Importance of Higher Education
For Indian students, as for all students elsewhere in the world, acquiring a good college degree is a route to making a secure life with a well-paying job and a high status in society. While education is not necessary to become entrepreneurs, it is necessary for young Indians to seal jobs in good organizations with good growth prospects.
Impediments to Higher Education
Though the heart and the mind yearn for the degree, the pockets may not support the yearning. Since India is still a developing country with high levels of poverty, many poor students cannot grab opportunities for higher education because of the prohibitive cost of higher education. Thankfully, education up to pre-university or pre-degree level is free and poor students can give vent to their intellect and shine. But, the aspirations for higher education meet roadblocks in the form of high cost of higher education.
High Standards of Education in India
The education system through its universities plays a vital role in educating the Indian students through hundreds of courses in tens of disciplines across the length and breadth of India. Many educational institutions in India such as IISC, AIIMS, IIMs, IITs, National Law Schools and university centres have achieved world standards and students can hope to study in these great institutions even if they don’t have the means of financing the cost of study there. This is made possible by grants and scholarships to meritorious students awarded by various bodies such as philanthropic entities, social groups, central and state governments and the institutions themselves.
Even if such avenues are out of reach for students, they can still pursue higher education by availing education loans extended by the financial community including NBFCs such as Tata Capital. What follows is a guide to take education loan for students who don’t have the wherewithal to fund the costs of higher education.
Besides lenders offering education loans at affordable interest rate of interest and terms, the government has also extended support to students by offering incentives in the form of
- Low-interest rates – a few basis points above MCLR
- Type of interest – simple interest during the course of study and compound interest when repayment starts
- Collateral-free loans up to Rs 4 lakh – financial entities free to increase the limit
- Liberal repayment terms – 7 years after repayment starts
- Parents and guardians can come in as co-applicants
- Tax benefits – interest tax deductible up to 8 years for co-applicants
- Bare minimum or no margin money
While students with the financial strength of their families behind them can avail education loan by satisfying all conditions including offering collateral, the not so fortunate students find it difficult to meet all conditions set by lender especially the ones on offering collateral.
Collateral-free Education Loans
Students can take heart from the fact that there is no statutory condition necessitating the offer of education loan without collateral other than the condition that no collateral is necessary for education loans up to Rs 4 lakh
Thus, students can hope to avail loans larger than Rs 4 lakh without collateral by convincing NBFCs such as Tata Capital to extend such loans. Typically, NBFCs look for financial strength of borrowers by evaluating their
- Credit score
- Steady sources of income
- Past and continuing relationship with the lender
In respect of education loan for Indians, unlike other loans, NBFCs bank on the students’ ability to complete their studies through which they can earn a living and repay the loan. Most also know that many students applying for education loans cannot offer collateral. Thus, they look for factors besides financial parameters to extend education loans which include
- Students’ excellent academic record
- Admission letters from highly reputed colleges
- Parents’ credentials – sources of income, credit score, relationship with financial institutions
These factors help NBFCs to consider offering education loans without collateral. Additionally, lenders consider collateral in the form of life insurance policies or gold ornaments, which students can leverage as they are idle assets.
NBFCs also consider one more avenue – personal loans – for granting education loans as they fall under the umbrella of personal loans. They do not seek collateral for personal loans as they are typically unsecured loans. If the credentials of borrowers are sound they can extend up to Rs 25 lakh as a personal loan. Tata Capital is the premier NBFC in India offering the Tata Capital education loan to all Indian students aspiring to obtain higher educational qualifications either in India or abroad.
Students should examine all avenues of funding available to them especially education loan without collateral. With these loans they can realize their dream of acquiring a good higher education degree in a reputed college of a reputed university. In regard to education, American author and politician Benjamin Franklin says, “An investment in knowledge pays the best interest.” Indian students craving for higher education would do well to acquire knowledge through higher education that will stand them in good stead throughout their lives.