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Student Loans: 5 Must-Knows

Last updated on: July 08, 2023 01:52 IST
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Prashant A Bhonsle lists 5 major points you need to keep in mind before applying for a student loan.

Illustration: Dominic Xavier/

Higher education can be expensive, so once you are accepted to your dream institute, take a student loan. It is an excellent way for you to partly or fully cover this enormous expenditure.

A student loan is a loan given to a student for pursuing higher education in India or abroad.

1. Evaluate the loan amount

Before you start your loan application process, you must think carefully about how much you will need to complete your education.

Studying in India will require you to spend mainly on tuition fees, learning resources (textbooks) and accommodation.

If you are going abroad, you will likely require more money for tuition and accommodation as well as additional expenses such as a student visa and travel.

Do note that some banks and NBFCs do not cover all these expenses, so it is important to choose one that covers as many of these expenses as you require.

2. Research the lenders and check eligibility criteria

The most important consideration is finding the lender you choose to go with.

The biggest unknown of applying for a student loan is your eligibility.

Before starting the loan application process, you should check if you are eligible to get a loan from them in the first place.

Different banks and NBFCs have different criteria for eligibility. Many lenders may only give you a loan if you have consistent good grades and/or if you are pursuing a certain course from a select list of institutes.

Therefore, it is essential to explore various options and ask the banks and NBFCs for their eligibility criteria to maximise your chances of getting a student loan.

3. Check the terms and conditions

Once you have shortlisted the lenders who can give you a loan, look for the ones that will give it to you on favourable terms.

The interest rate is one of the important factors you need to consider. The lowest interest rate you can get is around 8 per cent, though most private banks and NBFCs start at higher rates.

An often-overlooked factor is the moratorium period for paying back the loan. The moratorium period is the duration after taking the loan during which you -- the borrower -- do not need to make monetary payments to the bank or the NBFC you borrowed from.

Sometimes, there is no moratorium period. Other times, the moratorium period ends immediately after the completion of your course.

The ideal scenario would be where the moratorium period ends after securing a stable job, because you will be receiving money in your salary which you can use to pay the lender back.

Do note that the lenders will check your credit history before giving you a loan, so ensure that you maintain a good credit rating by repaying your existing loans (on time).

4. Prepare necessary documents

After choosing your lender, prepare all the necessary documents. Different lenders ask for different documents to prove your identity and your worthiness to get the loan, and you must check their official Web site to find the documents you will need to submit. These usually include:

◆ Aadhaar card

◆ Passport

◆ College admission letter

◆ Statement of cost

◆ Previous school/college transcripts

◆ Previous bank account statements

◆ Entrance exam results

◆ College prospectus

◆ At least 1 passport size photograph

Remember to keep multiple copies of these documents!

5. Explore different benefits and schemes for students

Lastly, keep an eye out for special schemes that will give you benefits in obtaining student loans if you belong to certain categories.

For example, if you are in the EWS (Economically Weaker Section) category, you will be eligible for various schemes like CGFSEL, which does not require you to have collateral or co-signers.

Moreover, some banks, especially government banks, also provide lower interest rates for female students to promote the Beti Bachao Beti Padhao campaign.

These schemes will either improve your chances of getting a loan or reduce the amount of money you will need to pay the lender back.

Prashant A Bhonsle is the founder and CEO, Kuhoo Technology.

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