the course and school, as well as previous placement track records and starting packages. This would provide you the assurance that you will be able to repay the loan and maximize your return on investment “ Co-Founder and Chief Strategy Officer Shalini Gupta adds

When it comes to loan repayment, you might want to let your child share the cost. This will not only make her more responsible but will also help her establish a trustworthy loan profile. EMIs, in any case, do not begin until after studies are over and the job begins.

You might ease the cost by paying the interest while the moratorium is in effect. Set aside a portion of your school budget to cover interest payments during the moratorium period. If there is money left over after the moratorium, you could use it to help your child with his or her EMI payments. “It’s critical to have discussions about which percentage of the EMI should be paid by the parents and which should be reimbursed by the kids.

Such a pre-analysis can reduce the likelihood of repayment difficulties, later on, lowering the risk of non-performing assets (NPAs) and reducing family stress “Sanyal agrees. Your child must comprehend the ramifications of missing even one EMI. “Non-payment will result in default,” warns Wilfred Sigler, Director-Marketing and Sales at CRIF High Mark, a credit information firm. “Default will influence credit score and appear in the credit report as well.”

If an EMI is missed, the student’s credit score will suffer, making it more difficult for her to obtain loans in the future. “They might not even be able to receive a credit card,” Sigler says, “much less a high-value credit like a home loan.” If you believe that paying EMIs will be a problem for you, look for a solution. If at all feasible, choose a lengthier repayment period. As a result, EMIs are kept to a minimum.

It’s worth noting that the loan’s cost rises as the term lengthens’s Sudheer agrees. The benefit is that the EMI burden would be lighter in the early years of a career. If repaying the loan becomes difficult at any moment, you should contact the lender to postpone it. With a bank, the facility is offered three times during the loan term, each for six months.

Banks may restructure the loan by lengthening the term and lowering the EMI, however, if the student is unemployed or underemployed, the extension (after moratorium) is limited to 15 years. Keep in mind that any loan term extension raises the total loan liability. Although a loan can be foreclosed at any time, some banks demand a pre-payment fee.

Banks cannot charge foreclosure fees if the loan is on a floating rate. Not only does an education loan make higher education possible, but it also comes with a tax benefit. According to Section 80(E) of the Income Tax Act of 1961, interest paid on an education loan can be deducted for up to eight years or until the loan is entirely returned, whichever comes first.

There is no limit to the amount of interest that can be deducted. Do your investigation and choose the education loan that is right for you before your child embarks on his or her journey to higher school.

One of the many critical aspects of the college loan procedure is loan repayment.

Even before applying for an overseas education loan, most candidates check for information about their lending bank’s/education NBFC’s loan repayment process. The repayment method for college loans in India differs depending on your lender’s rules. This blog focuses on the various lenders’ repayment processes for education loans.

Even better, in the 29th episode of Loanflix, a thorough web series on abroad education loans, you can obtain all the information right immediately from our education loan specialist, Ms.Damini Mahajan. As stated in the preceding paragraph, the repayment of college loans is heavily influenced by the policies of various lenders.

In India, there are two major types of education loan providers: government banks and non-banking financial companies (NBFCs) (Non-Banking Finance Companies). Government banks and non-bank financial companies (NBFCs) have quite diverse policies on education loan repayment due to the type of loans they give. Secured loans, which require the offering of collateral security against education loans, are typically offered by government banks.

NBFCs make unsecured loans and education loans without requiring collateral. Before we go into the intricacies, there is one notion that everyone should be familiar with: the moratorium period, sometimes known as a loan holiday.


What is a moratorium period in the repayment of Education loans?

A vacancy in tenure is referred to as a moratorium. A moratorium period on loan repayment refers to a loan holiday offered to applicants before the repayment procedure begins for their school loans. The main reason for this being considered a benefit is because the moratorium period only applies to college debts. This provision does not apply to any other type of loan.

To get back to the topic, a moratorium period is a period throughout your loan term during which you are not required to begin repaying your loan. Students can begin paying interest during this time (depending on their lender’s requirements), but EMI payments must begin after the moratorium period has ended.

Let’s look at the terms and circumstances set forth by public banks and non-bank financial companies (NBFCs) for the moratorium period.

How to Repay a Government Bank Education Loan

Because of their flexible payback terms, government banks’ loan repayment process is in some ways advantageous to students. There are three crucial aspects to understand when it comes to the repayment procedure.

When Does Repayment of Education Loans Begin?

The majority of college loan applicants are concerned about the loan repayment timeframe. So, here we go, The majority of government banks offer a payment-free time. That is, candidates who received their education loans from government banks do not have to start repaying their debts until the moratorium period is finished.

In government banks, the moratorium period usually comprises of the course duration plus six to twelve months after the course (depending on your lending bank’s policies). Government banks calculate interest on a simple interest basis for this era. At this point in the loan term, the EMI payment is expected to begin.

In other words, government banks do not require loan applicants to begin repayment until the moratorium period has expired. You may now encounter government banks that request an ‘interest-only moratorium period. This approach is only followed by a few banks, such as the Oriental Bank of Commerce or the Syndicate Bank.

Most major banks, such as SBI, Bank of Baroda, and others, provide a payment-free moratorium period.

Are There Any Advantages to Paying Off Your Education Loan Interest Early?

Until roughly two years ago, government banks offered an education loan repayment assistance program in which candidates may receive a 1% discount if they paid full interest on their loans regularly during the moratorium period. This project, however, was abandoned approximately a year ago.

So, if you come across any agreements that mention this program, be aware that such a provision does not exist! This education loan repayment assistance program is no longer available. Using the student loan payback calculator available on government banks’ official websites, you can now figure out how much you need to pay back.

The aforementioned variables are incredibly important to the government banks’ education loan payback process, and they will aid you in your education loan repayment process in the long run. Get in contact with our team by requesting a callback to learn more about your lending bank’s school loan process.

NBFC Loan Repayment Process

The largest lenders of unsecured education loans are NBFCs (Non-Banking Finance Companies). They have a slightly different payback method than government banks because they are private lending companies. While NBFCs’ operations are loosely based on RBI directives, they have developed their methods for processing education loans.

Here’s a quick rundown of how NBFCs manage student loan repayment.

How Soon Do NBFCs Start Repaying Education Loans?

NBFCs, like government banks, give a moratorium on education loan repayment. Those who have taken out unsecured school loans to study abroad, unlike government banks, are not exempt from making payments during this time. As a result, education loan payments for unsecured education loans taken from well-known NBFCs should begin as soon as the first payout is received.

Students must pay their interest throughout the moratorium period, according to NBFCs. The good news is that NBFCs are willing to take partial interest payments during the moratorium period. When candidates are allowed to pay only a portion of the interest accrued during the moratorium period, this is known as partial payment.

This means that if you are being charged Rs.10,000 per month in interest during your moratorium period and are unable to pay, NBFCs will accept only Rs.4000 to Rs.5000, depending on their regulations. NBFCs may even demand full payment of interest during the moratorium period, depending on your profile. This clause is solely dependent on the terms of their college loan repayment. Once the moratorium period is ended, the loan EMI will be taken from your account.

Process of Loan Disbursement: Government Bank Education Loans

The Loanflix web series begins with a detailed overview of the two main forms of education loans available in India. Let us try to comprehend the education loan disbursement process of secured education loans from government banks, as this is the most sought-after category of abroad study loans.

Most government banks, such as SBI education loan distribution and Bank of Baroda education loan disbursement, use a similar loan disbursement process.

1. The education loan is approved by the government banks, which issue a sanction letter to the pupils.

2. Students and their co-applicants should go to their respective branches after receiving the sanction letter to create a mortgage and sign the education loan agreement.

3. Once the students and their co-applicants have signed the agreement, the education loan can be released.

4. However, the process of disbursing education loans does not begin immediately after students sign the loan agreement.

Students must next send an education loan disbursement letter to their lending bank, detailing the chosen mode of payment for their particular colleges’ tuition payments. At times, overseas colleges, particularly those in the United States, prefer to pay tuition fees via third-party payment systems such as Flywire, Globalpay, and others.

5. Similarly, many students who want an early loan disbursement to study abroad in countries such as Germany or Canada prefer to pay their living expenses through third-party payment providers.

Students must indicate information of their preferred payment method to their respective government banks in an education loan disbursement letter, which must be submitted to their respective government banks after signing the loan agreement, for their education loans to be transferred on time.

6. Most government banks disburse the tuition fee component of the overseas studies education loan either directly into the university’s tuition fee accounts or via a third-party payment software whose credentials must be stated in the education loan disbursement letter by the students.

7. There is an important issue that all students should remember. Tuition fees for the entire course are not transferred at once by government banks. The money is issued when students submit a request to the bank, which might be yearly or semester-wise, depending on the university’s preferred interval for tuition fee payment.

When it comes to loan distribution, there are a few things to keep in mind. Most government banks send a student’s living expenditures into a FOREX card, which is one of the most significant aspects of the study abroad loan. This FOREX card is given to students to make money withdrawals easier while they are studying abroad. The FOREX card, on the other hand, has an expiration date. The majority of banks, such as SBI and Bank of Baroda, lease this FOREX card to higher education hopefuls for three months.

Within this time frame, students are expected to create a savings account in their host nation. Their respective government banks will subsequently disburse the education loan into this savings account for the balance of their higher education course, as directed by students in the education loan disbursement letter to the bank.


I hope enough information is given in this article. Still if you have any doubt then feel free to ask in the below comment section.

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