Eligibility Criteria for Education Loans in India: The Definitive Guide
In India, education has always been regarded as the biggest social leveller. Moreover, families from all backgrounds put a lot of stress, At the same time, on ensuring their children receive quality education and pursue higher studies.
However, with increased tuition rates in India and overseas, funding higher studies has become difficult. For instance, an MBBS degree… Therefore, for a middle-class family, mobilising such amounts upfront is practically impossible.”
This is where education loans come into the picture. By providing well-structured financing, they open up higher studies to millions of students in India. Banks, non-banking financial corporations (NBFCs), and online lenders now offer loans for tuition, living expenses, and even travel. But the important thing to remember is this — not all students qualify automatically for an education loan.
Banks look very carefully at various factors to determine whether you qualify for a loan. Specifically, they assess your grades, the school you attend, your co-signer’s salary, collateral, and credit score.”
Knowing the requirements in detail is the first step for students and their families to obtain funding successfully.
This handbook will take you through each element of education loan eligibility in India, divvying it up into easy-to-understand sections. It will also tell you about how websites like MoneyBuddha are changing the nature of students’ interactions with loans by making it easier to check eligibility and compare.
1. What Sets Education Loans Apart
We need to get a basic understanding of why education loans are different from other kinds of loans before we jump into the topic of eligibility.
- First, Purpose-based financing: Unlike personal loans, education loans are approved for exclusive academic use.
- Second, Moratorium period: Repayment generally begins after study completion, providing students with a breathing spell until they start earning.
- In addition, Flexible tenure: Repayment tenures stretch from 15 years in a few instances, making finances lighter.
- Moreover, Comprehensive coverage: The costs that can be paid for include not just school fees, but also costs for staying in a hostel, travelling, study trips, laptops, and exam expenses.
- Finally, Tax relief: You can deduct the interest you pay on education loans from your taxes for up to 8 years, thanks to Section 80E of the Income Tax Act.
Because of these factors, lenders look at applicants differently. They’re not just lending money to someone who already makes money (like the student), but are taking a risk based on how much they think the student will earn in the future. This makes it harder to check if someone qualifies for a loan.
2. The Core Eligibility Criteria
Generally, Each lender has slight variations, but there are some general rules that are the same for banks, non-banking financial companies, and government programs.
Nationality and Citizenship
- The person applying for the loan should be an Indian citizen.
- In some cases, Non-Resident Indians (NRIs), Persons of Indian Origin (PIOs), and people with Overseas Citizen of India (OCI) cards may also be considered.
- In particular, A valid Indian passport and a confirmed admission letter are required in the case of foreign education loans.
Example: The State Bank of India (SBI) demands Indian citizenship as a minimum requirement under its Global Ed-Vantage scheme, which provides for up to ₹1.5 crore for foreign education.
Age Requirements
Age restrictions differ based on the study level and lender. Specifically,
- For example, for undergraduate courses the limit is 16–30 years, whereas for
- postgraduate courses it is 21–35 years
- For professional/doctoral studies: Some lenders make eligibility up to 40–45 years.
Private NBFCs are more flexible, especially for working professionals pursuing executive MBAs abroad.
Academic Merit
Banks prefer students with a consistent academic record. While average students are not excluded, strong academic performance enhances approval chances.
- Admission through competitive exams (JEE, NEET, CAT, GMAT, GRE, IELTS, TOEFL) signals employability.
- Higher grades and fewer backlogs improve credibility.
Case: For instance, A student getting into IIT or IIM will not encounter much opposition to availing a loan. However, a student with several backlogs in an unrecognised private college can be in trouble.
Confirmed Admission
Banks accept evidence of confirmed admission for the release of funds. Initial sanction can be made using provisional admission letters, but final confirmation of admission is required before release of funds.
Recognised Institutions and Courses
- In India, UGC, AICTE, NAAC, Bar Council, and MCI-approved colleges are acceptable.
- Abroad: The university should be accredited and recognised internationally. Some banks have lists of approved universities for quicker approval.
Courses mostly included are:
- Engineering, Medicine, Law, Pharmacy, Architecture.
- Management, Finance, Economics, and IT.
- Vocational and professional diploma courses.
3. Loan Amounts and What They Cover
The amount sanctioned is based on whether studies are being pursued in India or abroad, and on the borrower’s overall eligibility profile.
- Domestic education: Up to ₹7.5 lakhs without collateral.
- Foreign education: ₹20–40 lakhs in public sector banks; up to ₹1.5 crore from private financiers.
Expenses covered include:
- Tuition and hostel charges.
- Books, a laptop, and instruments.
- Travel, study tours, project costs.
- For foreign studies: visa, airfare, medical insurance, and living costs
4. The Role of the Co-Borrower
As students do not generally have any income, banks insist on a co-borrower (generally a parent or guardian).
- The co–borrower will sign the loan papers and is responsible just like the main borrower for repayment.
Additionally, their steady income and good credit history are crucial for loan approval.”
- Salary slips, ITR filings, business income, and co-borrower liabilities are considered by banks.
Example: If a parent has a ₹12 lakhs annual income and no outstanding major loans, banks have confidence in repayment, enhancing the chances of approval for the student.
5. Collateral and Security
The need for collateral depends on the loan size.
- Loans of ₹7.5 lakhs and below are mostly collateral-free, except for a co-borrower.
On the other hand, loans above ₹7.5 lakhs often require physical security.”
Accepted securities include
- Homes or businesses.
- Fixed savings or LIC policies.
- Government bonds.
Non-Banking Financial Companies like HDFC Credila can provide loans without collateral for students who are admitted to top international universities, with amounts reaching as high as ₹40 lakhs
6 Creditworthiness and Repayment Capacity
Banks look at the CIBIL score of the person borrowing alongside the main borrower (it is best if it’s 700 or more). A lower score might mean a higher interest rate or a loan denial.
To evaluate repayment ability, they look at:
- The leftover money of the co-borrower after expenses.
- The ratio of the monthly payment to their income.
- Employment or business stability.
Repayment period:
- Domestic studies: 7–10 years.
- Overseas studies: 10–15 years.
7. Government Schemes Facilitating Eligibility
Government schemes expand access to economically weaker sections.
- Vidya Lakshmi Portal is a web-based common platform to submit loan applications to multiple banks.
- In addition, under the Central Sector Interest Subsidy (CSIS), students from families with incomes below ₹4.5 lakhs receive a full interest subsidy.
- The Padho Pardesh Scheme provides financial help to students from minority communities who want to study abroad.
- Likewise, the Dr. Ambedkar Central Sector Scheme offers special assistance for OBC and EBC students.
- Special benefits for women: Several banks provide 0.25–0.5% interest relief.
Example: A student belonging to a rural family with a ₹3.5 lakh per annum income, admitted to an M.Sc. course in Delhi University, would study practically free of charge under CSIS, as study year interest is subsidised.
8. Domestic vs. International Eligibility: A Comparison
Criteria Domestic Loan Overseas Loan
Loan Amount Up to ₹7.5 lakhs without collateral Up to ₹1.5 crore (collateral common)
Expenses Covered: Tuition, hostel, exam fees, travel, visa, insurance, and living costs
Collateral not required below ₹7.5 lakhs. Often required for higher amounts
Recognition UGC/AICTE-approved institutions , Accredited international universities
Co-Borrower Requirement Mandatory Mandatory
9. Repayment Structures in Detail
Repayment design is an important aspect of eligibility since banks check whether the borrower can actually repay.
- Moratorium period: Course duration + 6–12 months grace.
- Simple interest can be levied during moratorium, while some schemes provide for full deferral.
- EMI term: Variable, up to 15 years.
- Floating vs fixed rates: Banks tend to provide floating interest pegged to repo rates, whereas NBFCs might offer fixed rates marginally higher.
- Prepayment and foreclosure: Generally permitted without charge, to promote prepayment.
10. Preparing Before Applying
Eligibility not only relies on satisfying bank terms — it also relies on the preparedness of the student and family.
Steps to prepare:
- Identify known courses and institutions well ahead of time.
- Strengthen the co-borrower’s credit history by repaying existing loans.
- Collect all the required papers before you start, like property papers, income proof, and academic records.
- Establish a practical expense budget for tuition fees, travel, and living.
- Apply 3–6 months prior to course commencement for an on-time sanction.
11. What Various Banks Consider Eligible
SBI (State Bank of India)
- Up to ₹20 lakhs for national, ₹1.5 crore for foreign.
- An Indian citizen, someone who has confirmed their details, and a co-borrower are necessary.
- Collateral-free up to ₹7.5 lakhs.
Axis Bank
- Up to ₹75 lakhs.
- A large list of foreign-approved institutions.
- Maximum repayment period up to 15 years.
ICICI Bank
- Overseas education loans up to ₹1 crore.
- Unsecured facilities for leading global universities.
HDFC Credila (NBFC)
- Tailor-made loans without rigid limits.
- Collateral-free loans for top-notch institutions.
- Flexible repayment plans.
12. The Role of Money Buddha
Eligibility for education loans can be a labyrinth at times. Parents hop from one bank to another, only to get opposing views, concealed fees, and lengthy waits.That is where Money Buddha turns things around.
What is Money Buddha
MoneyBuddha is an online platform that facilitates students in discovering, comparing, and availing education loans with ease. It facilitates the connecting of banks/NBFCs and students through unbiased information and dedicated counselling.
How MoneyBuddha Assists
- Loan comparison: Students are able to compare lenders side by side on interest rate, collateral requirement, processing time, and tenure.
- Eligibility check: The website suggests suitable lenders based on the student’s education, family earnings, and college.
- Documentation help: Advisors assist families in preparing important papers like property documents, income proof, and other needed files to ensure they do not get rejected.
- Quickening approval: Collaborating with lenders helps move the process along more quickly.
- Complete guidance: From the moment students start asking questions until they make their last payment, they receive constant support.
A Student's Experience with MoneyBuddha
Consider Riya, a Delhi student who got into the University of Toronto for her MS in Computer Science. Her parents went to three banks and received conflicting information on collateral. They were confused and approached Money Buddha.
- The site compared SBI, Axis, and HDFC Credila loans side by side.
- Advisors clarified that SBI needed collateral, but Credila was able to provide unsecured finance.
- Documentation was done without any hiccups, and within 2 weeks, Riya’s loan was approved.
Money Buddha converted a potentially harrowing 2-month ordeal into a speedy, well-informed choice.
13. Why Eligibility Matters Beyond Approval
- Lower interest rates.
- Shorter processing times.
- Access to subsidies and benefits.
- Higher repayment flexibility.
For parents, being well-equipped means peace of mind. For students, it provides the ability to study rather than concern themselves with money.
14. Conclusion
Indian education loans are more than funds; they enable individuals to achieve their ambitions, become independent, and seek foreign study opportunities. As the cost of education continues to increase, these loans have become extremely crucial for middle-class societies and more affluent individuals.
But it is hard to get a loan. Banks carefully evaluate several factors to determine whether you qualify. Grades, the institution, co-signer’s salary, collateral, and credit score are among the main considerations. Moreover, government programs support students from low-income families so they can pursue their aspirations.
Websites such as MoneyBuddha facilitate this whole process, giving a helping hand to families at every step. They assist students in knowing how to obtain loans and what the best choices are for their future.
In short, student loans are not exclusively for course fees. They assist individuals in developing their careers, living their lives, and pursuing their dreams. With knowledge of what they should meet the requirements for and forward planning, students can ensure cash doesn’t get in the way of learning.
Leave a Reply