Rajendra Kuruhuri IIM Indore

Education Loans in India

Most students and parents today realize how

expensive an education is. Whether you hope
to study at a private high school, a college,
university, or an overseas school, tuition costs
plus the costs of books and living can quickly
add up. If you are worrying about the cost of
school, you should not feel that money has to
decide your education. There are a number of
financial aid options that can help you.
Educational loans can be one important part
of your overall financial aid package. There
are special distance education loans,

need-based loans, college loans, government based loans, and private education loans -- in
fact, chances are excellent that there are educational loans that can meet your
specific needs.

What Education Loans are?

Educational loans work like any other debt. That is, loans are simply specific money that you
borrow from a bank, a private lender, or some other type of lender. Afterwards, you must repay
your debts with interest. However, unlike other types of loans, educational loans are different in
several respects:

Different Qualification Features

Loans created for students recognize the fact that students have not had time to build up credit
rating. For this reason, applications for student loans are simpler and more streamlined. The
qualifications for such loans are also usually more lenient.

Generous Repayment Terms

 Rajendra Kuruhuri IIM Indore

Loans designed to help students pursue an education recognize that students should spend their
school time studying, not working to repay a loan. For this reason, many loans created for
students allow students to pay back their debts very gradually and only after graduating. This
means that students can focus on their studies rather than on their loans. In fact, most loans
designed for students give students the opportunity to put off repaying their debt until six months
after graduation. This gives students a chance to settle down and find a job before repaying their
debts.

Many Various Student Loan Types are Available

Since there are so many students, each with separate needs, there are a number of loans designed
to help students pay for their education. Many of these loans are designed specifically to help
students with their unique money issues. There are loans created by private sources, by the
government, and by schools. Many feature very low interest rates. Some are need-based and
some are not. No matter what a student's financial needs, there is likely a loan available that can
help the student meet their educational goals.

Comparative Analysis of PSU Banks - Education Loan Products

Bank Bank of Baroda State Bank of India Corporation

Bank

Products Type Interest Education in India or Corp Vidya

(P.a.) abroad. (Education in India
Baroda Vidya 10.00% or abroad.)

Baroda Gyan 12.00%

Baroda Scholar 12.00%
Baroda Career 12.75%
Development
Plan
Max. Type Max. In India – Rs10L In India – Rs10L
Amount Amount Abroad – Rs20L Abroad – Rs20L
Baroda Rs4L
Vidya
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Baroda Gyan Rs10L

Baroda Rs20L
Scholar
Baroda In India,
Career Rs10L
Development Abroad,
Plan Rs20L
A Maximum amount of Rs50L
is sanctioned based on the Merit
of the Candidate.
Tenure Type Period 5Yrs – 7Yrs 7Yrs – 10Yrs
Baroda Max. 12 (Moratorium Period - (Moratorium Period -
Vidya EMI’s. 1st Course period + 1 year or 6 Course period + 1
EMI to be months after getting job, year or 6 months
due 12 whichever is earlier.) after getting job,
months after whichever is earlier.)
1st
disbursement
of each
year's loan
component.
Baroda Gyan 5 to 7Yrs
after
Moratorium
Period
Baroda
(Course
Career
period + 1
Development
year or 6
Plan
months after
Baroda
getting job,
Scholar
whichever is
earlier.)

Tenure
Processing Type Amount 1. No processing fee/ Studies in India – Nil
Charges Baroda Nil upfront charges. Studies Abroad -
Vidya 2. Deposit of Rs.5000/- for Rs.2000.
education loan for studies
Baroda Gyan Nil abroad which will be
adjusted in the margin
money.
Baroda 1% of the
Scholar Loan amount
Sanctioned.
(Refundable)
 Rajendra Kuruhuri IIM Indore

Baroda
Career
Development
Plan
Margin Type Max. Amount Up to Nil Up to Nil
Baroda Nil Rs4L Rs4L
Vidya Above In India, Above In India,
Baroda Gyan Up to Rs4L- Rs4L 5% Rs4L 5%
Nil Abroad, Abroad,
Above Rs4L- 15% 15%
5%
Baroda 15%
Scholar
Baroda
Career
Development
Plan

Eligibility 1. Should be an Indian national 1. The applicant should be 1. Should be an

residing in India. at least 18Yrs old from the Indian national
2. Secured admission to the date of loan sanction. residing in India.
eligible courses in the reputed 2. The loan applicant should 2. Should have
institutions (foreign/indian). have a source of regular completed previous
3. Have secured admission to income. qualifying
the course through entrance test 3. In case of NRIs the examinations.
/ merit based selection process. applicant should be holding 3. Secured admission
a legitimate Indian passport to Professional/
or a legitimate work permit Technical courses in
Eligibility and should have been India or abroad
employed overseas for at through Entrance test
least 2Yrs. / Merit based
selection process/
Management quota.
4. Person already in
gainful employment
not eligible for loan
under the scheme
except for pursuing
evening course
covered under the
scheme of approved
Institute.
5. If a gainfully
employed person
wants to pursue full
time education either
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on study leave or by
resigning from
present employment,
such proposals may
be considered
provided the
applicant submits the
proof in this regard
to the sanctioning
authority before
disbursement of loan.
Interest Up to 10.00% Up to Rs4L 11.25% Up to 11.00%
Rates Rs4L Above 12.75% Rs4L
Above 12.00% - 12.75% Rs4L–Rs5L Above 12.00%
Rs4L Above 11.75% Rs4L –
Rs7.5L Rs7.5L
Above 11.50%
Rs7.5L
Security 1. Up to Rs.4L - No security 1. Up to Rs.4L - No 1. Up to Rs.4L,
2. Above Rs.4L and up to security Co-
Rs.7.5L, 2. Above Rs.4L and up to obligation of
Collateral in the form of a Rs.7.5L, Parent/s, Grand
suitable 3rd party guarantee Collateral security in the Parent/s (if parents
along with assignment of future form of suitable third party are deceased). No
income guarantee. The bank may, at other security.
3. Above Rs.7.5L, its discretion, in exceptional 2. Above Rs.4L and
Tangible collateral security cases, waive third party up to Rs.7.5L,
equal to 100% of the loan guarantee if satisfied with Co obligation of
amount along with assignment the net-worth/means of Parent/s Grand
of future income parent/s who would be Parent/s (if parents
Baroda Career Development executing the documents as are deceased)
Plan, "joint borrower". together with
Security 1. 100% tangible collateral 3. Above Rs.7.5L, collateral in the form
security by way of mortgage of Tangible collateral of suitable third party
property or assignment of security of suitable value, guarantee.
securities NSC, KVP, LIC along with the assignment 3. Above Rs.7.5L,
policy, FDR etc. of future income of the Co-obligation of
2. Personal guarantee of student for payment of Parents/Grand
Father / mother of the applicant installments. Parents (if Parents
or any other person having are deceased)
sufficient worth. All loans should be secured together with
by parent(s)/guardian of the tangible collateral
student borrower. In case of security along with
married person, co- the assignment of
obligator can be either future income of the
spouse or the parent(s)/ student for payment
 Rajendra Kuruhuri IIM Indore

parents-in-law of installments. The

loan to be fully
secured after
maintaining
prescribed margin on
respective securities.
Prepaymen Charges 1% of the Outstanding Charges 1% of the Nil
t Penalty Loan Amount. Outstanding Loan Amount.
USPs 1. 1% interest concession, if 1. Low Processing 1.1% interest
interest debited during the Charges. concession, if
repayment holiday is serviced. 2. Interest charged on the interest debited
2. Hassle free processing. daily reducing balance. during the repayment
3. One of the Oldest Banks in 3. 0.5% Concession in rate holiday is serviced.
India and Customer Trust. of interest to loans for girl 2. 0.5% Concession
4. One of the largest and most student. in rate of interest to
widespread networks of 4. One of the Oldest Banks loans for girl student.
branches across in India. in India and Customer 3. 0.5% Concession
5. Easy EMI Repayment Trust. in rate of interest to
Option. 5. One of the largest and loans for SC/ST.
6. 1% Concession in rate of most widespread network of 4. Maximum
interest to loans for girl student. branches across in India Repayment Period of
7. Interest charged on the daily 10Yrs.
reducing balance.

Analysis

• Among PSU Banks, Bank of Baroda has better product profile. Whereas, SBI competing
strongly.
• Bank of Baroda offers a max. amount of Rs50L.
• Bank of Baroda offers 1% concession to girl students. Whereas, SBI and Corporation
Bank offers 0.5% concession to girl students.

Competitive Study – BOB Over SBI – Educational Loan

Bank Bank of Baroda State Bank of India

Categorizations Wide Variety of Product Less Number of

Categorizations. Categorizations.
 Rajendra Kuruhuri IIM Indore

Concession 1. 1% Concession in rate of 0.5% Concession in rate of

interest to loans for girl interest to loans for girl
student. student.
2. 1% interest concession, if
interest debited during the
repayment holiday is
serviced.
Amount A Maximum amount of A Maximum amount of
Rs50L is allowed. Rs20L is allowed.
Prepayment Penalty Charges 1% of the
outstanding loan amount.
Interest Rates Charges 10.00% Interest Charges 11.25% Interest
Rate up to Rs4L. Rate up to Rs4L.
EMIs Low EMI for the loans up to High EMI for the loans up to
Rs7.5L. Rs7.5L when compared to
Bank of Baroda.

EMI- Educational Loan

Product Bank of Baroda State Bank of India

EMI Total Interest EMI Total Interest
Rs 4L @ 5Yrs 8,598.82 1,09,929.20 8,746.92 1,24,815.20
Rs 5L @ 5Yrs 11,122.22 1,67,333.20 11,312.65 1,78,759
Rs 15L @ 5Yrs 33,366.67 5,02,000.20 33,177.48 4,90,648.8

Baroda Career Development Plan

Rs 10L @ 5Yrs 22,625.30 3,57,518 - -

Rs 15L @ 5Yrs 33,937.95 5,36,277 - -

Analysis

• Among PSU Banks, Bank of Baroda is the market leader. Whereas, SBI is competing
strongly as it is oldest and highly networked bank in India.

Comparative Analysis of Private Banks - Education Loan Products

 Rajendra Kuruhuri IIM Indore

Bank Axis Bank HDFC Bank HSBC Bank

Products Education in India or abroad Education in India or Education in India or

abroad for Students and abroad
also Working Executives.
Max. In India – Rs10L In India – Rs15L Upto Rs1Cr
Amount Abroad – Rs20L Abroad – Rs20L
(Min. – Rs50K) Working Executives – Rs6L (Min. – Rs5L)
Tenure 5Yrs – 7Yrs 5Yrs – 7Yrs Ranges Up to 15Yrs
(Moratorium Period -
Course period + 1 year or 6
months after getting job,
whichever is earlier.)

Processing 1% of the loan amount applied Max. 2% of the loan amt. 1% of the loan
Charges for, subject to a minimum of amount applied for,
Rs10000 plus service tax. subject to a
minimum of
Rs10000 plus service
tax.
Margin Up to Nil 5% to 15% of the Loan 15% of the Loan
Rs4L Amount Amount
Above In India,
Rs4L 5%
Abroad,
15%
1. Applicant need to be a 1. Applicant need to be a 1.Age Should be in
Eligibility Resident Indian Resident Indian between 18Yrs to
Secured admission to 2. Applicant should be aged 65Yrs
professional/technical courses between 16 - 35 yrs. 2. Income,
in India or Abroad through 3. All Loans require a co- Rs5L p.a. (salaried)
Entrance Test/Merit based applicant. Rs7. 5L p.a. (self-
selection process. employed)

Eligibility

Interest 15.75% 12.00% to 14.00% 13.00%

Rates
Security 1. Third party guarantee and/or Up to Rs7.5 L , 1. Residential
collateral security may be asked No Collateral Or Third Property. Both self-
for in appropriate cases. Party Guarantee. occupied and owned
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2. Assignment of LIC policy in by either primary or

Security favor of the Bank for the sum Above Rs7.5L, co-applicant.
assured being at least 100% of 2. Must have a co-
the loan amount. The policy is 1. Residential Property applicant in India
kept alive during the currency 2. HDFC Bank Fixed and can only be
of the loan. To ensure this, the Deposit parents or spouse of
annual premium may be 3. LIC/NSC/KVP student.
included in the computation of
the loan requirement, along
with the tuition fees and other
recurring charges. Further, the
future income of the student
needs to be assigned in favor of
the Bank for meeting the
installment obligations.
Prepaymen Nil Charges 4% on the 1. Up to 25% of the
t Penalty principal out sanding outstanding loan –
Nil (Once Every
Financial Year).
2. Excess of 25% of
the outstanding loan
– 4% of the amount
prepaid.
USPs 1. Pre-approved loan facility.
1. Insurance Protection 1. Prepayment option
from HDFC ERGO. up to 25% of loan
2. No Prepayment Penalty. 2. No Security is required after 6 months of
up to Rs7.5L of loan disbursement.
3. Doorstep delivery of home amount. 2. 0.5% Concession
loan papers. 3. No Security is required in rate of interest to
for studies in Management loans for girl student.
Institutes up to Rs12L 3. A Max. amount of
(Min.). Rs1Cr is provided.
4. A tax rebate is offered
under section 80-E of the
Income Tax Act 1961* for
the entire interest amount
paid towards your education
loan.

Analysis

• Among Private Sector Banks, HSBC has better product profile offering a max. loan of
Rs1Cr. Whereas, other banks offers a max. loan amount of Rs20L.
 Rajendra Kuruhuri IIM Indore

• HDFC Bank offers a low interest rate of 12.00% among private sector banks.
• HSBC bank offers a max. repayment tenure of 15Yrs. Whereas, Axis bank offers nil
penalty on prepayment of loan amount.

Comparative Study - PSU Banks Over Private Banks - Education Loan

Bank PSU Banks Private Banks

Categorizations Bank of Baroda provides Wide Less Number of

Variety of Product Categorizations.
Categorizations.
Concession 1. Bank of Baroda Offers, HSBC Bank Offers a
a.1% Concession in rate of Concession of 0.5%
interest to loans for girl student. Concession in rate of interest to
b.1% interest concession, if loans for girl students.
interest debited during the
repayment holiday is serviced.
2. Corporation Bank Offers,
a.0.5% Concession in rate
of interest to loans for SC/ST.
Amount Bank of Baroda offers a Max. HSBC offers a Maximum
amount of Rs50L. amount of Rs1Cr.
Prepayment Penalty Corporation Bank charges Nil as Axis Bank also charges Nil as
penalty on the prepaid loan penalty on the prepaid loan
amount. amount.
Interest Rates Bank of India offers reasonable HDFC Bank offers 12.00%
Interest Rates. Interest Rate.
Processing Charges SBI Offers Low Processing HSBC Bank Offers 1%
Charges. Processing Charges on the loan
amount.
EMI Bank of Baroda offers Flat HDFC Bank also offers flat
EMIs. EMIs.
Tenure Corporation Bank allows HSBC Bank allows repayment
repayment for a Max. of 10Yrs. for a Max. of 15Yrs.

EMI- Educational Loan

Product Bank of Baroda HDFC Bank

EMI Total Interest EMI Total Interest
Rs 4L @ 5Yrs 8,598.82 1,09,929.20 8,897.78 1,33,866.80
 Rajendra Kuruhuri IIM Indore

Rs 5L @ 5Yrs 11,122.22 1,67,333.20 11,122.22 1,67,333.20

Rs 15L @ 5Yrs 33,366.67 5,02,000.20 33,366.67 5,02,000.8

Baroda Career Development Plan

Rs 10L @ 5Yrs 22,625.30 3,57,518 - -

Rs 15L @ 5Yrs 33,937.95 5,36,277 - -

Analysis

• In Education loan category, Bank of Baroda holds edge over all other PSU and Private
Sector Banks by providing better products and services.