The Indian government has implemented various initiatives and interest subsidies to offer financial support to students seeking education abroad. These efforts are designed to help individuals from economically disadvantaged backgrounds and marginalized communities pursue their educational aspirations. It’s important to note that while commonly referred to as government education loans for studying abroad, these initiatives do not provide direct loans. Instead, they function as programs offering financial assistance and interest subsidies. Under these schemes, students can benefit from reduced interest rates, flexible repayment options, and additional forms of support.
Lending Options
There are essentially three categories of lenders sanctioned by the Indian government that extend education loans for overseas studies. You can read more about this in GyanDhan’s blog.
Public Banks: Indian public banks offer education loans for studying abroad, necessitating collateral. Loan amounts range from INR 7.5 Lakh to INR 1.5 Cr. Government bank loans not only present competitive interest rates but also provide tax benefits under Section 80E. Prominent lenders in this category include the State Bank of India and the Union Bank of India.
Private Banks: Private banks in India also provide education loans for international studies with varying interest rates, commencing at 11% per annum. The loan amounts are contingent on factors such as the chosen country, course, applicant’s profile, and the co-signer’s financial status. These loans qualify for tax benefits under Section 80E and typically offer expedited processing times compared to government banks. Key players in this category include ICICI Bank, Axis Bank, and IDFC FIRST Bank.
NBFCs (Non-Banking Financial Companies): NBFCs extend both secured and unsecured education loans for pursuing studies abroad, influenced by factors like the country, course, and applicant’s profile. Interest rates in this category range from 11.50% to 13.75% per annum, slightly higher than those offered by private and government banks. Unlike private bank loans, NBFC loans do not provide tax benefits under Section 80E. Noteworthy NBFCs in this sector include HDFC Credila, Avanse, InCred, and Auxilo, which typically offer quicker processing times compared to government and private banks.
Indian Government Education Loan Schemes
The Credit Guarantee Fund Scheme for Education Loans (CGFSEL), introduced by the Indian Government in 2015, is tailored for students aspiring to study abroad without the need for collateral or a co-applicant. Under this scheme, eligible students can secure loans up to INR 7.5 Lakh if they belong to the economically weaker section, have an annual family income below INR 4.5 Lakh, and have obtained admission to an approved technical or professional course.
The National Minorities Development & Finance Corporation (NMDFC), a government entity, extends loans for professional and job-oriented courses to minorities. Categorized under two credit lines based on family income, credit line 1 (income up to INR 1.20 Lakh in urban areas and INR 98,000 in rural areas) offers education loans up to INR 20 Lakh for study in India and up to INR 30 Lakh for study abroad at a 3% interest rate. The moratorium period is the course duration plus 6 months, with a repayment tenure of 5 years. Credit line 2 (income up to INR 6 Lakh) features varying interest rates (8% for men and 5% for women).
The National Safai Karamcharis Finance & Development Corporation (NSKFDC), dedicated to the economic development of the safai karamcharis/Manual Scavengers community, provides education loans with a maximum limit of INR 10 Lakh for studies in India and up to INR 20 Lakh for studies abroad. The interest rate is 4% per annum (with a 0.5% rebate for women in India), a moratorium period of 1 year, and a repayment tenure of 5 years.
The National Backward Classes Finance & Development Corporation (NBCFDC), a government undertaking, offers education loans for both domestic and international studies. Eligible students, belonging to backward classes with a family income not exceeding INR 3 Lakh per annum, can avail loans up to INR 15 Lakh for studies in India and up to INR 20 Lakh for studies abroad. The interest rates are 4% p.a. for men and 3.5% p.a. for women, with a moratorium period of 5 years and a repayment tenure of 15 years.
For the welfare of scheduled castes, the National Scheduled Castes Finance & Development Corporation (NSCFDC) provides education loans with a quantum of up to INR 20 Lakh for studies in India and up to INR 30 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries. The moratorium period is the course duration plus 6 months, and the repayment tenure is 10 years for loans below INR 7.5 Lakh and 15 years for loans above INR 7.5 Lakh.
Formulated by the Ministry of Social Justice and Empowerment, the National Handicapped Finance & Development Corporation (NHFDC) provides education loans for professional undergraduate and postgraduate courses to students with disabilities. Collateral is required for loans exceeding INR 7.5 Lakh, with loan amounts of INR 10 Lakh for studies in India and INR 20 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries, a moratorium period of course duration plus 1 year, and a repayment tenure of 7 years.
Established by the Ministry of Tribal Affairs, the National Scheduled Tribes Finance and Development Corporation (NSTFDC) offers financial aid for technical and professional courses in India or abroad. Loan amounts range up to INR 20 Lakh for studies in India and up to INR 30 Lakh for studies abroad. The interest rate is 4%, with a 0.5% rebate for women beneficiaries. The moratorium period is 6 months after the course is completed or employment is obtained, and the repayment tenure is 10 years for loans below INR 7.5 Lakh and 15 years for loans above INR 7.5 Lakh.
