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‘Seeking Education Loan For Your Child To Study Abroad? Here’s What You Should Know‘

Going abroad for higher studies can be expensive, if you haven’t planned your finances well. If you are thinking about taking a loan, keep these 7 points in mind.

The first thing parents often ask us when they want to explore options for higher studies abroad is, “How much will it cost?” It is natural to worry about the expense, especially given that an education abroad can cost you quite a package. If funds are a constraint, there are many ways to finance your child’s degree without burning a hole in your pocket. Here are 7 points to keep in mind before you seek educational loans:

1.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.

2.Compare Loan Options to Narrow Down Your Choice.
It’s important not to be penny wise, pound foolish. Often people fall into a sticky situation, where they opt for a loan with low interest rates, but the coverage does not last for the whole tenure of education. 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 – and don’t forget to read the fine print. Some details include:
- 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 4 slabs – a) Below Rs. 4 lakhs, b) Between Rs. 4 lakhs and Rs. 7.5 lakhs and c) 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.
- SBI is offering an upper limit of 30 lakhs for premier schools abroad on an average of 9.7% - 13.45% interest,
- GyanDhan, India’s First Educational loans Marketplace, offers 100% financing for top B- Schools and engineering schools. They offer loans with collateral starting as low as 9.1%.
- Avanse Educational Loan covers 100% of study abroad expenses on a floating interest of 12% - 17%.
- Nationalized banks are offering a comparatively lower rate of interest between 9% - 13% 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.

3.Find Out the Eligibility Criteria for Loans
Before signing on for a loan, learn about the essential grounds on which it will be sanctioned. Enquire with the loan lenders namely banks, and non-banking finance companies about the specifications so that you can be prepared with all relevant details. 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.
Generally, the courses for which loans are sanctioned are graduate and post-graduate degrees in: management, engineering, medicine, arts, architecture, pure science, and hotel management. Usually banks (both public and private) sanction loans for approved admissions in reputed institutions and NBF firms are more flexible about courses and colleges. However, stay updated about the latest entries as well as the status of your chosen program in the list of the eligible courses.

4.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 4 lacs, 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.

5.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.

6.Your Child Can Help Fund Their 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 child’s living expenses and reduce the loan amount.

7. 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. In most cases, your child will have adequate time to repay after completing their education. You can start with the interest repayment from the moratorium or holiday period and pay the principal in instalments after your child bags a job.
While higher education abroad may seem like a huge strain on your budget, it gives you the best return on investment. The initial payoffs may give you heartburn, but in the long run, your child will be equipped for a changing economy and a fast-paced world.

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.