The cost of education is increasing each year. Parents and prospective students need to begin saving for their higher education earlier and a host of investment and loan products have emerged to meet consumer needs.
An education loan has emerged as one of the most popular methods of financing higher education courses. These, taken out by either the student, their parents or their spouse, can cover the cost of a university course and living expenses while the student is studying and usually offer a grace period after graduation before repayments begin.
These are the five advantages of paying for higher education through an education loan. For more information, use an education loan calculator to see how much you could borrow on what terms to kickstart your future today.
They come with tax benefits
Under Section 80E of the Income Tax act, the person who took out the education loan can claim a tax deduction for the full amount of interest providing the loan was secured from a bank or financial institution and the loan is being spent on higher education courses and the costs associated with them.
They come with a grace period
Education loans do not typically ask the borrower to begin making repayments within the first year of graduation. This allows the graduate to find a job and become financially stable before they are expected to make repayments. This alleviates much of the stress involved in graduating and finding a job and reduces the graduate’s expenses in the earliest portion of their career.
You leave your savings intact
If you are not spending your savings on education, you can continue to save for your financial goals. Instead of letting the financial burdens of education interfere with plans to get married, buy a house, save for retirement, or have children, education loans allow the borrower to continue to meet their long-term financial goals while pursuing their education and career goals.
Females often get a discount
As part of a partnership with the government to boost female university attendance and participation in higher education, banks and financial institutions typically offer a discount of around 0.5% on the interest rate offered to female borrowers.
The only necessary criteria to be eligible for the scheme are that the borrower is an Indian national, has been admitted to the university and is between 16 and 35 years of age.
There is no collateral
Education loans do not require the borrower to put up assets as collateral. This eases the pressure on property-owners and asset holders.
For borrowers borrowing over a certain amount, there may be instances where the collateral is required. However, for candidates attending respected institutions, this is not usually necessary unless the borrowing figure exceeds Rs 30 lakh.
Some parting words…
The individual benefits of education loans are dwarfed by the macroeconomic benefits the ripple across India. Education loans offer Indians from all different backgrounds the opportunity to attend university. This boost to social mobility and productivity will echo across Indian society for generations to come. The gift of education is the gift that keeps on giving. Student loans give India that gift.