INTRODUCTION

EDUCATION
Education never ends it is not said without reason. We are educated all our lives and
getting an education not only is a great achievement but something that gives you the
tools to find your own way in the world. Education is indispensable; little do we realize
how much more it can bring to us in terms of worldly amplifications. Anyone can
have propensity and the natural endowment for education. But one might not have the
resources to finance their education. You certainly cant let lack of resources impede
you from advancing your prospects through education. Then you accidentally stumble
upon the word education loans. Loans for education you have never thought about
it as a feasible arrangement. Education loans can open newer panoramas in regard to
your education aspirations.
Education loans are open to all people in all its myriad forms. Education loans can
realize your education plans or the education plans of your children. You can
strengthen you own future and the future of your son or daughter with education loans.
An extensive range of student and parent loans are presented under the category of
education loans. There are many types of education loans. Discerning about the types
of education loans will help you in making the accurate decision. The single largest
resource of education loans is federal loan. The two main federal education loan
programs are the Federal Family Education Loan Program and the Federal Direct Loan
Program. In the Federal Family Education Loan Program the bank, credit union or the
school is the lender. While the federal direct loans program, the department of
education is the lender.
Private education loans are offered to people so that they can provide financial backup
to their education plans. Private education loans are not endorsed by other government
agencies but are provided by other financial institutions. Private education loans
program are optimum for both undergraduate and graduate studies.
Formal education is requisite for future success. Though this is not a hard and fast
rule, but education certainly helps you in gaining an upper hand. With universities
getting expensive by each day an education loan will certainly give you an incentive
to go ahead with your education plans. Each year while contemplating on your
education plans the thought of finances almost invariably comes in. While working
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towards you degree, you are constantly plagued about paying for the education fees,
books, and other living expenses. Education loans can provide funding for tuition fees,
board and room, books computer, and even student travel. An education loan can help
you with all these expenses. Education loans are sufficient enough to take care of all
these expenses. If you have been forced to drop your education for any reason, you
can still take up your education at any point of time. Irrespective of your age and also
where you have left your education.
There are no specific eligibility criteria for education loans. Any person who is in need
of sponsorship for education can find an education loan that befits his or her financial
necessity. Loan amount on education loans vary with the kind of education you want
to pursue. The repayment options with education loans will similarly accommodate
your personal financial preferences. You can either repay interest amount while still
in school or six months after graduation. Education loans offer up to ten years for
repayments. The refund alternatives on education loans also include deferment,
forbearance and consolidation. The various sites on education loans can give you
innumerable repayment options and monetary remuneration.
Education loans will help you in planning your life after graduation. However, an
education loan like every loan is a huge financial obligation. An education loans is
generally the first substantial loan for most people and therefore the first major
expense. Do not be completely dependent on your education loans for the funding of
your complete education. Try to apply for any other financial sustenance like
university grants, scholarships, fellowships, work study programs and assistance ship
and any other form of aid. This will certainly encourage a fluid dispensation of your
education loans. You can start by going to the financial aid office in your school or
university. It will provide you further insight to the kind of education loans, you must
apply for.
Education is an experience of life. It is so rewarding in itself that it helps you to
manage almost everything in your life. Education loans discipline your impulse
towards education and training into a fruitful contrivance. The payoff is delicious in
terms of improved quality of life. Education is expensive! Is it? With education loans
it cant be. Now, you dont have to take the road in front of you. Make your own road
with education loans.

LOAN FOR MEETING THE COST OF EDUCATION

An Education Loan/ Student loan means financial institution or any bank gives
financial support, which facilitates student for taking the higher education. Education
Loans are mostly granting to the parents of the students, unless or until the students
are eligible, above 18 years of age.
MAIN OBJECTIVES OF EDUCATIONAL LOAN SCHEME
Educational loans are the scheme followed by aims at providing financial support
from the banking system to deserving and merit students for pursuing higher education
in India and abroad. The main emphasis is every meritorious student though poor is
providing an opportunity to pursuing education with the financial support from
banking system with affordable terms and conditions. By this way, the deserving
student can claim the opportunity to pursue higher education with sufficient financial
support of commercial banks.
NEED AND SIGNIFICANCE OF EDUCATION LOAN
Education loans are justified on grounds of efficiency and equity. Education becomes
more purposeful when the student has to complete his/her studies to acquire the
capacity to repay the loan. Employability of the student after completing the course
becomes important and therefore educational standards will have to go up. No one
who has the academic ability and desire to pursue higher studies will be excluded for
lack of ability to meet the cost of education since the loan mechanism can also be used
to offer incentive to students to select certain type of studies.
Because of the developments in the sphere of education, private cost of education has
gone up and as and when the fee structure has revised, it will further go up. In a
situation like this, many aspirants for higher education will have denied access to
higher education unless educational loans come to their rescue. Apart from students,
even educational institutions whose finances are affected by reduced UGC and
Government grants need loan finance for infrastructure development and for building
assets from which regular returns can be obtained for financing their activities in
future.

BENEFITS OF EDUCATION LOANS

The following are the important benefits of education loan.
1. Financial support for professional courses such as MBA, B.Tech and MBBS
2. Available for higher education in India and abroad
3. Easy repayment only after job placement
4. Affordable Interest Rates
5. Lesser burden on parents
6. Loan covers up to as much as 20 lack available by various banks
7. Expenses such as tuition fees, travel expenses, hostel charges are included in
education loan
DIFFERENT TYPES OF EDUCATION LOANS
Education loans categorized into two types:
The Government Education loan
The parent loan
The Government loan
The Government Education/ Student loan divided into
1. The Federal Family Education Loan:
It is provided by private lenders, like credit unions or financial Institutions
provides
2. The federal direct student loan:
These types of loans are afforded by direct lending of educational institutions.
These loans must be paid back but the payment can be rescheduled at the time
of completion of course.
The parent Loan
These loans can apply by the parent for further higher and professional education of
their children. However, after getting their credit report will apply for the loan,
because which loans are provided by private lenders such as banks and financial
Institutions. But the rate of Interest is high, and it can be reimbursed with in the period
of 10 years.
Education Loan Model Approved by the Government
The Government of India, in consultation with Reserve Bank of India and the Indian
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Bankers Association, has framed a comprehensive Educational Loan Scheme, aiming

to ensure that no deserving student in India is deprived of higher education for the
want of finances. The scheme covers most graduate, post- graduate and professional
courses in schools and college (engineering, medical, veterinary, law, dental,
management etc.) both within and outside India. Since the scheme was introduced in
2001, popularity of education loans has risen sharply. During 2004-05, the 27 PSU
banks together had sanctioned 169,768 fresh loans for a cumulative amount of
3,525.91 crore, against 1, 07,929 fresh loans amounting to 2,032.94 crore in the
year before. The most important features of the scheme are:
The scheme envisages loan up to 7.5 lakh for studies in India and 15 lakh
for those studying abroad. (However, based on the nature of the course and the
needs of the student, individual banks offer a higher amount on case-to-case
basis. State Bank of India, for example, has a cap of 10 lakh on educational
loans for in land and Rs.20 lakh for studies abroad);
For loan up to 4 lakh, no collateral or margin is required and the interest rate
is not to exceed the Prime Lending Rate (PLR), which stood at 10.5 percent at
the end of 2005. For loan above 4 lakh, collateral security is needed and the
interest rate is not to exceed PLR + 1
The loans are to be repaid over a period of 5-7 years, with provision of a grace
period of one year after completion of studies or six months after securing a
job, whichever happens earlier;
Education loans allow the borrower to reduce tax liability, although the 20052006 budget has reduced the extend Where students were earlier allowed to
deduct up to 40,000 from the total for the years towards servicing of the
principal and interest of the loan for eight years from the time of the first
deduction, under the changed ( 2005) tax laws, deduction is only allowed on
the interest portion of the loan. Under the changed tax regime, the deduction is
not subject to any limits, but the repayment of the principal amount will not be
taken in to account for the tax benefit;
Margin: Up to lakh Nil
Above 4 lakh, student in India 5%
Studies abroad 15%
Security:
Up to 4 lakh: No security
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Above 4 lakh and up to 7.5lakh: Collateral in the form of third party

guarantee. The bank may waive the third party guarantee if satisfied with the
net-worth means of parent who would be executing the document as joint
borrower.
Above 7.5 lakh :Collateral security of suitable value or suitable third party
guarantee along with the assignment of future income of the student for the
payment of installment;
Expenses that can be considered in relation to the sanctioning of loan are fee
payable to college , school, hostel, examination, library, laboratory fee,
purchase of books, equipments, uniform, caution deposit, building fund,
refundable deposits supported by institution bills, receipts, travel expenses,
passage money for studies in abroad, purchase of computers (if essential for
completion of the course) and other expenses (if required for completion of the
course).
Although the educational loans scheme is especially designed in order to
ensure that no deserving student in India is deprived of higher education for
want of finances, there exist several pitfalls in the scheme that make it
inadequate to ensure participation of backward classes and SC/STs in higher
education through the means of reservation. The main drawbacks of the scheme
are in the field of margin, collateral and interest rates and payback period.

GENESIS OF EDUCATIONAL LOAN SCHEME OF COMMERCIAL

BANKS
The original scheme of educational loans i.e. National Loan Scholarship Scheme was
initiated in India in the year 1963 and it continued till 1991. This government
sponsored National Loan Scholarship Scheme proved to be a failure when assessed in
terms of recovery of loans. Moreover, the economic crisis facing Government of India
in the early nineties necessitated the winding up of the scheme. Hence, it was dropping
in the beginning of the nineties. At the same time, it has realized that a similar type of
educational- loan scheme was required to cushion the impact of rising user-charges in
India. Accordingly, a new scheme of education loans, Viz, Education Loan Scheme,
has started. The main tenet of the scheme was its economic viability. Nevertheless,
the state and central Government was gradually changing over their responsibility for
the disbursement of education loan to the various commercial banks in the country.
The government sponsored National Loan Scholarship Scheme (1963-91) could not
succeed, as the rate of recovery was very low as the recovery rate was negligible and
the country faced severe economic crisis in the early nineties, the NLSS had
discontinued. Actually, the government was not in a position to finance the higher
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education sector liberally and it started to look out for other non-government measures
of financing higher education. In the early nineties, Indian Government set up various
committees one after the other to (a) review the financing patterns in the higher
education sector and to (b) suggest some remedies. To name a few Punnayya
Committee, Swaminadhan Committee, Pylee Committe, Mahmood-ur-Rehman
Committe, Ambani-Birla Committe, CABE Committe,Yashpal Committe etc. Almost
all committees recommended raising the user-charges. The most significant and path
breaking recommendations were those of the Punnayya Committee (UGC, 1993) and
the Swaminadhan Committee (AICTE, 1994) and were more or less quite similar33.
Towards the beginning of the year 2000 (or in late 90s), the new scheme of educational
loans i.e. Educational Loan Scheme was floated by the scheduled commercial banks
as per the guidelines of the Reserve Bank of India, though the first two
recommendations of the Punnayya committee regarding freeships/ concessional fees
for higher education especially at post-graduate stage seem to have gone unheeded.
Moreover, the special preference to the meritorious and needy has found no place in
the present arrangement of loans.
COMMERCIAL BANKS
Commercial banks are broadly classified into public sector banks, private sector banks
and foreign banks. The Indian banking industry is made up of 28 public sector banks,
31 foreign banks and 20 old private sector banks and 9 new generation private sector
banks including cooperative banks. The commercial banks in India can be
conveniently classified for the study as follows:
Public Sector Commercial Banks:
Among the banking institutions in the organized sector, the public sector commercial
banks are the oldest institutions having a wide network of branches, commanding
utmost public confidence and have the lions share in their total banking operations.
Public sector banks in India reached its present position in three stages; First, the
conversion of the then existing Imperial Bank of India into the State Bank of India in
1955 followed by the establishment of its seven subsidiary banks; second the
nationalization of 14 major commercial banks in 1969 and the last nationalization of
six more commercial banks in 1980. All these are owned by central Government either
directly or through Reserve bank of India All the public sector banks are corporate
bodies but status under which were established was different. As quoted in the RBI
bulletin, public sector banks are classified into two broad categories, Viz.
Nationbalised Banks and State Bank of India and its associates.

At present 19 nationalised banks are there in the country. They were established under
the two Acts, Viz. Banking Companies Acts 1970 and 1980. The State Bank of India
group comprises of SBI and its seven sunsidiaries. The separate act was enacted as
State Bank of Inbdia Act on july1, 1955. Through this Act, SBI wasw nationalized.
The seven subsidiary banks are almost owned by SBI and popularly called as SBI
associates. This group of banks is the largest commercial bank in India in terms of its
branch network, resources and manpower. SBI also acts as an of RBI.
Private Sector Commercial Banks:
The 20 old private sector banks are
1. Bank of Rajasthan Ltd.
2. Bharat Overseas Bank Ltd.
3. Catholic Syrian Bank Ltd.
4. City Union Bank Ltd.
5. Dhanalakshmi Bank ltd.
6. Federal Bank ltd.
7. Ganesh Bank of Kurundwad Ltd.
8. ING Vysya Bank Ltd.
9. Jammu & Kashmir Bank Ltd.
10.Karnataka Bank Ltd.
11.Karur Vysya Bank Ltd.
12.Lakshmi Vilas Bank Ltd.
13.Lord Krishna Bank Ltd.
14.National Bank Ltd.
15.Ratnakar bank Ltd.
16.Sangli Bank Ltd.
17.SBI Commercial and International Bank Ltd.
18.South Indian Bank Ltd.
19.Tamil Nadu Mercantile Bank Ltd.
20.United Western bank Ltd.
New Generation Commercial Banks
All the commercial banking companies started operations in India on or after 1991 is
termed as new generation banks. There are nine new generation public sector banks.
They are:
1. Axis Bank
2. Bank of Punjab Ltd.
3. Centurion Bank of Punjab Ltd.
4. Development Credit bank Ltd.
5. HDFC Bank
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6.
7.
8.
9.

ICICI Bank
Indus land Bank Ltd.
Kotak Mahindra Bank Ltd.
Yes Bank

The opening of the banking sector to private as well as foreign bank has been a major
milestone in the history of the industry in the country. As the result of the deregulation
of the sector, a host of new generation private sector banks has entered the scene. The
entry of new generation private sector banks and foreign banks is rewriting the rule
of banking in the country. Today, there is a great emphasis on customer convenience,
which is the key to success. Technology has emerged as key enabler to achieve this
objective, and is now an integral component of any banks core strategy.
Commercial Banks and Disbursement of Education Loan
Commercial banks in India have been providing educational loan since a long time.
There were also some attempts to improve the system. RBI guidelines generally
formed the basis for the educational loan schemes of different banks.
The guidelines of RBI
The concerned students must have a consistently good academic record and not
necessarily a brilliant academic record.
Loan may be given for studies in India as well as abroad.
The amount of loan to be sanctioned must be need- based and no maximum or
minimum be fixed.
In the case of job-oriented courses, loans may be sanctioned even for certificate
courses recognised by the Government or University.
Loans may be sanctioned even for those who have completed a part of the
course and not necessarily only to those at the beginning of a course.
Third party guarantee or collateral security be obtained for the loans.
RBI also formulated a scheme for students pursuing studies in private
professional colleges as per the direction of Supreme Court. Under this scheme,
the maximum loan available is 15,000 per year for merit or free seat and
50,000 per year for payment seat. The loan is collateral free within the ceiling
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prescribed and carries annual interest of 12 percent.

DEFINITION OF 'EDUCATION LOAN'

Money borrowed to finance education or school related expenses. Payments are often
deferred while in school and for a six-month grace period after graduation. Sallie Mae
is the largest source of education loans and handles the two major types, the Stafford
loan and the Perkins loan. One of the major benefits of these types of loans is that they
come with low interest rates and do not require collateral or a credit check.
For what type of courses can educational loans be taken?
Educational loans can be taken to pursue a wide variety of courses, for example:
School/graduation courses, like High School, B.Sc., B.Com., B.A., etc. Postgraduate/specialized courses, like B.Sc., M.Sc., B.A., M.A., B.Com, M.Com., etc.
Professional courses, like M.B.A., M.C.A., B.E., M.E., B. Tech, M.B.B.S., etc. Other
courses, like computer courses, fashion designing, commercial pilot training, etc.
Keep in mind, however, that, usually, the courses financed should be for durations of
more than a year, i.e., 12 months.
Costs covered under educational loan
Educational loans usually cover the costs of tuition fees, hostel fees, mess fee and
examination fees. Some banks may also finance the cost of books, equipments and
other instruments required by the student for that course. For studies abroad, banks
may provide one-way air fare. But this needs to be checked with your individual bank.
Who is eligible for an educational loan?
There are many criteria that determine the eligibility of a student for an educational
loan. These vary greatly from bank to bank. The most important criterion is that the
student must have qualified for, or have a confirmed admission in a college or institute.
The other factors that are normally important with nationalized banks are the age band,
i.e. the student applying for the loan must be in the age group of 16-26 or some such
specified range. Other criteria are good academic record (first class throughout, with
no gaps or breaks in education, etc.), and a regular source of income for the parents.
The recognition granted to the institution the student has opted for is also an important
criterion.

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What is the maximum amount that can be availed under educational loans? /
How is the maximum loan amount calculated?
The maximum loan amount varies from bank to bank, but, most importantly, it
depends on the course for which the loan is sought and the institution chosen. For
example, the loan amount for an M.B.A. course would be different for different
institutes--the fees at I.I.M.'s would be approximately Rs 2 Lac, whereas at Somalia it
would be Rs 80,000. Hence the loan amount will vary drastically. But many banks
have a margin criterion, which means that they would provide up to 75 per cent or 90
per cent of the total cost of the course, while the balance has to be paid by the
applicant. The loan amount can also depend on the borrower's parents/guardians net
monthly salary. The loan amount could also be calculated as being six or 10 times the
monthly salary of the parent. Ultimately, however, the loan amount would depend on
the discretion of the bank.
What security does one needs to provide for the loan?
The security depends on the loan amount. It is quite possible that banks may not
require security for a loan of up to Rs 25,000, but would require it for amounts greater
than that. These limits are usually in slabs that vary with banks. The usual security
that the banks generally take is National Savings Certificates (NSCs), bonds, gold,
vehicle, house or property, etc. In addition to these, some banks might
also require the applicant to have a life insurance policy equivalent to, or greater than,
the loan amount.
What are the documents required for an educational loan?
The general documentation required by the banks for disbursing education loans is
usually very simple. The most important among them is proof from the
college/institute that the student has a confirmed admission there. Then comes an
agreement with the students or the parents/guardians, and proof of residence. Proof of
age is also important, considering that quite a few banks have a clause that they
would not finance a student above a certain age limit. Also required are documents to
prove that the parents/guardians have a regular source of income, namely, salary
statements, IT returns, etc. And, lastly, a resume of the student, clearly showing his
past academic performances.

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What is a holiday period?

A holiday period is the maximum time given to the student before he/she needs to start
paying back the principal loan in Equated Monthly Instalments (EMIs). In other
words, it is the period between the student's final examination in the course for which
the loan was availed and when he/she actually starts paying the EMIs. Typically,
holiday periods range from six to 12 months. Take note, however, that if the student
starts working immediately after completing the course, he does not enjoy a holiday
period. Repayment usually starts six months after the course completion or the
commencement of a job, whichever is earlier.
Will I get an educational loan for payment seats' also?
Yes, one can get an educational loan for payment seats too. Usually, the banks have a
ceiling for each course, and, based on that, they decide the loan amount. So long as
the loan amount does not cross that ceiling, the student can be assured a loan, provided
he/she satisfies the other eligibility criteria.
What security does one needs to provide for the loan?
The security depends on the loan amount. It is quite possible that banks may not
require security for a loan of up to Rs 25,000, but would require it for amounts greater
than that. These limits are usually in slabs that vary with banks. The usual security
that the banks generally take is National Savings Certificates (NSCs), bonds, gold,
vehicle, house or property, etc. In addition to these, some banks might also require the
applicant to have a life insurance policy equivalent to, or greater than, the loan amount.

CONCLUSION
Financial resource crunch has often staved off the middle class Indian student from
higher education. To add insult to injury, the fee hikes announced by premier institutes
from time to time, have made quality education a distant dream for deserving
youngsters with monetary disadvantage. Experts believe that getting a loan sanctioned
by a bank, whether it is to pursue a degree abroad or from a premier institute in India
is not difficult for a meritorious student. Banks have various education loan schemes
for school, graduate and postgraduate studies in India. They prefer giving loans to
meritorious students in order to be doubly sure that the applicant will not turn into a
defaulter. Thus, stringent checks about both the academic background of the student
and the credibility of the institute that he or she is applying to are undertaken to avoid
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any trouble. From the statistical analysis it can be concluded that a student pursuing
higher, postgraduate professional courses is more likely to get education loan than a
student pursuing undergraduate courses. Similarly, students seeking admission in
unapproved institution has less chance of getting education loan. Banks do not seem
to be discriminating too much between a student with prior work experience and a
fresher. Available literatures reveal that default rate on education loan is a perennial
problem across globe; especially, when the students leave the country for pursuing
higher studies abroad, the risk of default increases further. Here, the students annual
family income plays an important role in determining, whether he is extended
education loan or not. In such cases either of the parents is made the co-borrower, thus
drastically reducing the chances of default.
Further analysis revealed that private banks do not prefer giving education loan.
Interest rate on these loans is very low, even lower than the prime lending rates. Low
lending rates coupled with higher risks of default does not make it a sound business
model; hence the reluctance. However, the government is bound by political agenda
to increase expenditure on education sector and promote higher education. Hence, the
public sector banks being under the control of government do not have an option, but
to extend loans to students. Some of the financial institutions, to overcome the
problem of default, use all relevant information available from 13 different sources,
and with the help of credit scoring models, do the credit profiling of the student vis-vis the educational institution. This helps it, in working closely with the students and
their parents to try and design appropriate education loan program for them. Thus, it
can be concluded that a student is more likely to get education loan if he approaches
a public sector bank. Additionally if the student has a higher family income and plans
to pursue postgraduate professional study from a government owned / approved
institution the chances of getting educational loan is phenomenally higher.

REFERENCE
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1.
2.
3.
4.

http://www.scribd.com/
http://www.smileofindia.com/
http://www.slideshare.net/
https://dtf.in/wp

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PUNJAB
NATIONAL BANK
(PNB)
EDUCATION
LOAN SCHEME

15

VIDYA LAKSHYAPURTI EDUCATION LOAN SCHEME

1. OBJECTIVE
To provide financial support to deserving / meritorious students for pursuing
education in India and abroad. The Scheme aims at providing financial
assistance to meritorious students with an opportunity including undertaking
basic education and to the meritorious students to pursue higher, professional
and technical education.
2. ELIGIBILITY
I. Courses eligible
Studies in India

School Education including Plus 2 stage

Graduation courses B.A., B.Com., B.Sc.,etc.
Post Graduation courses : Masters & Ph.D.
Professional courses : Engineering, Medical , Agriculture,
Veterinary, Law, Dental, Management, Computer etc.
Computer Certificate courses of reputed institutes accredited to
Department of Electronics or institutes affiliated to University
Courses like ICWA, CA, CFA etc.
Courses conducted by IIM, IIT, IISc, XLRI, NIFT, etc.
Courses offered in India by reputed foreign University.
Evening Courses of approved Institutes.
Other Courses leading to Diploma / Degree etc. conducted by
Colleges / Universities approved by UGC / Govt. / AICTE /
AIBMS / ICMR etc.
Courses offered by National Institutes and other reputed Private
Institutes.

Studies abroad
Graduation For job oriented professional / technical courses
offered by reputed universities. Credentials of the Educational
Institution may be got certified from authenticated sources /
Embassy in India.
Post Graduation MCA, MBA, MS etc.
16

 Courses conducted by CIMA London, CPA in USA etc.

II.

Student eligibility
Should be an Indian National
Secured admission to Professional / Technical courses through
Entrance Test / Selection process.
Secured admission to foreign University / Institutions.
Student should have secured pass marks in the qualifying
Examination for admission to Graduation Courses.

III.

Expenses considered for Loan

Fee payable to Collage / School / Hostel.

Examination / Library / Laboratory fee.
Purchase of books / equipments / instruments / uniforms.
Caution Deposit / Building Fund / Refundable Deposit supported
by Institution Bills / Receipts.
Travel Expenses / Passage money for studies abroad.
Purchase of computers essential for completion of the Course.
Any other expense required to complete the course like study
tours, project work, thesis, etc.

3. QUANTUM OF FINANCE
Need based finance, subject to repaying capacity of the parents / students with
margin and the following ceilings : Studies in India

Maximum Rs. 7.50 lacs.

Studies abroad

Maximum Rs. 15.00 lacs.

4. MARGIN
Upto Rs. 4.00 lacs

Nil

Above Rs. 4.00 lacs

Studies in India 5%
Studies in Abroad 15%
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 Scholarship / assistantship to be included in Margin.

Margin may be brought in on year-to-year basis as and when
disbursements are made on a pro-rata basis.
5. SECURITY
No Security may be insisted upon for loans upto Rs. 4.00 lacs. However, for
loans above Rs. 4.00 lacs, Collateral Security of Suitable value (atleast equal
to loan amount) or co-obligation of parents / guardian / third party alongwith
assignment of future income of the student for payment of instalment may be
obtained viz., :Upto Rs. 4.00 lacs

No Security.

Above Rs. 4.00 lacs

Collateral Security of Suitable value

(equivalent to 100% of the amount of loan)
or co-obligation of parents / guardian / third
party.

In addition to above assignment of future income of the student for payment of

instalments (stands included in the Agreement).
NOTE:
The document should be executed by both the student and the parent /
guardian.
The security can be in the form of land / building / Govt. Securities / Public
Sector Bonds / Units of UTI, NSC, KVP, LIC Policy, Gold, Shares /
Debentures, Bank Deposit in the name of the student parent / guardian or
any other third party with suitable Margin.
Wherever the land / building is already mortgaged, the unencumbered
portion can be taken as security an II charge basis provided it covers the
required Loan amount.
In case the loan is given for purchase of Computer, the same to be
Hypothecated to the Bank.

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6. RATE OF INTEREST
Upto Rs.4.00 lacs
Above Rs.4.00 lacs

PTLR
PTLR + 1%

The interest to be debited monthly on simple basis during the Repayment

holiday / Moratorium period.
Penal interest @ 2% be charged for above Rs. 2.00 lacs for the overdue
amount and overdue period.
7. LONING POWERS
As per loaning Power Chart in force from time to time .
No application for educational loan received should be rejected without
the concurrence of the next higher authority.
8. REPAYMENT
Repayment Holiday / Moratorium Course period + 1 year OR 6 months
after getting job, whichever is earlier.

The loan is to be repaid in 5-7 years after commencement of repayment. If the

student is not able to complete the course within the scheduled time, extension
of time for completion of course may be permitted for a maximum period of 2
years. If the student is not able to complete the course for reasons beyond his
control, sanctioning authority may at his discretion consider such extensions as
may be deemed necessary to complete the course.
The accrued interest during the repayment holiday period to be added to
the principal and repayment in Equated Monthly Instalments (EMI) be
fixed.
1% Interest concession may be provided by Incumbents to lonees if the
interest is serviced by them during the study period when repayment
holiday is specified for interest / repayment under the Scheme.
Interest concession is to be provided to borrowers only at the time of final
repayment of the loan.
9. POST SANCTION FOLLOW UP
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Branches to contact college / university authorities to send the progress report

at regular intervals in respect of students who have availed loans.
10. UPFRONT FEE
NIL
11. TIME NORMS
Loan applications have to be disposed of within a period of 15 days to one
month but not exceeding the time norm stipulated for disposing of loan
applications under Priority Sector Lending.
12. CAPABILITY CERTIFICATE
Since, some of the foreign universities require the students to submit a
certificate from their bankers about the sponsors solvency / financial capability,
with a view to ensure that the sponsors of the students going abroad for higher
studies are capable of meeting the expenses till completion of studies, capability
certificate may be issued in such cases. For this financial and other supporting
documents may be obtained from the applicant.
13. LOAN APPLICATION
Form No. PNB 813.

14. MODE OF APPLICATION OF INTEREST

Interest on Education Loan accounts shall be worked out at the end of each
month and recorded on a separate sheet in the ledger but not debited to the
borrowers account. Instead, it should be debited to a separate account opened
in the Subsidiary General ledger titled Interest Accrued on Advances under
Education Loan Scheme forming one of the components of the main head of
General Ledger. Interest Accrued on Advances and credited to Revenue Head
Income Interest on term loan till the commencement of repayment of first
instalment. On the date fixed for commencement of repayment, the whole
amount of interest so far worked out and recorded as above should be debited
to the borrowers account by corresponding credit to the Interest Accrued on
Advances under Education Loan Scheme. Repayment of loan and interest may
be determined keeping in view the above procedure for charging of interest.
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15. CONFIDENTIAL REPORTS

On Borrower(s) : No confidential report on the borrower will be required as
the application for loan will indicate the information required to be furnished in
the confidential report.
On Guarantor(s) / Co-obligants : Form No. PNB 905 /282(C).
16. DOCUMENTATION
i. Agreement (Annexure -1) duly stamped, to be taken in case where the
student is minor. Further, in case of Minor student, on attaining his/her
majority confirmation from student be obtained as per Annexure III.
ii. Agreement (Annexure II) duly stamped , to be taken in case where the
student is Major.
iii. Letter of Guarantee (PNB 785) duly stamped as an Agreement to be taken
in case of loan amount is above Rs. 4 lacs.
iv. In case of collateral security is to be taken is mortgage, procedure given in
Book of Instruction on Loans to be followed.
The documents should be executed by the student and parent / guardian.
17. DISBURSEMENT
Education loan is to be disbursed in the form of term loan. A limit upto which
advance is to be allowed during each year will be set up. Each time the
borrowing scholar is in need of funds to pursue his studies; he will approach the
lending office and will explain his needs to the Incumbents Incharge will permit
drawing on the borrowers account within the limit fixed. This will also enable
the Incumbent In charge to remain in close touch with the borrowing studentss
activities.
The loan to be disbursed in stages as per the requirement / demand directly
to the Institutions / Vendors of Books / equipments / instruments to the
extent possible.
Loan to be sanctioned by the branch nearest to the place of domicile of the
student.

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In case of , purchase of stationary and books, loan may be disbursed in

cash on declaration by the applicant and production of bills.
18. CLASSIFICATION
Advances allowed under the Scheme will be classified under Priority Sector.
19. CHECK LIST
To facilitate expeditious disposal of applications, a check-list regarding
documents, security etc. alongwith application forms for Education Loans be
provided to intending borrowers. An illustrative check-list enabling a ready
reference, so that intending borrowers can furnish all related documents / papers
in one lot, is given below :

Loan application on Banks format.

Passport size photograph.
Proof of Address.
Proof of having secured pass marks in last qualifying examination.
Letter of admission in professional, technical or vocational courses.
Prospectus of the course wherein charges like Admission Fee, Examination
Fee, Hostel Charges etc. are mentioned.
Details of Assets & Liabilities of parents.
In case loan amount is above Rs. 4.00 lacs :
Particulars of Guarantors and details of their Assets & Liabilities.
If immovable property offered as Collateral Security copy of Title
Deed, Valuation Certificate and Non-encumberance Certificate from
approved Lawyer of the Bank.
Photocopy of Passport & Visa, in case of study abroad.
Any other document / information, depending upon the case and purpose
of the loan.

20. POST SANCTION SUPERVISION

The Bank will reserve the right of giving loan under this Scheme to any scholar
or continue / discontinue the yearly disbursement to a borrower under the
Scheme, depending upon whether or not he / she shows good results at the
institution he /she has joined for studies and whether of not reports about his /
her conduct are satisfactory.
Such reports will be required to be produced to the Incumbents Incharge of the
lending office before the start of each academic year subsequent to the first year.
Loan pass book (PNB589) be issued to the borrower containing details such as
22

date of sanction of loan, amount of loan, amount of loan sanctioned, subsidy

received (if any) rate of interest, amount due under each instalment, due date of
instalment etc.
21. OTHER CONDITIONS
Zonal Managers and above may consider relaxation with regard to Eligibility,
Margin and Security norms on merits of each case.
No Due Certificate need not be insisted upon as a pre-condition for considering
educational loan. However, Branches may obtain a declaration / an affidavit
confirming that no loans are availed from banks.

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STATE BANK OF
INDIA
(SBI)
EDUCATION
LOAN SCHEME

24

SBI EDUCATION LOAN

A term loan granted to Indian Nationals for pursuing higher education in India or
abroad where admission has been secured.
1. ELIGIBLE COURSES
All courses having employment prospects are eligible.
Graduation courses/ Post graduation courses/ Professional courses
Other courses approved by UGC/Government/AICTE etc.
2. EXPENSES CONSIDERED FOR LOAN
Fees payable to college/school/hostel
Examination/Library/Laboratory fees
Purchase of Books/Equipment/Instruments/Uniforms
Caution Deposit/Building Fund/Refundable Deposit
Travel Expenses/Passage money for studies abroad
Purchase of computers considered necessary for completion of course
Cost of a Two-wheeler upto Rs. 50,000/Any other expenses required to complete the course like study tours, project
work etc.
3. AMOUNT OF LOAN
For studies in India, maximum Rs. 10 lacs
Studies abroad, maximum Rs. 20 lacs
4. INTEREST RATE
For loans upto Rs. 4 lakh 10.50% p.a.
For loans above Rs. 4 lakh 11.50% p.a.
5. PROCESSING FEES
No processing fee/ upfront charges
Deposit of Rs. 5000/- for education loan for studies abroad which will be
adjusted in the margin money

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6. REPAYMENT TENURE
Repayment will commence one year after completion of course or 6 months
after securing a job, whichever is earlier.
Place of Study

In India

Abroad

Security
Amount
Upto Rs. 4 lacs
Above Rs. 4 lacs to Rs.
7.50 lacs

Loan Amount

Repayment Period
in Years

Up to Rs. 7.5 lacs

5-7

Above Rs. 7.5 lacs

5-10

Up to Rs. 15 lacs

5-7

Above Rs. 15 lacs

5-10

Studies In India
No Security

Studies Abroad
No Security

Third Party Guarantee

Third Party Guarantee

Tangible Collateral
Above Rs. 7.50 lacs to Rs. Tangible Collateral
security of suitable
10 lacs(India)/ Rs. 15
security for full value of
value of loan or third
lacs(Abroad)
loan
party guarantee
Tangible Collateral
Rs 15 lacs to Rs. 20 lacs
___
security for full value of
loan

7. MARGIN
For loans up to Rs.4.0 lacs : No Margin
For loans above Rs.4.0 lacs:
o Studies in India: 5%
o Studies Abroad: 15%
8. DOCUMENTATION REQUIRED
Completed Education Loan Application Form.
Mark sheets of last qualifying examination
Proof of admission scholarship, studentship etc
26

Schedule of expenses for the specified course

2 passport size photographs
Borrower's Bank account statement for the last six months
Income tax assessment order, of last 2 years
Brief statement of assets and liabilities, of the Co-borrower
Proof of Income (i.e. Salary slips/ Form 16 etc)
* Conditions Apply

EDUCATION LOAN SCHEME FOR STUDENTS OF SBI

Loan amount

Upto 95% of all costs upto a maximum of

Rs.14.50 lac. (Taking into account expenditure of
married students and cost of a laptop, which is
essential for students.)

Margin

5%

Rate of Interest

Repayment

9% (Floating). EMI*: Rs.1287/-per lac.

8.5% (Floating), if tangible security
equivalent to 50% of loan amount is
furnished. EMI*: Rs.1260/- per lac.
Should a tangible collateral security
equivalent to 50% of outstanding loan
amount be furnished midway through the
tenure of the loan, the concession of 50
basis points in the rate of interest shall
become applicable from the month
following the month in which such security
is furnished.
Only Simple Interest will be charged
during the course and moratorium period.
The rate of interest will not change during
the complete tenure of the loan.
Interest is calculated on daily reducing
balance.EMI of 9 years & 9 months

Up to 10 years. A customised repayment schedule

taking into account individual repayment capacity
of the student is permissible.

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Moratorium Period

Up to 3 months after completion of course.

Co-borrower

Yes. The loan will be granted jointly with the

parent/ guardian.

Security

Lien on the original Certificate and Marks

Sheet of the student. The Certificate will
remain in custody of SBI during the
currency of the loan.
Third party guarantee (TPG), preferably of
earning sibling of the student or a person
known to the Bank i.e., a person who is our
customer or he/she is a reputed person or a
guarantor of one of our borrowers.

Application Processing
Time

Loans will be sanctioned and disbursed within

three days, after submission of application form,
complete in all respects except where mortgage of
immovable property is to be created.

Processing Fees/
Prepayment
ChargesForeclosure
Charges

Nil.

Takeover of Education Loan Permissible

from other Banks/ Financial
Institutions for existing
students and alumni
Contact Branch

Hyderabad University Campus Branch,

Gachibowli, Hyderabad- 500019
Telephone: 040-23011301/289
Fax: 040-23011617

Documents to be enclosed
i.

Mark sheet of last qualifying examination for school and graduate studies in
India.

ii.

Copies of letter conferring scholarship, freeship, studentship etc.

iii.

Documents evidencing the duration of course and commencement thereof

viz. prospectus or certificate from the competent authority of the institution.
28

iv.

Proof of admission to the course.

v.

Schedule of expenses for the course.

vi.

Two copies of passport size photograph of the borrower(s) / guarantor(s).

vii. Statement of Bank account for the last six months of the borrower(s)
viii. Signature identification from bankers of borrower(s) guarantor(s).
ix.

A copy of Passport/Voters ID Card/Proof of residence.

For salaried persons

i.

Latest salary slip showing all deductions.

ii.

Employment details for the last 5 years.

iii.

Latest TDS Certificate Form 16.

iv.

Statement of assets and outstanding liabilities.

For Self-Employed/Professionals and Businessmen

Proof of income.
Income Tax/Wealth Tax (if applicable) assessment orders not more
than 2 years old.
Assets and Liabilities.

If Collateral Security is Mortgage of Landed Property

Original Sale Deed

Original receipt of payment made for registrar
Society share certificate
Non encumbrance or certificate from advocate
Valuation Report

29