How to Pay College Fees Through Education Loan: A Guide for Indian Students

Planning to study abroad or pursue higher education in India? One of the first questions that comes up is: How do I pay for college? College fees can be a major burden for many families. An education loan can help you pay your fees and make your dreams a reality, without burdening you. However, you need to plan your moves when it comes to education loans to pay your college fees.

In this guide, we will explain everything you need to know about paying for university through an education loan in India. Also, we will discuss on how to apply, what documents you need, and tips to get the best loan deal. So let us start with a very important question.

Why Choose an Education Loan to Pay College Fees?

College education, especially abroad education, is quite expensive. According to RBI press releases, the average education loan size in India is around INR 10 - 15 lakhs for domestic colleges and around INR 30 - 50 lakhs or more for international courses. Now, paying this amount upfront is not easy for most. An education can take the financial pressure away from this. Let us understand more clearly why education loans are better as compared to own funds:

As you can see and understand from the table above, an education loan to pay college fees is a smarter choice than self-financing.

How to Pay Tuition Fees Through Education Loan

Paying for university through an education loan is simple, here is a simple and step-by-step process:

Step 1: Research and Compare:

Before you take an education loan, you need to do thorough research and compare various lenders on various criteria like:

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  Loan amount
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  Interest rates
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  Processing fees
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  Moratorium period
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  Margin money
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  Repayment tenure

We have given a table below to compare education loans from various lenders:

Watch this video to learn more about education loan comparison between public banks and private banks:

Step 2: Check Your Eligibility Criteria:

Even if you have finalised a lender, until and unless you do not meet the eligibility criteria for an education loan, no lender will sanction a loan for your education.

Some of the common eligibility criteria include:

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  18 to 35 years of age
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  Indian nationality
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  Admission to a recognized course/university
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  Good academic record
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  Co-applicant (usually a parent or guardian) with a stable income and a good credit score
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  If applying for a secured education loan, then property papers, fixed deposit certificates or government bonds are required as security.

Step 3: Apply for Education Loan:

Submit your loan application either online or at the bank branch. Please note that you need to submit the documents required for your education loan along with your loan application. The following is the list of documents required for education loan:

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  Loan application form
• 
  Admission letter
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  Fee structure
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  Academic records
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  KYC documents (Aadhaar, PAN, and more.)
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  Income proof of co-applicant
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  Collateral documents (if applying for a secured loan)

Please note that these are just the basic documents that every lender asks for along with your application form. Apart from this, there can be specific documents required depending on your profile, education loan amount, country, course and many other factors. It basically depends on the lender and as per their assessment of your profile.

Step 4: Get the Sanction Letter:

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  Once approved, you will receive a sanction letter. This confirms that your loan is approved and ready to be disbursed. 
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  We recommend that you go through this document carefully as it contains all the important information regarding your education loan like loan amount, interest rate, repayment structure, moratorium period, margin money requirement and more. 
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  Also, you need to sign the sanction letter within a stipulated period to get your education loan. 
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  If you do not sign it within the mentioned period, your loan will get cancelled and you have to re-apply for your education loan.

Step 5: Fee Payment:

The bank will directly pay the tuition fees to the university, either in one go or in instalments as per the course schedule. Paying for university is done in this final stage.

Tips to Get the Best Education Loan Deal

The following are some of the tips that can help you get the best education loan for you:

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  Start early: Begin the loan application process soon after receiving an admission letter from your university.

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  Maintain a good credit score: A good credit score for your co-applicant improves the approval chances of your loan application. Also, better interest rates are offered to you.

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  Compare options: Before finalizing your lender, do thorough research and check other lenders’ terms and conditions.

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  Consult experts: With GyanDhan just one click away from you, you do not have to spend your time researching and applying. However, if you further want to save time, and get better interest rates and faster loan processing, all you need to do is check your loan eligibility at GyanDhan. One of our education loan counsellor will get in touch with you with dedicated support from application till approval of your education loan, and you do not have to pay us anything.

Paying for university using an education loan is a smarter financial choice than using your own savings. It allows you to keep your emergency funds, spread the cost of studying over time of approximately 10 to 15 years through monthly instalments and even enjoy tax benefits on the interest paid. Most importantly, it will help you pay your college fees and build your credit history simultaneously. An education loan is not just a loan, it is an investment in your future.

Frequently Asked Questions