A study loan is not just about covering tuition fees—it is an investment in an aspiring students’ future. It offers financial independence and ensures that no student has to forgo education due to financial problems. Study loans make higher education accessible to a larger audience with flexible repayment options, low-interest rates, and customized plans.
Whether you aspire to study at a prestigious university, a specialised course, or an international degree, a tailored study loan can help a student turn your aspirations into reality.
Types of Study Loans in India
Education loans can be categorised based on various factors such as the study location, security requirement, funding source, repayment structure, course, etc. It is crucial for students to compare interest rates, loan terms, and repayment options before selecting the most suitable study loan.
Based on Study Location: Study loans can be categorised into two based on location i.e. domestic education loans and study abroad education loans. Domestic study loans refer to the financial aid that helps to finance studies within India. Such loans cover tuition fees, hostel fees, books, equipment, and other educational expenses, and are offered by banks, NBFCs (Non-Banking Financial Companies), and government schemes. On the other hand, study abroad education loans refer to the financial assistance that helps to pay for expenses of students who are planning to study in countries like the USA, UK, Canada, or Australia. These loans not only cover tuition fees but also travel expenses, living costs, insurance, and other academic-related expenses. These types of student loans require collateral for higher loan amounts.
2. Based on Loan Provider: Students who are in need of finance can take education loans under government schemes or banks, NBFCs, and international lenders. Government-backed education loan schemes like the Central Sector Interest Subsidy (CSIS) and Dr. Ambedkar Central Sector Scheme offers financial aid with subsidised interest rates, especially for students from economically weaker sections. Public sector banks and private banks provide student loans on competitive interest rates and repayment terms. While public banks such as Punjab National Bank, Canara Bank, Indian Bank, Union Bank of India, etc. offer lower interest rates and better government schemes.
On the other hand private banks such as Axis Bank, ICICI Bank, HDFC Bank, Kotak Mahindra Bank, etc. offer faster loan approval and flexible repayment options. NBFCs such as Bajaj Finance, LIC Housing Finance, Cholamandalam Investment and Finance Company, Mahindra & Mahindra Financial Services and fintech companies provide study loans with a quick approval study loan process, often without collateral, but with higher interest rates.
3. Specialised Education Loans: Some study loans are customised based on the specific needs of students. These loans include skill development, bridge education loan, loans for top-tier institutions and parents sponsored education loans.
- Skill development loans are designed to finance short-term training courses and vocational education. These loans are often available at lower interest rates with quick disbursement.
- Education loans for top-tier institutions, such as those offered to students admitted to IITs, IIMs, or foreign universities, come with affordable interest rates and special repayment options.
- Bridge education loans are the ones that cover short-term financial needs until a more comprehensive funding option is found.
- Parent-sponsored education loans are often opted by parent(s) or guardian(s) to finance their child’s education, with the repayment responsibility falling on them rather than the student.
4. Based on Repayment Terms: There are two types of loans based on repayment duration; Short-term and long-term. Short term education loans usually have a repayment tenure of up to five years and are mostly taken for diploma courses or skill-based education programs. They either require immediate repayment or have a very short moratorium period. Wherein, long-term education loans are available for professional degrees and higher education. They have a repayment period of 10 to 15 years with a moratorium period during the study duration plus an additional grace period before repayment begins.
5. Based on Security Requirement: Generally, education loans are classified as either secured or unsecured. Unsecured loans or loans without collateral. These student loans are considered on the basis of applicant’s academic record, co-applicant’s financial background, and repayment capacity. While they are easier to obtain, they often come with higher interest rates and a lower borrowing limit. These types of loans are offered by private banks and NBFCs.
Secured education loans or student loans with collateral are offered by banks like SBI, PNB, and Canara Bank. These loans are provided on the basis of collateral, such as property, fixed deposits, insurance policies, or bonds, as security. Generally, these loans come with lower interest rates and higher borrowing limits, making them ideal for students requiring large loan amounts.
Also Read: Scholarships vs Education Loans: Which is the Best Funding Option?
Benefits of Choosing a Study Loan
Below are some of the reasons that one may choose a student loan to finance their education.
- Easy Access to Quality Education: One of the primary reasons for choosing a study loan is that it helps students to enroll in renowned institutions that might otherwise be financially out of reach. Whether it’s a top-tier university in India or an elite institution abroad, student loans help bridge the affordability gap.
- Lower Interest Rates Compared to Personal Loans: Study loans often come with lower interest rates than personal loans. Governments and banks provide special schemes to encourage higher education, making student loans more affordable. In India, students can also avail subsidised interest rates under government-sponsored schemes like the Central Sector Interest Subsidy (CSIS) Scheme, Dr. Ambedkar of Interest Subsidy on Educational Loan for Overseas Studies for OBCs & EBCs, etc.
- Covers Major Expenses: A study loan not only covers tuition fees, but it also covers:
- Accommodation expenses
- Books and study materials
- Travel expenses (especially for overseas education)
- Laptop and other required equipment
- Living expenses
- Flexible Repayment Options: Study loans come with flexible repayment terms making it easier for students to pursue higher education without any constant worry. Lenders typically provide a grace period i.e. students does not have to repay the loan immediately after borrowing it. The repayment tenure usually begins after completing the course which allows the borrowers/students enough time to secure a stable income.
Case Studies & Real-World Examples
Case Study 1: Radha’s Dream of Studying Abroad
Radha, a bright student from Mumbai, secured admission to Harvard University for an MBA program. The total cost of tuition and living expenses was altogether around ₹70 lakhs. Her family could only afford ₹ 15 lakhs. She was all worried if she could continue her studies or drop education. While she was looking for options to finance her education, Radha got to know about an affordable education loan from an Indian bank covering tuition fees, accommodation, and other expenses. She also utilised government interest subsidies, helping her reduce the overall financial burden. Post her MBA, Radha secured a job in a reputed consultancy firm and repaid her loan within 4.5 years.
Case Study 2: Parth’s Journey to IIT Chennai
Partha, an aspiring engineer, cleared JEE Advanced with AIR amongst top 500 and secured admission to IIT Chennai, his dream institution. While tuition fees were subsidised, hostel charges and study materials were additional expenses that his family struggled to afford. Parth started looking for various affordable options and came across a government-backed study loan with a low-interest rate. This scheme benefited from the Central Sector Interest Subsidy Scheme that helped him waive interest during the course period. After completing his engineering degree, he got placement in a reputed fintech firm and repaid his study loan within 3 years. This subsidy scheme made quality education accessible to him without any strain.
Case Study 3: Shariya’s Collateral-Free Loan for Medical Studies
Shariya, a medical student, secured admission to AIIMS Delhi but required financial assistance for study materials, accommodation, and equipment for her course. Since her family lacked collateral to offer, she struggled to secure a student loan. Then from a friend she received information about a collateral-free study loan under the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) and she applied for it which helped her to manage her finances well and secured a job as a MBBS doctor. Student loans without collateral makes higher education attainable for deserving students.
Also Read: Education Loan Eligibility Criteria – Complete Guide for Students
Frequently Asked Questions (FAQs)
What is a study loan?
A study loan or education loan refers to financial assistance that helps students pay for their higher studies. This financial assistance helps to cover expenses such as tuition, books, accommodation, and living costs. Students who borrow finances from a bank, financial institution, or government program and repay it with interest after they finish their studies or after a fixed moratorium period.
Who can avail a study loan?
Students who have applied for undergraduate degrees, postgraduate degrees, professional courses such as medicine or engineering, and sometimes, vocational training programs can avail benefits under education loan. Eligibility criteria for an education loan varies depending on the lenders and students’ specific needs.
What are the different types of study loans?
The two major types of education loans are:
Secured loans: These loans are given based on collateral like property or gold as security. They usually have lower interest rates.
Unsecured loans: These don't require collateral. Education loan approval is based on students' academic record and the co-applicant's creditworthiness. They might have slightly higher interest rates.
What expenses does a study loan cover?
Study loans can cover a range of educational expenses, including:
- Tuition fees
- Books and supplies
- Accommodation and living expenses
- Travel costs (especially for studying abroad)
- Other related costs, like exam fees or project expenses
How do I repay a study loan?
Repayment of an education loan begins after you complete your course or after a grace period, usually 6-12 months. The loans can be paid in the form of EMIs (Equated Monthly Installments).
Are there any tax benefits on study loans?
In some countries, there might be tax benefits on the interest you pay on your study loan. It's best to check with a tax advisor or refer to your country's tax regulations.
How long does it take to process a study loan?
Loan approval may take anywhere from a few days to a few weeks, depending on the lender and document verification process. Once the study loan application verification completes, the loans get approved.