The Indian government has introduced diverse programs and interest subsidies to financially aid students pursuing education abroad. These endeavors aim to assist individuals from economically disadvantaged backgrounds and marginalized communities in their educational endeavors. It’s crucial to understand that while often termed government education loans for studying abroad, these initiatives are not direct loans but rather programs providing financial assistance and interest subsidies. Through these schemes, students can enjoy advantages like lowered interest rates, adaptable repayment choices, and additional forms of support.
Different education loan options
There are basically 4 types of lenders that can provide education loan for abroad studies by the Indian government. These lenders are –
- Public Banks – Indian public banks offer abroad education loans, requiring collateral. Loan amounts vary from INR 7.5 Lakh to INR 1.5 Cr. Government bank loans provide tax benefits (Section 80E) and competitive interest rates. Notable lenders include State Bank of India and Union Bank of India.
- Private Banks – Private banks in India provide education loans for overseas studies with varying interest rates, starting at 11% per annum. Loan amounts depend on factors like the chosen country, course, applicant’s profile, and co-signer’s financial status. These loans qualify for tax benefits under Section 80E and offer quicker processing times compared to government banks. Key players include ICICI Bank, Axis Bank, and IDFC FIRST Bank.
- NBFCs – NBFCs offer secured and unsecured education loans for studying abroad, influenced by factors like country, course, and applicant’s profile. Interest rates range from 11.50% to 13.75% per annum, higher than private and government banks. Unlike private bank loans, NBFC loans lack tax benefits under Section 80E. NBFCs, such as HDFC Credila, Avanse, InCred, and Auxilo, provide quicker processing times compared to government and private banks.
Education loan schemes by the Indian government
- Credit Guarantee Fund Scheme for Education Loans (CGFSEL): Introduced by the Indian Government in 2015, the Credit Guarantee Fund Scheme for Education Loans (CGFSEL) specifically caters to students aspiring to study abroad without collateral or a co-applicant. Under this initiative, students can secure loans up to INR 7.5 Lakh without the need for collateral or a co-applicant, provided they belong to the economically weaker section, have an annual family income below INR 4.5 Lakh, and have secured admission to an approved technical or professional course.
- National Minorities Development & Finance Corporation (NMDFC): NMDFC, a government body, offers loans for professional and job-oriented courses to minorities, categorized under two credit lines based on family income. For credit line 1 (income up to INR 1.20 Lakh in urban areas and INR 98,000 in rural areas), education loans for study in India extend up to INR 20 Lakh, and for study abroad, up to INR 30 Lakh at a 3% interest rate, with a moratorium period of course duration plus 6 months and a repayment tenure of 5 years. For credit line 2 (income up to INR 6 Lakh), the interest rates vary (8% for men and 5% for women).
- National Safai Karamcharis Finance & Development Corporation (NSKFDC): Dedicated to the economic development of the safai karamcharis/Manual Scavengers community, NSKFDC provides education loans with a maximum limit of INR 10 Lakh for studies in India and up to INR 20 Lakh for studies abroad. The interest rate is 4% per annum (with a 0.5% rebate for women in India), a moratorium period of 1 year, and a repayment tenure of 5 years.
- National Backward Classes Finance & Development Corporation (NBCFDC): NBCFDC, a government undertaking, extends education loans for both domestic and international studies. Eligible students, belonging to backward classes with a family income not exceeding INR 3 Lakh per annum, can avail loans up to INR 15 Lakh for studies in India and up to INR 20 Lakh for studies abroad. The interest rates are 4% p.a. for men and 3.5% p.a. for women, with a moratorium period of 5 years and a repayment tenure of 15 years.
- National Scheduled Castes Finance & Development Corporation (NSCFDS): For the welfare of scheduled castes, NSCFDC provides education loans with a quantum of up to INR 20 Lakh for studies in India and up to INR 30 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries. The moratorium period is the course duration plus 6 months, and the repayment tenure is 10 years for loans below INR 7.5 Lakh and 15 years for loans above INR 7.5 Lakh.
- National Handicapped Finance & Development Corporation (NHFDC): Formulated by the Ministry of Social Justice and Empowerment, NHFDC provides education loans for professional undergraduate and postgraduate courses to students with disabilities. Collateral is required for loans exceeding INR 7.5 Lakh, with loan amounts of INR 10 Lakh for studies in India and INR 20 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries, a moratorium period of course duration plus 1 year, and a repayment tenure of 7 years.
- National Scheduled Tribes Finance and Development Corporation (NSTFDC): Established by the Ministry of Tribal Affairs, NSTFDC offers financial aid for technical and professional courses in India or abroad. Loan amounts range up to INR 20 Lakh for studies in India and up to INR 30 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries. The moratorium period is 6 months after the course is completed or employment is obtained, and the repayment tenure is 10 years for loans below INR 7.5 Lakh and 15 years for loans above INR 7.5 Lakh.
In conclusion, the Indian government provides diverse education loan options for studying abroad through public banks, private banks, and NBFCs. Additionally, government schemes like CGFSEL and initiatives by NMDFC, NSKFDC, NBCFDC, NSCFDS, NHFDC, and NSTFDC cater to specific demographic groups, offering financial support and interest subsidies. These programs aim to empower students from economically disadvantaged backgrounds, promoting inclusive education.