Education Loan in India: SBI student loan, Scholarship Scheme & Global Advantage Loan

In this blog, I'm going to share all the important information related to education loans: where you can easily get an education loan, how to get it, how to reduce the interest, who should take an education loan, and who shouldn't. Here, I’m specifically talking about education loans in India. I’ll use SBI (State Bank of India), one of the biggest banks in India, as an example to explain the entire process. Most banks in India follow a similar procedure for education loans.

1. SBI Education Loan

SBI offers education loans in five categories:

1. SBI Student Loan: For students who want to pursue their education within India.
2. SBI Global Advantage Loan: For students who want to study abroad.
3. SBI Scholar Scheme: For students studying in top Indian colleges like IIT, IIM, and NIT.
4. SBI Skill Development Loan: For vocational courses.
5. SBI Takeover Loan Scheme: For those who already have an existing loan that they want to transfer to SBI.

Here, I will focus on the first three schemes, as these are the most common.

2. How Education Loans Work

Education loans are offered for higher education, such as graduation, post-graduation, vocational courses, and part-time courses. You can only apply for this loan after you’ve secured admission to a college. If your family doesn’t have enough funds for your education, you can approach a bank, and based on certain conditions, the bank will sanction a loan.

3. Loan Amounts Offered by SBI

SBI STUDENT LOAN SCHEME: Loan amount upto 20 lakh. Covers tuition fees and additional expenses like computer, educational tours, hostel, etc. Maximum loan coverage is 95% of the total expenses; 5% margin money required for amounts exceeding 24 lakh.

SBI SCHOLAR LOAN SCHEME: Loan amount varies by college category:

• Category AA: Up to 50 lakh
• Category A: Up to 40 lakh
• Category B: Up to 30 lakh
• Category C: Up to 27.5 lakh

No margin money required; covers 100% of educational expenses including tuition fees and other related costs.

SBI GLOBAL ADVANTAGE SCHEME: Designed for studies abroad, offers loans ranging from 27.5 lakh to 21.5 crore.

Covers not only tuition fees but also expenses like computer, educational tours, hostel, etc.

Requires a 15% margin, covering up to 85% of total expenses.

4. Loan Amount Coverage

However, SBI doesn’t give 100% loans in all cases.

SBI SCHOLAR SCHEME: Provides 100% of the loan amount.

SBI STUDENT LOAN: Up to 4 lakh: 100% of the loan amount. Above 24 lakh: Up to 95% of the loan amount; 5% margin money (self- contribution) required.

SBI GLOBAL ADVANTAGE SCHEME: Requires a 15% margin; covers up to 85% of total expenses.

5. Collateral and Security

For the SBI Scholar Scheme, no collateral is needed. In fact, if you get admission to a top college, SBI usually has a dedicated counter at the college to process these loans.

For the SBI Student Loan, no collateral is needed for loans up to Rs 7.5 lakhs. For loans above that, your parents will need to become co-borrowers, and you will need to provide collateral, such as property documents, government bonds, or an LIC policy.

In the SBI Global Advantage Loan, collateral is required for 110% of the loan amount.

6. Processing Fees and Other Charges

For the SBI Scholar Scheme, there are no processing fees.

For SBI Student Loans, there are no processing fees for amounts up to Rs 20 lakhs. For amounts above Rs 20 lakhs, you’ll need to pay Rs 10,000 plus GST.

The same applies to the SBI Global Advantage Loan. It’s important to note that you should carefully check if there are any additional fees like legal or documentation fees.

7. Interest Rates

Interest rates can vary, but currently:

SBI Student Loan: Interest rate is 11.15%.

SBI Scholar Scheme: Interest rate ranges from 8.55% to 9.65% depending on the category of your college. For example:

• AA category: 8.55%.
• C category: 9.65%.

SBI Global Advantage Loan: The interest rate is 11.15%.

There’s a 0.50% concession on the interest rate for female students. Also, keep in mind that these are floating interest rates, meaning they may change with the Reserve Bank of India’s (RBI) interest rate adjustments.



8. Loan Disbursement and Repayment

Disbursement happens in installments, depending on your college’s fee structure. For example, if your MBA has a semester system, the loan will be disbursed in four installments.

After you finish your course, you get a one-year grace period (called a moratorium period) to find a job and start repaying the loan. During this time, you will be charged simple interest, but there is no penalty for not making EMI payments. SBI gives up to 15 years for loan repayment.

9. Special Tips

1. Loan Insurance: It’s not mandatory to take loan insurance, so you can refuse it if you don’t want it.
2. Maximize Loan Sanction: It’s better to get your loan sanctioned for the maximum possible amount. You only pay interest on the amount disbursed, not the full sanctioned amount.
3. Tax Benefits: Even if your family has enough money to fund your education, taking an education loan can offer tax benefits. Under Section 80E of the Income Tax Act, you can get a deduction on the interest paid for 8 years. This can reduce the effective interest rate of your loan significantly, especially if you fall under the 20-30% tax bracket.

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