Education Loan Types of Education Loan , MBA Degree

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What are the types of education loans? [2022] | Types of Education Loan?

Types of Education Loan

Do you want to know what are the types of education loans? So after reading this blog post, your questions will be easily answered – Types of Education Loan?

Harmanpreet Kaur, 24, has got admission to a top-tier MBA institute. The fee for the two-year course is Rs 25 lakh. Her parents can afford to pay up the fees upfront, but she doesn't want to strain them financially. She is considering the benefits of taking an education loan vs self-financing her course.

benefits of education loan

An education loan should not be treated as a loan but as an investment that lets you study the course of your choice from a top-ranking institute. It can help you build the foundation for a successful career in future. But given that the Covid-19 pandemic has resulted in a shortage of jobs, Harmanpreet is naturally worried about finding her dream job and repaying her education loan. However, she should remember that an education loan offers tax benefits too. Let us see the advantages of availing of an education loan.

  • Save funds, stay liquid: If Harmanpreet takes an education loan, her parents don't have to liquidate their funds to finance her education. It eases the financial burden on the family.
  • Long moratorium period: Moratorium periods for education loans last for the entirety of the course. Some banks offer an extension of six months after the student starts her job or for one year after the course. This means the student doesn't have to worry about repaying the loan in the short term, and the family can better plan their finances with this timeline in mind.
    Students from economically weaker sections can take the loan under the government’s 'Subsidy on Interest' scheme.
  • Lower interest rates: Education loans are much cheaper than other forms of unsecured loans, such as a personal loan.
  • Tax benefits: Interest paid on education loans is completely deductible under Section 80E of the Income Tax Act, 1961. Axis Bank tax benefit calculator illustrates the benefit There is another tax benefit for students who are studying abroad. Under current laws, any payment above Rs. 7 lakh made abroad attracts TCS (Tax Collected at Source) of 5%. So, if a student is studying abroad, and she self-finances the course, she will have to pay 5% TCS. However, if the student avails an education loan from a financial institution in India, the TCS is only 0.5%.
  • Multiple expenses covered: The education loan pays for various costs a student might incur -- travel, living, study material, laptops, insurance etc.
  • Builds financial discipline: An education loan helps inculcate financial discipline from an early age, as the student has to start repaying the loan immediately after working. This ensures that you save or set aside money to repay your loan and forms the first step in the journey towards financial independence. Besides, regular repayment of the loan also helps the student build a credit history, which is essential when you want to take a home loan or an auto loan in future.
  • Funding of refundable deposits: Many banks and education lenders also fund refundable deposits that universities ask students to pay. This is generally capped at 10% of the tuition fee.
  • No Collateral: Lenders give collateral-free loans if the loan amount isn't high. Generally, most banks offer loans worth Rs 4 lakh – Rs 7.5 lakh without security. Axis Bank funds higher amount up to Rs 40 lakh based on university & co-applicant profile.

Axis Bank provides education loans to students desirous of pursuing professional qualifications or higher studies in India or overseas. The interest rates are competitive, and students from defined categories are eligible for subsidies under government schemes. To know more

Disclaimer: The Source, a content creation and curation firm has authored this article. Axis Bank does not influence the views of the author in any way. Axis Bank and The Source shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.

What are the Types of Education Loan?

Education loan is basically a form of monetary assistance received by the students to meet the expenses related to their studies. Education loans can be availed through funding, scholarships and awards and are given in cash, which has to be repaid to the lender along with an interest rate. Students who wish to avail education loans are advised to borrow based on their needs as the repayment tenure of these loans can vary substantially depending on the lender and the amount borrowed by the student.

Most student loans available to individuals in India are offered at relatively low interest rates, and interest payments are not required to be made immediately. Students are usually given a period from the time the loan is taken to the time the repayment starts.

Education loans are unsecured loans that can be used to cover expenses related to education, such as tuition fees, books, living expenses and other expenses like transportation costs etc. If you want to get an education loan but are unemployed or still studying, a co-signer may be required to obtain the education loan, as can a qualified adult such as a friend, parent or relative. The loan can be repaid after the student completes his education. Given the flexible terms and conditions attached to the repayment of education loan, availing it is quite simple and straightforward.

Different Types of Education Loan – Types of Education Loan?

There are many different education loans that are offered for different types of education programs. Depending on the type of education, there are student loans for diploma and certificate courses, student loans for skill -based courses, student loans for study abroad, etc.

Whatever the course, there are two broad categories of education loans based on location.

1)  Domestic Education Loan  – For educational courses within the geographical limits of the country.

2)  Study Abroad Education Loan  – For educational courses outside the geographical boundaries of the country.

Apart from these, education loans can be divided on the basis of some other categories. These include the following:

On the basis of course of education:

  1. higher education loan
  2. diploma study loan
  3. loan for vocational courses
  4. On the basis of security of surety and/or guarantee:
  5. secured loan
  6. unsecured loan

What is education loan for study abroad?

As the name suggests, education loan for study abroad is a loan that can be availed for pursuing an education course abroad. Depending on the type of course, there are many options that are available under study abroad education loan.

Following are the education loans in India:

  1. graduate education loan
  2. Vocational/Graduate Education Loan
  3. career education loan
  4. loan for parents
  5. graduate student loans

Graduate student loans can be availed by individuals who have completed secondary education and wish to pursue a three or four year course to enhance their job opportunities.

Professional / Graduate Student Loans

Professional/graduate student loans can be availed by students who wish to pursue advanced degrees or higher education in colleges across the country. The student must have completed an undergraduate course in order to apply for an undergraduate student loan.

career education loan

Career education loans can be availed by students who wish to attend graduate career-oriented programs at trading and technical schools and colleges across the country.

loan for parents

Parents of students can avail these loans, which are unsecured, to meet expenses related to their child's education, such as tuition fees, living expenses, books, uniforms, and other expenses like transportation costs. Loans can be obtained not only by parents, but also by other adult relatives who wish to enroll their children in secondary schools, military primary schools, religious, private or non-public schools across the country.

We hope that after reading this blog post your question is what are the types of education loan? (Types of Education Loan) You must have easily found the answer to this question. 

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