Education loans are often portrayed as a breath of fresh air in the otherwise highly chaotic admission process of your dream college. They give students hope that they can pursue the course of their choice from the college of their choice. Implying that students can truly concentrate on studying, without worrying about their expenses. But are these education loans as easy to get, as they are marketed by numerous banks? We did some research on education loans and found that the following things can actually cause a hurdle in your journey to your dream college. Have a look:
The first and foremost thing to check while applying for a loan is to check for your college’s accreditation. The Union Human Resource and Development Ministry, has taken out a new set of guidelines for education loans. For students to avail the loan scheme of the Indian Banks Association, they must ensure that their college falls under the list of NAAC accredited colleges and universities. Institutions of national importance and technical institutions funded by the centre are also a part of this list. In addition to this, programmes and colleges accredited by the National Board of Accreditation or NBA are also eligible for education loans. However, if you are studying in any other college or university, you may not be able to get an education loan.
In fact, most bankers believe that students from NAAC and NBA accredited institutions have a much better shot at getting employment via campus placements directly. This implies that they will be able to repay their loans quickly and easily as compared to students who do not find jobs after finishing their degrees.
As per the loan scheme of the Indian Banks Association, students whose parental income is up to Rs 4,50,000 can avail interest subsidy. Students can avail a loan of a maximum of Rs 7,50,000 without any collateral and third-party guarantees.
- Additional Approvals:
If your college is not a part of the NAAC and NBA list of accredited colleges, then you will require approval from your respective regulatory body. For example, if you want to take up a loan for a nursing course, you will need approval from the Nursing Council of India. For a course in medicine, you will require approval from the Medical Council of India.
Currently, there are 997 colleges and 59 universities that are accredited with NAAC in India, as opposed to a total of 1056 between 2017 and June 2019.
- Employment Prospects
An official of the Canara Bank recently claimed that the major reason behind rejecting a candidate is low chances of employment. Ideally, a student can pay back a loan in 15 years. However, if the student is unemployed or underemployed, then they may be eligible for a moratorium on the repayment of the loan.
Nevertheless, if your course and college do not guarantee stable employment, banks may use this against you while reviewing your loan application.
- Lack of proper mechanisms:
When students apply for a loan, they are given an option to pick three banks in their location. The banks are then given a period of 15 to 30 days to respond back to the loan applicant. However, due to lack of a proper mechanism, banks often fail to respond in the stipulated time. Unfortunately, banks do not give much importance to education loans. K Srinivasan, from the Education Loan Task Force, recently stated that loan processes are poorly monitored in India.
All applications for education loans are first received at the Vidya Lakshmi Portal, from where they are further forwarded to the banks. If we look at the statistics from the last four years, only 42,700 loans have been approved out of the 1,44,00 applications received on the portal