Getting a foreign degree is not easy and here I am not talking of the number of exams you have to clear, but the moolah you have shell out to get foreign educated. Sample this. You need almost Rs 10 lakh for every academic year!
Higher education abroad is a costly affair. Even if the school, impressed with your academic record, has agreed to waive off the tuition fees, there are living costs and other expenses to take care of. At least Rs 4-5 lakh is required annually. And if you think you could work in a gas station to pay your way through, think again. The visa officer is not going to be impressed. You have to arrange for the entire amount in double-quick time, since the statement of finance has to be submitted before the I-20 (the US student visa) is granted.
But before you give up hope of going to the Big Apple check out the education loans offered by various banks in India. But here though, you need to be able to put up adequate collaterals.
Canara Bank offers up to Rs 10 lakh to a student who has secured admission abroad and Rs 5 lakh for pursuing education at home. The loan is given in the joint name of the parent and the child. Interest is charged at a flat rate of 15.81 per cent which is likely to be reduced soon. The repayment of principal has to be made in monthly instalments six months after the completion of the course or getting a job, whichever is earlier. The amount has to be repaid within five years. The interest however, has to be paid on a quarterly basis by the parent. Also in case of loan amounts exceeding Rs 25,000, 15 per cent of the loan amount has to be deposited as margin in the bank's savings account for study in India and 25 per cent for education abroad. As security the bank asks for mortgage of immovable property or pledge of approved securities valued equivalent to 100 per cent of the loan amount. Securities include pledge of shares, insurance policy, National Savings Certificate (NSC) and the like.
The State Bank of India's Gyan Jyoti scheme offers higher education loans for up to 90 per cent of the amount required or Rs 10 lakh in case of education abroad and Rs 5 lakh in case of education in India. The guarantor or the borrower has to provide collateral security for the loan amount in the form of mortgage of immovable property, NSC, LIC or public sector bonds that add up to 100 per cent of the loan amount. The interest is charged at 12.24 per cent per annum for loans up to Rs 2 lakh and at 14.28 per cent for loans above Rs 2 lakh. However, this is likely to fall in the coming weeks. The loan is given in the joint name of the parent and the student and the interest on the loan has to be met by the parent during the course period. The principal amount has to be repaid within 60 months after one year of completing the course or on securing a job, whichever is earlier. The stipulated margin is uniformly 10 per cent of the total loan amount that is you need to deposit 10 per cent of the loan amount in the bank's account.
Bank of Baroda also offers a loan of up to Rs 10 lakh for studies abroad and Rs 5 lakh for studies in India and charges a flat rate of 14 per cent as interest. Here, the loan is given in the name of the student only. So the total amount, that is, the principal and the interest has to be repaid after six months and within five years of completion of the course by the student. As security the bank asks for a LIC policy in the name of the student for 100 per cent of the loan amount. The bank also insists on semester-wise report cards to ensure that the student is still studying and is not misusing the loan amount.
Punjab National Bank offers a loan up to Rs 10 lakh for students going abroad and Rs 3 lakh for those pursuing higher education in India. The rate of interest is fixed at 14.5 per cent. It is charged as simple interest during the course of the study and is compounded once the course is over. The amount has to be paid back within five years of the completion of the course. This includes a two-year grace period. For loans up to Rs one lakh, the bank requires a LIC policy valued at 150 per cent of the loan amount as collateral and for loans above Rs one lakh mortgage of immovable property worth 150 per cent of the loan amount is required.
Corporation Bank also offers loans both for education in India as well as abroad. For foreign courses the bank provides Rs 80,000 per annum up to a maximum of Rs 3 lakh. Alternatively, if you are pursuing a professional course like medicine in India, you are allowed up to Rs 60,000 per year up to a maximum of Rs 3 lakh. For engineering and other technical courses, the cap is set at Rs 20,000 per year up to a maximum of Rs 80,000. The rate of interest is charged at 11.75 per cent for loans up to Rs 2 lakh and 14.75 per cent for loans above Rs 2 lakh. As security mortgage of immovable property or approved securities up to 150 per cent of the loan amount are asked for loans exceeding Rs 25,000. A margin of 25 per cent of the loan amount has to be deposited if the loan amount exceeds Rs 25,000. The interest that accrues during the study period has to be repaid in 24 equal monthly instalments (EMIs) after the completion of the course. The principal has to be repaid in the next 54 months. The total amount has to be repaid within 10 years from the date of taking the loan.
Foreign banks do not have any specific education loan schemes but offer personal loans which can be used for educational purposes. Citibank offers loans but only for the iGNIIT course. The rate of interest is 15.5 per cent and loan is given for 90 per cent of the tuition fees. No collateral is asked for.
Loans are given only if you have secured admission in a university for a recognised degree. In case of higher education, most banks give loans only for professional courses. To be eligible for the loan, the individual should have secured a first class in the last qualifying university exam at home. For studies abroad all banks ask for a copy of the passport and the provisional admission letter. But here lies a problem. Many universities abroad, ask for a bank statement stating that you are in a position to pay your way through. So unless the bank issues you a statement the university will not give you a provisional admission letter and unless you present a provisional admission letter, the bank will not give you a statement. So it is a typical case of who came first, the chicken or the egg. To overcome the problem you need to speak to the bank manager. If you or one of your parents is an account holder with the bank then the bank generally issues you a statement stating that it will give you a loan if you secure admission.
Although, taking a loan may be the only way to finance higher education, the collateral asked for may be a problem. Says Nikhil Mohta, a student of Indian Institute of Management, Ahmedabad, who has taken a loan from the Bank of Baroda. "I have given fixed deposits worth Rs 50,000 as security. If I had the money to pay security then I might as well have used it to fund myself."
Also, the procedure is long and tiresome. "It took around a month and a half and then too they kept asking for new details every now and then," says Mohta. However, once the loan comes into effect it is useful, as the bank is prompt in making fee payments.
However, the EMIs are generally very flexible and your repayment plan can be worked out according to your convenience. "I've opted to pay Rs 5,000 per month after six months of completing my course," says Mohta.
Also, section 80E of the Income Tax Act permits a deduction of a maximum of Rs 25,000 (increased to Rs 40,000 in the budget proposals of 2000-01) from the income of the student towards repayment of the loan availed, for eight years or till the loan is repaid, whichever is earlier. However, this benefit is not available to the parent of the student.
Educational loans generally fall within the category of consumer loans but the rate of interest is much lower than consumer loans.
