What Are The New Changes In Education Loan Policy And Its Impact On Students?

As per the Ministry of External Affairs, almost 261,406 Indian students went abroad for studies in 2020. On the other hand, the number of international students attending Indian educational institutions is 49,348 as of 2019-2020. 

Therefore, to encourage more international students to come to India for studies, the financial institutions, especially those who offer education loans, underwent policy changes. The alterations in policy change are limited to education loan, and aspiring students need to know them beforehand. 

New changes in education loan policy 

Individuals planning to avail a study loan for abroad or come to this country can consider the following changes to decide accordingly. 

  • Revision in nationality criteria 

Initially, as per Model Educational Loan Scheme for Pursuing Higher Education in India and Abroad (2015) scheme, only the students needed to be Indian nationals to be eligible for an education loan

However, as per the new policy, the lending institutions of India will also accept education loan applications of students born abroad (who hold overseas citizenship by birth while the parents were working with Foreign Government/ Regional Agencies/ Government agencies or International) studying in India. 

Moreover, the students from NRI/OCI/PIO category are also eligible to apply for this loan while studying in India. 

However, in this case, the co-applicant must be a residing Indian citizen. In case the parents also belong to the category mentioned above, this scheme necessitates an additional co-applicant who is a resident of India. 

  • Cover exchange program 

This new policy for education loans also covers the exchange program wherein the Government sends eligible Indian students to partner with foreign universities for 6 months to one year. 

However, students also need to submit certain documents like a passport, Aadhaar Card, and PAN Card for this purpose. Students who fail to submit PAN or Aadhaar cards need to present the same within a stipulated time frame. 

  • Better financing 

In case of loan quantum, earlier, there was a cap of Rs.10 lakh and Rs.20 lakh for study in India and overseas, respectively, with some limited exceptions. This new policy withdrew this cap. However, it only mentioned that the fund should be need-based and enough to meet expenses, ensuring minimum margins. 

This is an overview of the new policy drafted for the education loan sector of the country. However, it is likely to impact the students nonetheless. 

The impact of new change in education loan policy on students 

Following are some probable impacts of new education loan policy on students: 

  • With the inclusion of different categories of students’ citizenship, more students will benefit from the new education loan scheme. However, to secure this loan, they must introduce a co-applicant who is residing in India. 
  • The students mandatorily need to have Aadhaar and PAN card to qualify for an education loan. 
  • The concerned lending institutions will decide the loan amount based on the assessment of funds required. It will ensure that students are not over-financed or under-financed. 

Typically, an education loan quantum usually aligns with course fees, admission fees, and pre-estimated living costs in some cases. Therefore, to keep adequate funds and avail higher amount one can opt for an education loan against property. 

Besides high value, a loan against property also accompanies a host of features that students can leverage. 

Benefits of an education loan against property 

Be it an education loan for abroad or within the country, availing a loan against property offers the following benefits:

  • Lenient eligibility 

The eligibility criteria for a loan against property for education are simple, thanks to its secured nature. Since the parents avail this loan for their children, the academic profile, university chosen, course applied for, etc., do not decide the credit eligibility. 

Moreover, a co-applicant is not mandatory to avail this advance. 

  • Substantial funds 

The zero end-use restrictions and substantial amount are some of the reasons you should finance your education with a loan against property. Here, the loan amount depends on the employment type of applicants, LTV, property type, current valuation, or the property to be pledged and likes. 

  • Simple documentation 

Individuals need to submit only a handful of documents. It includes the following:

  1. Identity proof
  2. Address proof
  3. Income proof
  4. Bank account details 
  5. Property papers 

Lenders approve the loan against any valid identity or address proof, not necessarily an Aadhaar card. 

  • Affordable interest rates

Top financiers also extend competitive interest rates to eligible applicants. It helps keep the borrowing cost at a minimum. However, you should also know the factors that affect the interest rate for LAP. 

They also provide pre-approved offers that simplify and expedite loan processing. These are available on various financial products, such as a loan against property, home loan, and likes. Enter your name and contact number to check your pre-approved offer instantly. 

Hence, knowing the new education loan policy and its impact is crucial for aspiring students. It will help them to make an informed borrowing decision.

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