Applying for an education loan for higher studies? Know things that Banks won't tell you

Education Loan Interest Rate 2022: Education is a tool that can help change the way we see or perceive things. However, with time, higher education has become expensive, especially in the case of one opting for specialised courses. Since everyone cannot afford to fund the entire fee of their courses, they look for an education loan which is offered by many banks. An education loan is an amount a student can borrow from financial institutions for paying his/her academic fees. However, when applying for an education loan, a student should not only keep in mind the interest rate but also other details. 

Experts say that starting early in the loan journey could be the key to saving lakhs of rupees.  "Starting early means you can look for better lenders, have more time for negotiations, reduce competition and also find better deals on flights and accommodation. If you start early, you can also evaluate multiple lenders - not just for the rate of interest but also for maximum loan amounts offered, processing fee and insurance discounts, special school schemes and scholarships," said GradRight’s Shivani Mani.

Mani added that students should be aware of potential blockers that may hamper loan prospects. "Know potential blockers for your loan: your credit history, cosigner requirements, school ranking, academic requirements, documentation, collateral validity etc are just some of the metrics lenders evaluate for loan approval. Any deviations on these could imply a loan rejection or delay in the process or harsher terms. Understand your blockers before applying for an education loan," she said.

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Experts said that taking a foreign degree is going to become expensive in the coming days but that should not discourage students as investment return would be productive for the quality of education, career growth, international exposure and skills developed.

"In March this year, if a student has taken a loan when the rupee was at 75 against the dollar then the same would add a few lakh to the loan, it is a public advantage corporation that supports the students to study overseas. Rs 7 would have been added for every dollar of the loan and the same has inflated the loan as well as the interest," said Amit Gupta, MD, SAG Infotech.

Gupta said that high inflation is affecting Indian students in foreign countries and they indeed need to assist themselves there since the living expenses surged. 

Gaurav Kapoor, director and co-founder, Fincorpit Consulting, said that the psychological impact of the rupee depreciation would affect the minds of the US and Europe-bound students including their parents.

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"MCLR and BPLR loans would see a rise in interest rates in subsequent times. The EMIs of the current and the subsequent borrowers would get surged because of the same. The rise in the interest rates is expected to continue in the subsequent time, major experts see that the base rates stabilize once it's nearly 6 to 6.5%," said Kapoor.

"There are a lot of hidden conditions which students usually overlook. They should read terms and conditions carefully. They should also keep in mind their budget and discuss with other students in their circle who might have taken education loans. While most banks keep interest rates in the range of 9 to 15%, the interest is mostly calculated by compounding, thus the repayment amounts can increase over the years," said Dinesh Verma, education expert and founder, Gullybaba.

Education Loan Interest Rate 2022
SBI offers an interest rate of 10.55 per cent for education loans and offers a concession of 0.5 per cent for girl students. However, the rates are lower if a student is going to premier institutions like IITs and NITs. 

Bank of Baroda charges 10.45 per cent for a loan up to Rs 7.5 lakh and 10.85 per cent for education loans above Rs 7.5 lakhs. The rates differ from BOB education loan schemes.

The loan rate differs from bank to bank. In the case of Axis Bank, the rate is 15.2 per cent for loans up to Rs 4 lakh, 14.7 per cent for loans between Rs 4 lakh to Rs 7.5 lakhs and 13.7 per cent for loans above Rs 7.5 lakhs. For the ICICI Bank, its education loan interest rate starts from 10.5 per cent while for the HDFC Bank, it starts from around 8.64 per cent.