Student Loan Interest Rates: Benefits, Types, And Eligibility

A student loan is an amount borrowed to finance the tuition fees, laboratory fees, hostel fees, examination fees, and other charges related to education. Many banks and financiers lend money to students to pursue academic courses from specific institutions in India or abroad. 

Financial entities publish charts of lending rates and the applicable institutions and courses. So, if your course and institute match with the lender’s chart, you can opt for the loan. Here’s a detailed guide on student loan interest rates to help you find a student loan according to your requirements! 

Types of Student Loan Interest Rates 

There are two major interest rates for education loans. These are:

Fixed interest rate

This rate of interest stays constant over the loan repayment period. Fixed rates are generally higher than current variable rates by 1%-2%. 

If you don’t want any uncertainty in your monthly instalments, you can choose flat lending rates. It is suitable for individuals who wish to avoid market risks linked with increased interest rates.  

Variable interest rate

Such rates vary regularly based on the repo rate changes of RBI. However, variations in the interest rate will not impact the EMI. It will only change the repayment tenure. According to RBI guidelines, there will be no prepayment penalty for variable interest loans. This rate is also called a reducing/adjustable/floating interest rate.  

You can opt for a variable rate when the repo rate can either reduce or stay constant in the future. Under this situation, the loan interest will either reduce or remain the same. In addition, this rate encourages prepayments with additional earnings and helps to repay the loan quicker. It also minimises the total interest on a loan.       

Benefits of Education Loan

Some of the advantages of availing a student loan are as follows:

Low lending rates

Financiers offer reasonable student loan interest rates to the applicants. Parents do not need to dip into their savings for their children’s higher education. It minimises the financial burden of a family. Navi offers such loans at a starting rate of 16%.  

Long moratorium tenure

Student loan moratorium tenure lasts for the entire course. Some lenders give an extension of 1 year after course completion or 6 months after getting a job.    

Coverage of multiple costs

An education loan incurs various expenses of a student such as insurance, laptop, study materials, living cost, travel expenses, and caution deposits. 

Collateral-free loans

Applicants don’t need to pledge assets as collateral for small loan amounts (usually Rs. 4 lakh to Rs. 7.5 lakh).

Effective financial management

Student loans help the applicants to achieve financial discipline. This is because a student starts saving money to repay the borrowed amount. Additionally, the loan repayment enhances their credit score, enabling them to avail any other in the future.      

Also Read: 3 Important Tips To Get Your First Personal Loan                

Eligibility for Student Loan 

You can avail an education loan after satisfying the following eligibility criteria:  

Age Requirement	-For non-employed individuals: up to 35 years -For working professionals: up to 45 years
Eligible Applicants	-An Indian resident who has got admission to a reputed institution for a technical or professional course -Students applying for higher education -When a permanent employee of a company (for more than 3 years) has got admission to a recognised institute for a professional degree
Loan Amount	-Usually up to Rs. 10 lakh for institutions in India (student’s contribution must be 5% of total expenditure) -Usually up to Rs. 20 lakh for education abroad, several entities provide up to Rs. 30 lakh (student’s contribution must be 15% of total expenses) -Up to Rs. 30 lakh for admission at ISB’s, IIM’s or IIT’s (student’s contribution should be 5% of total expenses)
Coverage	-Admission fees (inclusive of examination fee and monthly fee) -Purchasing a laptop or PC if the course requires it -Airfare Equipment, stationery and books -Lodging and boarding charges of hostel or other accommodation -Refundable deposit/building deposit or caution deposit shown in the institution’s receipt, should not be above 10 per cent of the tuition fee -Costs related to thesis, project, education tour, etc. -Insurance premium, if any
Security/Guarantor/Co-borrower	–Up to Rs. 4 lakh: Co-borrower can be parents of the student (also in-laws/husband for a married woman) –Above Rs. 4 lakh – 7.5 lakh: Co-borrower can be parents of the student (also in-laws/husband for a married woman), require third-party guarantees as collateral –Above Rs. 7.5 lakh:  Co-borrower can be parents of the student (also in-laws/husband for a married woman), need tangible security as collateral (must be equal to 100% of the borrowed amount)
Repayment Tenure	-Differs from lender to lender, can be between 7-15 years -No fee or penalty on foreclosure or prepayment
Frequency of Repayment	-Monthly or quarterly -Repayment generally begins 6 months after securing a job or after 1 year of course completion, whichever is earliest
Appraisal Criteria	-CIBIL score and net-worth of guarantors -I-20 form/visa/passport for abroad education -Admission letter of the institute -Impressive academic record, minimum 50% marks in the exams

 Also Read: How Does GST On Personal Loans Work?

Final Word

Navi provides personal loans across India through an automated and paperless process (mobile app). If you are worried about student loan interest rates, you can avail Navi personal loan at competitive interest rate for your higher education. You can borrow up to Rs. 20 lakh by downloading the Navi App. The repayment tenure ranges up to 84 months. It facilitates instant loan approval and flexible EMIs.

Use Navi EMI Calculator to compute your education loan cost. All the best!   

Frequently Asked Questions

Can an applicant switch from a fixed rate to a variable rate?

Yes, you can switch from a fixed to a variable interest rate and vice versa. You will have to bear a charge for this shift. This fee can be a maximum of 2% of the borrowed amount. 

What are the tax-saving options on a student loan?

The following tax benefits are applicable for education loans:

• A borrower can get a deduction on the interest payable as per Section 80E of the IT Act.
• You can claim a rebate without an upper cap.
• Rebate applies to vocational, part-time and full-time courses pursued abroad or in India. 

Which courses qualify for student loans?

Some of the eligible courses for student loans are as follows:

• Post-graduation and graduation courses
• Degree/Diploma courses from reputed institutes
• Professional courses 

Can an applicant transfer a student loan to another lender for a lower interest rate?

Yes, applicants can transfer their student loans to other financiers. In this situation, the current lender will levy a specific fee, while the new lender will take a processing charge. So, you need to compute the total expenses before transferring your loan.     

What to do if my student loan gets rejected? 

Student loans might get rejected at times. In case of rejection of your loan application, your financier will convey you a reason. If you don’t receive any information, you can place an RTI appeal.

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