Education is an exhilarating and transformative experience but unfortunately, with that excitement often comes financial stress. Tuition fees, accommodation, travel and other academic needs can add up quite quickly – to the point where paying that cost entirely out-of-pocket can simply be impossible for many students and their families. Education loans are valuable financial tools that provide funding that will allow students and their families space to breathe and focus on their students’ education, rather than worrying about money and financial limits.
The education loan process can be daunting for many first-time borrowers. From gaining an understanding of eligibility requirements, gathering supporting documents, determining the right lender, ensuring the paperwork gets approved and finalized and making sure all those papers are forwarded to the lender in time, is a process that is complex and takes the attention of the student (and family) to detail. If any part of the process is bungled, issues can arrise with significant consequences such as delays in the loan application being processed or even rejection of the loan because the application is incomplete.
In this article “Full Education Loan Process in India Explained from Eligibility to Disbursement”, we explain the complete process of taking an education loan and give you the information you will need to know regarding eligibility, loan types (merit-based or need-based), required documents, the application and sanctioning process, disbursement of the loan funds and repayment. We also provide practical advice and insights into the education loan process to help students avoid pitfalls, recognize and understand potential misconceptions, and navigate the whole process from start to finish. Whether you are planning to study in India or abroad, this information will provide you with an education loan process overview that will help you understand and manage your education loan, from the point of education loan application, right up to final repayment.
Types of Education Loans in India
Education loans in India are intended to accommodate various student needs, especially if you are pursuing higher studies either in India or abroad. Knowing the different types of loans allows you to choose the one that meets your academic needs, your money needs, and your ability to repay the loan. Broadly, education loans in India can be categorized into the following types:
1. Domestic Education Loans
These loans are available for students attending higher education institutions in India. They finance educational expenses which include tuition fees, hostel/accommodation expenses, books, and more. Domestic education loans will be priced by banks and NBFCs whether they are provided as a collateral based or other, based on what amount is being asked for loans, what their policies are.
2. International Education Loans
International education loans are designed for students intending to study abroad. They pay for education related expenses, including tuition fees, living expenses, travel expenses, and miscellaneous expenses. Lenders may ask for a co-applicant with a good credit score and high income requirements, perhaps even collateral to qualify for the loan, depending on the amount of the loan.
3. Collateral Based Loans
A collateral based education loan requires the borrower or co-applicant to pledge assets as security for the loan. Common forms of assets pledge include a property deed, fixed deposit, or government securities. These loans generally have larger amounts and lower interest rate spreads as the lenders can reduce their risk.
4. Non-Collateral (Collateral-Free) Loans
For students who do not have assets to pledge, collateral-free education loans are available. These loans generally have lower loan amounts and slightly higher interest rates, and lenders assess eligibility based on the student’s academic record, the co-applicant’s financial stability, and the reputation of the educational institution.
5. Government-Sponsored Loans
Some banks provide alleviation mortgages under government-sponsored initiatives such as Vidyalakshmi Education Loan Scheme or Central Sector Interest Subsidy (CSIS) Scheme. These proceeds could have benefits like interest subsidies during the moratorium period and lower interest rates.
6. Loans for vocational- and skill-based courses
Some banks provide education loans for vocational course or skill-based courses recognised by the government or leading institutions. They assist students in completing professional and credential certifications or training courses to better their employability
7. Instant Education Loans
This is a relatively new category of education loans and they are not appropriate for all students. Instant education loans are quick loans with small pricing when it is disbursed based on a review of documentation and review of eligibility through a digital verification process. Instant education loans are helpful for students wanting easy access to proceeds for tuition or other immediate education-related expenses.
Eligibility Criteria for Education Loans
Before applying for an education loan, it is essential to understand the eligibility requirements. Banks and NBFCs evaluate applications based on factors such as academic performance, financial stability, and course details. Meeting these criteria increases the likelihood of quick approval and favorable loan terms.
| Eligibility Parameter | Requirement |
|---|---|
| Academic Admission | Admission in a recognized course/institution in India or abroad |
| Courses Covered | Professional, vocational, graduate, postgraduate, skill-based programs |
| Age Limit | 18–35 years (undergraduate), 18–45 years (postgraduate); may vary by lender |
| Co-Applicant | Required (parent, guardian, spouse); must meet income and credit score criteria |
| Income Requirement | Stable income based on bank’s guidelines (varies per lender) |
| Credit History | Good CIBIL score for applicant and co-applicant |
| Nationality | Indian citizen (NRIs eligible in select schemes) |
| Collateral Requirement | For loans above certain amounts; otherwise, non-collateral loans may be available |
Major Lenders Offering Education Loans in India
When it comes to financing higher education, choosing the right lender is as important as meeting eligibility criteria. Both public and private sector banks, as well as Non-Banking Financial Companies (NBFCs), provide education loans in India. These lenders differ in terms of loan amount, interest rates, processing time, and additional benefits. Here’s an overview of the major education loan providers:
1. Public Sector Banks
Public sector banks are the most trusted and widely preferred lenders for education loans in India. They typically offer lower interest rates and flexible repayment options.
| Bank Name | Maximum Loan Amount (INR) | Interest Rate (p.a.) | Key Features |
|---|---|---|---|
| State Bank of India (SBI) | Up to 1.5 crore | 8.15%–10% | SBI Global Ed-Vantage for overseas studies, long repayment tenure, moratorium period during course |
| Bank of Baroda | Up to 50 lakh | 9%–11% | Covers tuition, hostel, travel, and study materials |
| Punjab National Bank | Up to 50 lakh | 9%–12% | Offers collateral-free loans for amounts up to 7.5 lakh, tax benefits under Section 80E |
2. Private Sector Banks
Private banks often provide faster loan processing, higher loan amounts, and special schemes for students seeking education abroad.
| Bank Name | Maximum Loan Amount (INR) | Interest Rate (p.a.) | Key Features |
|---|---|---|---|
| HDFC Bank | Up to 45 lakh | 10.5%–12% | Offers collateral-free loans for premier institutions, fast disbursal |
| ICICI Bank | Up to 50 lakh | 11%–12.5% | Flexible repayment options, moratorium during course, covers tuition & other expenses |
| Axis Bank | Up to 50 lakh | 11.5%–12.5% | Covers tuition, accommodation, and study materials for approved courses abroad |
3. Non-Banking Financial Companies (NBFCs)
NBFCs offer education loans with flexible terms, higher amounts, and sometimes, less stringent eligibility criteria, although the interest rates may be slightly higher.
| NBFC Name | Maximum Loan Amount (INR) | Interest Rate (p.a.) | Key Features |
|---|---|---|---|
| HDFC Credila | Up to 75 lakh | 11.5%–12.5% | Specializes in overseas education loans, faster processing, collateral-free options available |
| Avanse | Up to 75 lakh | 12%–13% | Offers loan against co-applicant income, tailored repayment plans |
| Auxilo | Up to 65 lakh | 12.25%–12.75% | Provides flexible repayment options and covers a wide range of countries and courses |
4. International Lenders
For students planning to study abroad without a co-applicant or collateral, international lenders are an option. These loans are generally in USD and come with higher interest rates.
| Lender Name | Maximum Loan Amount | Interest Rate (p.a.) | Key Features |
|---|---|---|---|
| MPOWER Financing | Up to 100,000 USD | 12% USD | No co-applicant or collateral needed, loans for recognized global universities |
| Prodigy Finance | Up to 100,000 USD | 9.35%–14% USD | Credit-based, flexible repayment, supports international students |
Documents Required for Education Loan Application
Applying for an education loan in India requires submitting specific documents to verify your identity, academic credentials, financial background, and the details of the course or institution you plan to join. The exact requirements may vary slightly depending on the lender, but the general checklist is as follows:
| Category | Documents Required | Details / Notes |
|---|---|---|
| Student KYC | Aadhaar Card, PAN Card, or any government-approved ID | Mandatory for identity verification |
| Photographs | 2–4 recent passport-sized color photos | To be submitted along with the application |
| Academic Records | Mark sheets and certificates (10th, 12th, Graduation) | Include all relevant transcripts |
| Entrance Exam Scores | GRE, GMAT, JEE, NEET, IELTS, TOEFL, etc. | Applicable if required for the course |
| Proof of Admission | Offer Letter / Admission Letter | Must be from a recognized institution |
| Course Fee Structure | Official fee breakup | Should include tuition, hostel, travel, and other expenses |
| Statement of Expenses | Detailed cost of study | Covers tuition, accommodation, travel, books, and other expenses |
| Passport | Passport copy | Mandatory for overseas education loans |
| Visa (if applicable) | Visa application / approval | Required for international studies |
| Gap Certificate (if applicable) | Self-declaration explaining study break | Only if there is a gap in studies |
| Scholarship / Assistantship | Official letters | To be submitted if applicable, reduces loan margin |
| Co-Applicant – Salaried | Salary slips (last 3 months), Form 16 / ITR (last 2 years), Bank statements (6–12 months), Proof of relationship with student | Ensures financial credibility |
| Co-Applicant – Self-Employed | Business registration (GST certificate / license), Partnership Deed / MOA / AOA, ITR & TDS for last 2 years, Bank statements (last 6 months), Proof of relationship | Required for income verification |
| Asset Documents (if collateral loan) | Property deeds, fixed deposits, other securities | Required only for secured loans |
How to Apply for an Education Loan?
Loan application for education in India is a defined process that includes exhaustive planning while gathering and/or assembling documents, and dealing with the bank or NBFC. Here is a process step guide to help with the process:
Step 1: Research and Compare Loans
Research and compare education loans from banks and NBFCs. Try to look for the following parameters:
- Eligibility for Loan amounts
- Interest rates (fixed or floating)
- Moratorium period
- Repayment tenure
- Collateral (if applicable)
Choose a loan that addresses your financial requirements and your potential repayment capacity at a later stage.
Step 2: Check eligibility
Before the loan application, check whether you fit the eligibility criteria established by your lender. Eligibility typically is based on Academic results, Admission to a recognized institution, the co-applicant’s income and credit history and Age and citizenship.
Step 3: Gather documents
Gather every document in advance. Here is a list of documents you are likely to be required to submit:
- KYC proofs (Aadhaar, PAN or passport)
- Academic credentials and entrance exam results
- Admission letter / offer letter
- Fee structure for the course and a detail of all other fees
- Co-applicant’s income proofs and bank statements
Step 4: Fill out the Application Form
Most banks have the option of applying either online or offline. Fill out your education loan application form very carefully with the details related to Personal details, Academic background, Course and college and Financial details of the co-applicant
Step 5: Submit the Application along with Documents
Once you have filled in the application form, submit the application form and the necessary documents to the bank / NBFC. If you applied online, you will be required to upload scanned copies of the documents i.e. KYC. If you have applied offline, you will need to take hard copies of the documents with you on the day – KYC form, six passport-sized photographs, conditional bahu letter (if applicable) etc.
Step 6: Verification and Assessment
Your information will be checked by the lender, verification of admission status of you and your co-applicant’s financial background and will review the collateral (if applicable). Verification can include Identity/Document verification, credit review of co-applicant, property verification for secured loans.
Step 7: Sanctioning of Loan and Agreement
A sanction letter stating Loan amount, Interest rate, Repayment terms and Moratorium period will be received after verification. You will need to read these terms carefully and sign appropriately to acknowledge that you accepted the loan, i.e. signed loan agreement.
Step 8: Disbursement
The amount of Loan will be disbursed after signing. The lender will disburse LOAN amount in tranches or as installments, and the lender will be making payment mainly to the college for tuition, hostel, and any other approved funding. The lender can in some cases even disburse the first payment prior to receiving your visa for overseas education.
Step 9: Repayment
Repayment of the loan usually starts after the moratorium period, which is the course period plus any additional grace period. The EMIs are fixed, depending on the loan sanctioned amount, interest rate, and period.
Interest Rates and Charges for Education Loans
Education loans in India come with interest rates and charges that vary depending on the type of lender, loan amount, collateral, and repayment tenure. Here’s a detailed overview based on verified sources:
| Lender Type / Bank | Interest Rate (p.a.) | Loan Amount | Processing Fee | Moratorium / Repayment Terms | Additional Notes |
|---|---|---|---|---|---|
| SBI (Public Sector) | 8.15% – 9.75% | Up to ₹50 Lakh (without collateral) | Nil – 1% | Course duration + 6–12 months | Lower interest rates for girls; trusted for Indian & abroad studies |
| UBI (Public Sector) | 9.25% – 9.75% | Up to ₹40 Lakh | Nominal | Course duration + 6 months | Moderate processing fees |
| Axis Bank (Private) | 11.5% – 12.5% | Up to ₹50 Lakh | 1–2% + GST | Course duration + 6 months | Quick processing; higher loan amounts |
| ICICI Bank (Private) | 11.25% – 12.5% | Up to ₹50 Lakh | 1–2% | Course duration + 6 months | Suitable for premium institutions abroad |
| HDFC Credila (NBFC) | 11.5% – 12.5% | Up to ₹75 Lakh | Moderate | Course duration + 6 months | Flexible repayment options; specialized for study abroad |
| Avanse (NBFC) | 12% – 13% | Up to ₹75 Lakh | 1–2% | Course duration + 6 months | Customized offers, faster disbursal |
| IDFC First Bank (Private/NBFC) | 10.75% – 12.25% | Up to ₹70 Lakh | Moderate | Course duration + 6 months | Higher loan amount; moderate interest |
| MPOWER Financing (International) | 12% USD | Up to $100,000 | High (varies) | Course duration + 6–12 months | No co-applicant or collateral required |
| Prodigy Finance (International) | 9.35% – 14% USD | Up to $100,000 | High | Course duration + 6–12 months | Suitable for students without co-applicant; flexible for global universities |
| Incred (NBFC) | 11.5% – 12.5% | Up to ₹60 Lakh | Moderate | Course duration + 6 months | Flexible eligibility, unsecured loans |
Disclaimer: Loan amounts, interest rates, and approval terms may vary based on eligibility, academic records, co-applicant details, and the lender’s policies. Always verify details with the respective bank or NBFC before applying.
Disbursement of Education Loans
Once your education loan has been approved, the next step will be to disburse funds. The disbursement stage is when the loan is released to the student, or the educational institution, and it is released according to a certain method of disbursement (often based on course fees).
- Methods of Disbursement: A loan would generally disburse to the university or college directly, and the loan typically will include tuition fees, hostel fees, and other debts pertaining to education. In certain instances, there is a portion of the loan disbursed to the borrower’s account to address the borrower’s personal or non-mandatory spending e.g. Students may travel to where their courses are completed, e.g. flight costs, etc.
- Payment Schedule: For courses that continue over multiple years, or multiple semesters, the lender may release funds at appropriate intervals, with regard to the academic delivery mode and the submission of fee receipts. This complies with the lender’s requirement of ensuring that loan funds are appropriately applied and to limit misuse of loan funds.
- Conditions for Payment: Lenders may require, as a condition for payment, the borrower submit documents related to tuition fees, admissions letters, and updated academic records prior to each successive payment.
- Pre-Disbursement Checks: Before disbursing funds, banks may check the co borrower/s, check the ability to repay the loan and any changes from the last eligibility check.
- Timing of Disbursement: Disbursements are usually made within days to weeks, subject to the lenders speed of processing and the payment type after all of the process have been completed.
This structured disbursement process will ensure accountability and a correct match to the students educational needs but also protect the lender’s interests.
FAQs: Full Education Loan Process in India Explained
Q. What is an education loan in India?
A. An education loan is a type of borrowing that is given by banks or NBFCs to fund tuition fees, living expenses, and related expenses related to higher education, both in India and abroad.
Q. Who is eligible to apply for an education loan?
A. Individuals who possess an admission required by a recognized institution and the necessary age requirements, and they have a co-borrower that has good enough income or credit history can apply for the loan.
Q. What are the types of education loans available?
There are 2 types of loans: secured (requiring collateral) and unsecured (no collateral necessary); some lenders may provide instant or fast track loans.
Q. What documents are required for applying education loan?
A. Most of the documents needed include KYC Proof, educational records, admission letter, fee structure, income proof of the co borrower, passport size photographs etc.
Q. How can I apply for an education loan?
A. The application is sent either online via the lenders website or offline at your bank interacting with a bank officer, along with all the required documents needed.
Q. What is the education loan sanction and verification process?
A. The lender will assess the eligibility of the applicant, the co borrower’s credibility and the documents need to assess the loan amount before agreeing to meet your requirements.
Q. What are the interest rates and charges?
A. Interest rates vary between banks, typically 8%–13% for domestic education loans, with processing fees and other charges applicable as per the lender.
Q. Can education loans be taken without collateral?
Unsecured loans are available up to certain limits, usually requiring a co-applicant with a strong financial background.