Studying in a foreign country is every student’s dream. Given a chance, they would definitely like to pursue higher education in their dream institute overseas. Although scholarships and grade-based financial aids are available for scholarly aspirants, others have to arrange for the funds on their own to fulfil this dream. Education loans go a long way in providing for foreign studies, especially for students belonging to middle-class families.
The cost of education has increased manifolds over the past decade again making it difficult for the mid-income families to fund their children’s higher education in top Indian colleges, let alone in a foreign institute. Since it is a major financial step, clear goals should be set in terms of selecting the college and course along with finding the right education loan.
When is the right time to start planning?
As a student, one should start planning for higher studies as per personal preferences soon after secondary examination. This is when the students have to select the right stream- science, commerce or arts and humanities. And it is also the time for students to find their true calling. Start researching about the courses you might be interested in and find the best colleges that offer these courses. Also, talk to your parents about the budget they can allocate to your higher studies and look for foreign institutes that fall in your budget. Mind the following things-
- Select a college that offers exclusivity in terms of educational qualities.
- Do not let beautiful architecture or a well-designed brochure drive your decision.
- Choose a course that ensures a stable job for you in your home country as well as abroad.
- Make sure that the college and course both are approved by the local government.
Parents also need to make proper financial goals about how they are going to fund their child’s dream of studying in a foreign institution. The sooner you start planning, the better it is. Ideally, you should save a certain amount every month towards your kid’s education fund. However, if you have not taken that step soon enough, you can start it when your kid goes to higher secondary school.
Also Read: How to Save for Your Child’s Education
How to plan?
If you see the graph, you will find a steep rise in the cost of education loan over the last decade. In such a scenario, it may be easy for the high-income parents to send their kids overseas for higher education. However, for the mid-income parents, overseas education may translate to the pledging of family assets. So, it is important to understand your kid’s preferences and the colleges he wants to go to. Do your research about the fees of the course that he wants to opt. In addition to the tuition fee, the cost of living in a foreign country should also be taken into consideration.
How to go about the education loan for studies abroad?
Since the cost of education is rising and the value of Indian rupee is weak against the currency of other developed nations, education loan in this case will be a high-value loan. Both public sector banks and private sector banks offer loans for overseas education at highly attractive rates of interest. But the eligibility criteria and approval process are comparatively stringent in case of banks. This is the reason why several Non-banking Financial Corporations (NBFCs) have stepped into the lending arena to offer education loans at easier terms and conditions but slightly higher rates of interest.
Also Read: How much does a foreign education cost?
Given below is a table showing the rates of interest offered by different banks for loan amount above Rs. 7.5 Lakhs-
| Banks | Interest Rate |
| State Bank of India | 10.90% |
| Punjab National Bank | 10.15% |
| HDFC Credila | 11.85% |
| Federal Bank | 10.60% |
| Axis Bank | 13.50% |
| Union Bank of India | 8.40% |
| Canara Bank | 10.10% |
| Indian Overseas Bank | 11.40% |
These are the public sector and private banks offering education loans for higher studies. Avanse and Auxillo are the top two NBFCs offering education loans for studies abroad. Student loan at Avanse start at an interest rate of 11.50% while at Auxillo the rate is charged as a spread over its base rate which is 12.70%.
At the time of granting the loan, banks estimate your employability in the future and on the basis of that, they either approve or reject the loan. Your eligibility for the loan will depend on a lot of factors such as income of the borrower, confirmed admission in a foreign institute, etc.
Keep all documents ready before approaching the bank for education loan. You would be required to submit the following documents-
- Letter of admission from the college that shows the total cost of tuition and other fees. It should also show the detailed breakup of the fee over different years or semesters.
- Travel related documents such as visa approval, study permits in the foreign country will also be required.
- Academic records of the student.
- Documents showing the income of the primary borrower/s or co-signers or guarantor.
- Other identity proofs related to the primary borrower.
In case of high-value loans, you may be required to pledge an asset as collateral. You will be required to submit the collateral documents, if any, at the time of getting the loan.
Funding education in a foreign country is a major financial decision for a mid-income family in India. Hence, every step should be taken carefully and with extensive research. The main purpose of studying in a foreign country should be quality education, so you should not get lured into a college just because it has a beautiful architecture or a great campus. Look for the right course, read about the college faculty and decide whether it is worth the money you will spend.