Rahim Ali’s son Saddiq is a brilliant student. A well- mannered lad, he made us all proud a few years ago, when he stood sixth in the Senior Secondary examination of our State. Currently pursuing his further studies in Delhi, he has two sisters - one elder to him - and the other younger.
Last week, Rahim Ali - who’s like my elder brother, gave me a distress call!
“Have you reached home from office?”
“Yes dada.”
“Good, I am coming over to your place right now with Saddiq.”
Sensing an urgency in his tone, I asked my wife to make two extra cups of tea.
“My son has applied for an education loan for his higher studies. He is refusing to take my money” disclosed an emotional father. “I have been saving for his higher studies since his childhood, and now he tells me he don’t want it!”
Meritorious Saddiq has clinched a seat in a premier institution of our country for his MBA. And now, he wants to take an education loan to pay for the same. But this has made his father uncomfortable.
“No, Abba, I have applied for the loan not because you can’t afford to pay for my education, but because I know I can repay it once I am out of the institution and armed with my MBA degree. And frankly speaking, this is what they do in West”, said a very composed and confident-looking Saddiq.
Although education loan is not a familiar term for most of us, many students and their parents are increasingly subscribing to it in India. In today’s world, higher education is not affordable any longer, especially if one aims for a premium institution or a foreign degree. To ease the burden, Govt had made education loans a priority lending. Repayment starts after a 'moratorium period' or 'repayment holiday', that is, one year after the end of one’s studies or six months after getting a job, whichever is earlier. However, many banks relax this rule for meritorious students. Girls can seek a lower rate as students, because they are eligible for a 0.5 per cent concession. Banks also have special schemes for economically weak and differently abled students.
Usually education loans have tenures of five to seven years. However, as per the guidelines, the tenure can be extended up to ten years for loans in the slab of Rs 7.5 lakh and 15 years above it. Before you apply your education loan, you must, however, know that loans are available for the following courses:
• Graduation, P.G. including regular technical and professional Degree/Diploma courses conducted by colleges/universities approved by UGC/ AICTE/IMC/Govt. Etc
• Regular Degree/ Diploma Courses conducted by autonomous institutions like IIT, IIM etc
• Teacher training/ Nursing courses approved by Central government or the State Government
• Job oriented professional/ technical Graduation Degree courses/ Post Graduation Degree and Diploma courses like MCA, MBA, MS, etc offered by reputed universities in Foreign Nation.
Expenses considered for loan
• Fees payable to college/hostel
• Examination/Library/Laboratory fees
• Purchase of Books/Equipment/Uniforms, Purchase of computers- essential for completion of the course
• Caution Deposit/Building Fund/Refundable DepositTravel Expenses/Passage money for studies abroad
• Any other expenses required to complete the course like study tours, project work etc.
In fect, in the interim budget for 2014-15 the Finance Minister announced a moratorium period for all the education loans that had been taken up to March 31, 2009, and outstanding as of March 31, 2013. He added that the government is set to take over the liability for outstanding interest as on Dec 31, 2013 but the borrower is required to pay the interest for the period after April 1, 2014.
With all this information, Rahimkai’s worries vanished within an hour. So much so, that he started praising his son’s move to apply for education loan.
“Abba, why don’t you and Amma go for a foreign trip with the money you had saved for my education? This will be a gift to me and my hard work” suggested a son.
The writer is the Principal Financial Planner at EconPenny. You can chat-twit-mail him at facebook@dipankar.jakharia | twitter@d_jakharia | dipankar.jakharia@gmail.com
