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‘GET YOUR FINANCES RIGHT‘

The first thing parents often ask us when they want to explore options for higher studies abroad is: “How much will it cost?” Last year, State Bank of India (SBI) announced that the ceiling limit for its foreign educational loans would be raised from Rs 30 lakh to Rs 1.5 crore. Parents looking for financing options welcomed the scheme, which took a load off their heads.

According to statistics, about 45 per cent of international students in US alone comprise of Chinese or Indian students. While SBI is the old stalwart, other reputed banks such as HDFC, and financial loan companies have equally viable and attractive financing schemes. Here’s a quick look at the financial loan options other than SBI:

- The Indian Government has installed the portal ‘Vidya Lakshmi’ that allows students to check out various loan options and fund providers. Loans are provided in four slabs — Below Rs 4 lakhs, between Rs 4 lakhs and Rs 7.5 lakhs; and above Rs 7.5 lakhs with differing interest rates for each slab.

- Credila, an HDFC Ltd. Company, India’s first dedicated educational loan company, offers loan approvals before you secure admission. You can get loans up to Rs 2.5 crores.

- Prodigy Finance offers competitive loans which does not need a co-signer or collateral. Students can start repaying six months after graduation, and there are no penalties for early repayment. You can also avail of their $10,000 scholarships, which is being given away this year to mark their decade of business.

- GyanDhan, India’s first educational loans marketplace, offers 100 per cent financing for top B-Schools and engineering schools. They offer loans with collateral starting as low as 9.1 per cent.

- Avanse Educational Loan covers 100 per cent of study abroad expenses on a floating interest of 12 per cent to 17 per cent.

- Nationalised banks are offering a comparatively lower rate of interest between 9 per cent to 13 per cent on an average.

Students are advised to stay updated with the latest on funding options. Many of these funding options keep changing over time to time. Make sure to do your due diligence in researching the authenticity and reliability of the information as well as the fund.

READ THE FINE PRINT

Education abroad varies for different universities, countries, and the chosen course. For instance, an UG education abroad can cost between $30,000 and $60,000 per year, whereas an MBA or PG can set you back by $40,000 to $60,000. With the upper cap on loan limits raised, applicants now have an additional avenue to fund their education. They can now fully fund their education with the loan, if required, instead of into various resources.

Many students make the mistake of taking financial loans for granted. In the fine print, you will find the conditions and clauses that may later come to bite, if you are not vigilant. Before signing up for an educational loan, keep these seven points in mind:

Consider the option of an overseas educational loan: You can avail of educational loans at both public as well as and private banks and organisations. Approach your local bank for details. Most banks offer attractive EMI options too. Apply for one that offers comprehensive coverage of study abroad costs. These loans will generally require collateral like property or assets or a co-signor.

Compare loan options to narrow down your choice: Don’t be penny-wise, pound foolish. It is important to understand all the features of different loans, and how it will impact your studies abroad. So be discreet in your selection. Make a comparative analysis to understand whether your needs are met in the loan profile or not, and don’t forget to read the fine print.

Find out the eligibility criteria for loans: Before signing on for a loan, learn about the essential grounds on which it will be sanctioned. The pre-requisites might vary across organisations; however, the basic criteria are:

- You are eligible to apply for educational loan if you are between 18-35 years old
- An Indian national and
- Secured a confirmed place in a prestigious institution abroad.

Stay updated about the latest entries as well as the status of your chosen programme in the list of the eligible courses.

Evaluate your security or collateral options: Each organisation will have a policy of a security or collateral against the loan they would be sanctioning. The nature of the collateral varies across providers ranging from LIC policy to immovable assets etc. It also depends on the amount that you are borrowing. For instance, if you are applying for below Rs 4 lakhs, you do not need to pay a security deposit. Furthermore, many leading organisations namely SBI, HSBC etc have exceeded the loan limit to be collateral free.

Don’t forget that you can also apply for financial aid: Loans are not the only way to finance your child’s education. You can apply for financial aid too. Universities offer two types of aid— need-based, and merit-based.

- Merit-based scholarships are granted on the basis of special skills, talents, or abilities. Your university may have merit based scholarships based on academic record, artistic, musical, or athletic abilities. Merit-based scholarships are usually very competitive.

- Need-based scholarships are awarded based on financial need. You will be required to demonstrate need at a predetermined level to be eligible.

You can fund your education through work-study: Universities abroad may allow you to work on campus and opportunities include tutoring, research assistant, a desk job in the library or administrative office. For example, in the US, international students are generally only allowed to work a maximum of 10-20 hours a week during term time. Though this option really provides very minimal support, it can help supplement your living expenses and reduce the loan amount.

Repayment of Loans: Don’t miss out on the finer aspects of loan repayment. Make sure that you are completely aware of the loan repayment schedule and the options available to you. Also, find out how the loan repayment will affect you if exchange rates change, or you choose to either prepay or delay your loan installment. Do a thorough research and make a detailed plan on how to repay your loan. This will also have to be done keeping in mind the job prospects at the time of application.

If you plan your finances well, your education will not seem like a burden. Play cautious and avoid redundant expenses by being minimalistic, and practical, and you will never feel the burden of finances while studying abroad.

ABOUT THE COMPANY

ReachIvy is a premium education and career advisory that helps aspiring students get accepted into top tier educational institutions globally. We have successful admits at MIT, Columbia, Harvard, University of Pennsylvania, London School of Economics, University of Michigan, Oxford, University of Chicago amongst others.

Vibha Kagzi, Founder and CEO, ReachIvy, holds an MBA from Harvard Business School, and a Bachelor of Science from Carnegie Mellon University. She has also pursued courses at the University of California, Berkeley, the London School of Economics and the Indian School of Business.

Our global team of counsellors have also acquired their degrees from premier institutes and are passionate about sharing their experiences with students worldwide.