Gone are the days when in a typical Gurukul, the students were more than welcome even if they did not have anything to offer their respected Guru as Guru Dakshina.
With the cost of education especially at the graduation and post graduation levels increasing every day, there is an obvious need for financial assistance to deserving students.
This need is particularly felt in the case of those students who are pursuing one or the other professional courses offered by prestigious colleges both within India and overseas.
Here the Banks both private and nationalized ones come into the picture.
Largely speaking, most of the banks follow the Reserve Bank o f India's (RBI) guidelines regarding interest rates, etc and make only minor modifications and extend loans to the student community. According to a recent report that appeared in the Business Line (Hindu Group) about 80% of Education Loans provided by the banks are for domestive requirements. And the rest made the financial assistance lent to students wanting to study abroad.
The Government of India in consultation with the Reserve Bank of India and the Indian Bankers Association has drawn up a elaborate and comprehensive Education Loan Scheme. The objective of this scheme is to ensure that no deserving candidate is deprived of education the he/she deserves at any level.
Broadly speaking the guidelines have set the following provisions. Though these may change from time to time depending upon the Government Policy and the extent of requirements, the basic spirit and the criteria for loan settlement have remain unchanged largely speaking.
The provisions --
(a) Loans up to Rs 7.5 lakh for pursuing higher education within the country and Rs 15 lakh for an overseas education are available.
(b) For loans up to Rs 4 lakh no collateral or margin is required and the interest will be charged not more than the Prime Lending Rate (PLR)
(c) For loans above, the interest rate charged will be not be more than PLR plus one per cent.
(d) The loans are to be repaid over a period of 5 to 7 years with the provision of a grace period of one year after completion of studies.
The repayment of an education loan is deductible under Section 80E of the Income Tax Act. The yearly limit for deduction Rs Rs 40,000/- (for both the principal and the interest). Only loans taken for higher education – full time studies in any graduate or post-graduate, professional, and pure and applied science courses – may claim deduction. The deduction will be available for a maximum of eight years starting from the day you start repaying.
Allahabad Bank, Oriental Bank of Commerce, State Bank of India, Punjab National Bank, Dena Bank, Bank of Baroda, Bank of Maharashtra, Canara Bank, Central Bank of India, Corporation Bank, Indian Bank, Indian Overseas Bank, State Bank of Hyderabad, State Bank of Travancore, Syndicate Bank, Union Bank of India, ICICI, HDFC, etc are some of the leading banks
Besides these banks there are numerous private lenders who are more active in the remote regions of India. While some of them are genuine, it is advisable to seek loans from recognized banks. As there are cases where students who are mid-way through their studies had to discontinue as the pending installments of loan never came through.
Meanwhile there is a thinking in the Government that has the Planning Commission seriously considering a proposal wherein students, even graduates, can write-off their educational loans by serving for a while in a government agency.
This move, for which the details are yet to be finalized, has been made to check brain drain from the country.
The Planning Commission may set up a National Student Loan Guarantee Corporation which will provide a guarantee to students of certified institutions who avail of a bank loan. The move will enable banks to lend without collaterals.
According to the Reserve Bank of India (RBI) data, there was a 51 per cent rise in education loans from Rs 9,962 crore at the end of March 2006 to over Rs 15,000 crore at the end of March 2007.
Officials say that a mechanism for loan waiver from a private or a foreign bank, and points regarding tax treatment are yet to be framed.