Students across the country are preparing for higher education. The pandemic has messed up school schedules and university exams. Despite the challenges, many students are evaluating their options. There will be students who want to do an apprenticeship in a foreign country that is not plagued by Covid-19. When it comes to education – at home or abroad – you also have to look at the financing options. Higher education doesn’t come cheap. But there are education loans to fill the gap. Here’s an introduction to education loans and what has changed in the pandemic.
Covid effects
Because of Covid-19, the admission procedures at universities have been delayed. Many universities cannot take exams. As a result, last year’s meetings are still ongoing and new meetings have been postponed. Nevertheless, many eligible students want to prepare for admission to their preferred universities. Once accepted, they can turn to the lending institutions such as banks to finance their training. However, you need to meet several conditions in order to get the loan.
Who is eligible
Indian students typically 18-35 years of age can apply for a loan upon admission to an accredited educational institution. You can use this loan not only for studies but also for any recognized training.
Since students have no income while borrowing, they often have a legal guardian as a co-applicant. After completing their studies, students can repay the loan independently from their income.
In the event of insolvency, responsibility passes to the co-applicant. What is covered
An education loan covers all expenses of your studies such as tuition fees, text costs, laboratory and library fees, the purchase of a laptop, etc. In addition, the cost of living such as dormitory and meals are covered. Due to Covid-19 and online home learning, not all of these options are offered in the course. Therefore, the loan only finances what the course requires.
Remember that if the loan value is low, you can get 100 percent financing. If the credit is large, the bank wants you to pay a percentage of the cost out of your pocket. What is big or small varies from lender to lender. The loan can be a few thousand rupees or even a billion. The student just needs to be authorized to do so. For the lender, the ability of the student or guardian to repay is primarily important. This is determined by evidence of stable income, taxes paid, assets, and creditworthiness.
Security may be required
Generally, banks offer education loans up to Rs 7.5 lakh with no collateral, which means that you do not need to mortgage any real estate or assets with the bank for the loan. For larger loans, some banks may insist on security such as a fixed-term deposit, real estate, etc.
The security is returned to the borrower after full repayment of the loan. If the student has been admitted to a reputable college such as an IIT or IIM, some banks can even lend up to Rs 40 lakh without security.
When to repay
You have up to 15 years to repay an education loan. Students also get paid leave, which is a moratorium. It usually takes 12 months from the end of the course, after which time students may need some time to find employment and start making payments. The moratorium can also be extended.
Due to Covid-19-related problems, the government itself had announced a moratorium on all loans in 2020. However, during a moratorium, interest will still be added to your loan balance, adding to your EMI exposure. Since the moratorium is essentially increasing the loan, it is advisable to start repaying as soon as possible.
Tax savings
Once you start repaying your educational loan, you will receive an exemption under Section 80E of the Income Tax Act. You can save unlimited taxes on the interest on your education loan for eight years from the start of repayment. If the student’s parents took out the loan, they are entitled to the tax exemption. This exception only applies to loans taken out by a certified credit institution such as a bank or a non-bank institution. If the loan is taken by family, friends, or the office, there is no exception.
Remember that due to Covid-19, students struggled to complete their studies and find a job. If they cannot find a job, they will have difficulty paying back the loan. The banks have come under pressure due to the increasing number of defaults on educational loans. Therefore, when you take out a loan, you should also make arrangements for repayment. Failure to repay the loan can cause your collateral to forfeit and affect your creditworthiness, making it difficult for you to obtain a loan in the future.
The author is the CEO of BankBazaar.com
source https://collegeeducationnewsllc.com/lessons-on-education-loans-and-whats-changed-in-the-pandemic/
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