Repayment of Education Loans

The cost of education increases with the quality required. Even after having various investments and savings, most people are not able to bridge the gap between the amount required for the course and the amount of money in hand. This gap can be bridged by the education loans provided by various banks and also Non-Banking Financial Companies (NBFCs).

The banks in India provide education loans who want to pursue their higher studies in India and also for students who want to pursue their higher studies abroad. The amount of loan provided by the bank can differ from another and their interest rates may vary as well. The repayment also differs from one loan provider to another.

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 Title

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 Benefits of Education Loan under the Income Tax Act

 Ways to Reduce Student Loan Costs 

 Repayment of Loans in Public Sector Banks

 Repayment of education loans in Private Sector Banks

 


Benefits of Education Loan under the Income Tax Act

  • Under Section 80E of the IT Act, a certain amount of deduction in taxes will be provided for those repaying the education loan borrowed.

  • This tax deduction will be given only to those who are repaying the loan borrowed by themselves, spouse, or their children.

  • A tax deduction will be given to the legal guardian of a student as well.

  • The period of tax deduction will be for 8 years.

  • The total amount paid as the interest can be deducted from the income.


 Ways to Reduce Student Loan Costs

  • The students have the option to pay the complete interest amount during the course period and grace period. This will be beneficial as 1% concession in the rate of interest will be given when the repayment period commences.

  • When the EMI’s are paid on time an additional interest will not be charged on the loan amount that has to be paid. This will also help in improving your credit score and you can avail loans easily in the future.

  • Central Scheme for Interest Subsidy on Education Loans is a scheme introduced by the government to uplift the Economically Weaker Sections(EWS). Under this scheme, a subsidy on interest will be provided for induvial whose annual gross parental or family income is below Rs.4.5 Lacs. 


Repayment of Loans in Public Sector Banks

 Repayment

  • In the case of a government-owned institution, the repayment of the education loan borrowed commence after the course is completed and also after the completion of the moratorium period.

  • Moratorium period is also known as the EMI free period where the students are given one year after the course completion or 6 months after securing a job (whichever is earlier) for before the commencement of the repayment period.

EMI Generation

  • The amount of interest accrued during the course period as well as the moratorium period will be added to the principal amount borrowed and the repayment will be fixed under the Equated Monthly Installments (EMI) scheme.

  • If the student is able to pay the full interest before the commencement of repayment then EMI is fixed only on the basis of principal amount.

  • The students have the option of prepayment and there will be no penalty charges for the amount prepaid. The student can prepay their education loan at their convenience. 


Repayment of Education Loans in Private Sector Banks

 Repayment

  • The repayment will begin after one year of completion of the course.

  • During this period the students have to have secured a job.

  • The minimum amount of time given for repayment of the loan is 3-years and the maximum time allowed will be 15-years.

  • A certain amount of processing charges will be charged by the private sector banks.

  • An additional rate of interest will be charged if there is a delay in payment of the loan.



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