Education Loan for MBA
MBA, which stands for Master of Business Administration, is one of the most popular post-graduate courses preferred by ambitious students in India. Pursuing MBA from an Ivy League institute in India or abroad is one of the biggest dreams of today’s generation. However, the cost of education has been increasing gradually year after year. Due to which, many students abandon their dream of pursuing MBA courses.
Education loans come as a real boon to such students to pursue their dreams. Multiple banks and NBFCs (Non-Banking Financial Corporations) offer comprehensive financing for MBA courses and other management courses in India and abroad.
What does an education loan cover?
Education loans can be availed to fund all your education-related expenses. An education loan covers all expenses such as course fees and other associated expenses including living charges, library charges and supplies, exam and other miscellaneous charges.
Quantum of loan
The loan amount varies from lender to lender. It is the sole discretion of a lender to decide the loan amount and depends on the internal policies of the lender. Most lenders sanction a maximum amount of Rs. 15 lakh for studies in India and Rs. 20 lakh abroad. Usually, lenders don’t ask for collateral for education loan up to Rs. 4 lakh. Beyond this amount, borrowers are required to offer collateral and a third-party guarantee.
However, multiple NBFCs including Incred, Avanse (a subsidiary of DHFL), Auxilo and Credila (a part of HDFC Ltd) can offer collateral-free education loan up to Rs. 40 lakh for students who have secured admission for MBA in premier institutions in India and abroad.
The interest rate on education loan for MBA
The interest rate applicable is much lower on education loans than other types of unsecured credit. Rate of interest varies from bank to bank. Generally, lenders charge interest within a range of 9% to 15.5%, depending on the loan amount and the college/university which the student has been admitted to. Most lenders offer floating interest rates. Tax benefits provided by the government of India on the interest paid can be claimed.
Lenders have different policies regarding processing fees; some banks charge a processing fee while others don’t. Generally, private banks charge a fixed amount and NBFCs a certain percentage of the total loan amount.
Student eligibility criteria
Any Indian student, who has secured admission for MBA into an institute approved by any competent authority in India or abroad, can apply for an education loan. The general eligibility criteria are as follows:
- Students should have passed HSC (10+2) and graduation
- Students should have got admission for MBA course.
- Students must have secured admission through entrance exam like CAT or MAT in a recognized foreign university/institution.
- Students’ age must be above 18 years
- Students must have an earning co-borrower in India
- Must be an immediate family member of the student such as father, mother, sister, brother, spouse (if the candidate is married)
- In some cases, applicant's father-in-law, mother-in-law, first cousin, maternal or paternal uncle/aunt/ grandparents can act as a co-applicant.
- Should have a valid document to establish their relationship with the student.
- If the student doesn’t have any credit history, income and asset details of the co-applicant, in most cases of parents, are also required.
Best lenders for education loan
SBI Education Loan
State Bank of India offers education loan under 3 categories - SBI Scholar Education Loan, Studies Abroad and SBI Student Loan – to suit the different needs of customers.
Features of SBI education loan
Student loan: Under this scheme, State Bank of India offers education loan for students who have secured admission for MBA in colleges/ universities approved by UGC/ AICTE/ Govt. and Regular MBA courses conducted by autonomous like IIM. Students can also get the loan for MBA courses from reputed universities abroad.
Students can get an education loan up to Rs. 10 lakh for studies in India and up to Rs. 20 lakh for abroad.
Scholar loan scheme: Under scholar loan, the bank provides loan for students who have secured admission for MBA courses in Select Premier Institutions like IIM, ISB, XLRI etc. through entrance test/ selection process. Students can avail of up to Rs. 40 lakh without security (only parent / guardian guaranty) for courses from institutions in List AA; Rs. 20 lakh without security (only parent/guardian guaranty) and Rs. 30 lakh with tangible collateral of full value and co-borrower for courses from institutions in List A; Rs. 20 lakh without collateral and with co-borrower for courses from institutions in List B; and Rs. 7.5 lakh without security, only parent co-borrower, and Rs. 30 lakh with tangible collateral for MBA from institutions in List C.
Studies abroad: If you are planning to study in foreign Institutes/ Universities in the USA, UK, Canada, Australia, Europe, Singapore, Japan, Hong Kong and New Zealand, can get education loans from Rs. 20 lakh to Rs. 1.5 cr at attractive interest rates.
PNB Education Loan
Punjab National Bank provides education loans to ambitious students to help them achieve their dream. Students can avail of the education loan under three key categories – PNB Saraswati, PNB Pratibha and PNB Udaan.
Features of PNB Education Loan
PNB Saraswati: Under PNB Saraswati, bright students who have got admission to in recognised universities/ institutions can get up to Rs. 7.5 lakh education loans with co-borrower (parents/ guardian) without security. Education loan above Rs. 7.5 lakh can be availed with tangible collateral and co-borrower (guardian/ parent).
PNB Pratibha: PNB Pratibha Scheme is designed to provide financial assistance to students who have secured admission in Premier Institutes in India including ISB, IIM, FMS, XLRI Xavier School of Management and FMS. Students can get up to Rs. 35 education loans based on parents/students (after getting employment) repayment capacity.
PNB Udaan: Students who want to pursue an MBA abroad can get education loan under this scheme. An education loan up to Rs. 7.5 lakh with parents/ guardian as a joint borrower, without tangible security and third-party guarantee, is available for students who get admission in reputed foreign institutions/ universities. Above Rs. 7.5, co-borrower and tangible collateral security of suitable value are compulsory.
Axis Bank Education Loan
Axis Bank offers education loan for meritorious students who have got admission to reputed/ accredited universities in India and abroad. Students can get education loans up to Rs. 10 lakh for studies in India and Rs. 20 lakh for studies abroad. The loan amount can be used to cover expenses like tuition fees, hostel charges, library, study material and other relevant expenses.
HDFC Credila Education Loan
HDFC Credila, a subsidiary of HDFC Ltd., is a pioneering specialist of education loan. It offers education loan for higher studies in India and abroad. HDFC Credila offers the total cost of the student’s education including living and other related expenses. The minimum loan amount is Rs. 1 lakh and there is no upper limit on the loan for meritorious Indian students.
InCred Education Loan
InCred is a leading Non-Banking Financial Company. It extends financial assistance to the deserving and meritorious students aspiring to complete their education in India or abroad. The company provides up to 90% coverage of education-related expenses such as tuition fees, library fees, travelling expenses, admission fees and hostel fees. Borrowers can avail of an education loan from up to Rs. 40 lakhs for studies in India without submitting any collateral. The amount can go up to Rs 1 Crore for Education in Foreign Countries.
Documents required for Education Loan for MBA
- HSC and SSC Marksheet/Certificate
- Marksheet/Certificate of Graduation
- Entrance exam Marksheets (If applicable)
- Scholarship Documents (If applicable)
- Proof of confirmed admission letter from university/ institute
Tax benefits under section 80E
Students can claim a tax deduction on the interest paid on an education loan, under Section 80E of the Income Tax Act. They will be able to get tax benefits once they start making repayment of the education loan. Students need to submit bills as proof to claim tax benefits. Remember the tax benefits are available for a period of 8 years, hence if their loan continues after this period, no tax benefits will be granted.
Financial constraints should not stop students from accessing quality education. With plenty of options available from banks and NBFC, parents can help their child realize their dream. Getting an education loan also provides young generations with the first exposure to the world of credit.