Education loan is a prudent option for students to pursue their academic aspirations independently. By offering student loans, new-age education-focused NBFCs bridge the gap between the student community and their academic ambitions.
As per a credit rating agency, in the fiscal year 2023, educational loans offered by NBFCs surged twofold, escalating from ₹13,000 crore in the preceding year to over ₹25,000 crore.
Despite a general understanding of the fundamentals of education loans amongst parents and students, some lesser-known facts could significantly impact the financial and educational journey of the aspirants.
Understanding these facts can guide students in making well-informed decisions about their education financing, thereby ensuring they possess the requisite financial support to accomplish their academic goals.
Delving into five fundamental facts about education loans:
Holistic offerings: New-age NBFCs offer comprehensive education loans that provide holistic coverage for not only the various educational expenses but also for the entire student journey. These loans go beyond just tuition fees and encompass a wide range of financial needs, including travelling expenses, accommodation costs, the purchase of learning devices, living expenses, and other education-related expenditures.
This holistic approach ensures that students have the financial support needed to cover all aspects of their education journey, enabling them to focus on their studies and career development without worrying about finances.
Loans for diverse courses: In the technological era with emerging jobs, NBFCs have emerged as game-changers as they offer financial support for a diverse array of courses. Their coverage spans conventional academic pursuits in the Science, Technology, Engineering, and Math (STEM) domain, unconventional and specialised study programs such as Music Production, certification programs, skill development, upskilling, and reskilling courses.
This comprehensive approach reflects the changing landscape of education, where traditional degrees are no longer the sole path to success. With these diverse courses, aspiring students can turn their dreams into reality by opting for the study program of their choice and never compromising on quality education.
A reliable alternative instead of liquidating assets and depleting family savings: Opting for education loans often proves to be a wiser choice than liquidating valuable assets or tapping into family savings. Education loans provide the means to pursue one's academic aspirations without having to make any compromises. Liquidating assets can lead to the loss of valuable investments or property, potentially hindering future financial goals.
Similarly, depleting family savings can leave families vulnerable in emergencies and without the resources needed for other essential needs. On the other hand, education loans offer a structured and manageable way to cover educational expenses, allowing students and their families to preserve assets, maintain financial security, and ensure that education remains an affordable and achievable dream.
Building credit history at a young age: Education loans provide students the chance to build a robust credit history early in life and effectively earn a self-made badge. When borrowers diligently follow proper credit behaviour, they prove their creditworthiness to financial institutions.
Responsible financial behaviour can subsequently lead to more favourable terms on other financing products such as a home loan, car loan or credit card. Education loans not only assist individuals in pursuing their academic goals but also enable them to build a solid foundation for a secured financial future.
Deploy a wise repayment strategy: Although student loans come with a grace period, education-focused lenders encourage students to make small contributions in the form of simple interest/partial interest as this is not an interest-free period. Therefore, students are encouraged to embark on their loan repayment journey during the moratorium period and to choose a repayment plan that aligns with their financial needs.
This approach empowers students to proactively manage their loans and instils financially prudent habits. Moreover, they have the option to select from flexible repayment methods, including National Automated Clearing House (NACH), Electronic Clearance Services (ECS), UPI apps, Digital Wallets, Internet Banking, Debit Cards, Cheques, and Post-Dated Cheques (PDCs). This enables a seamless student loan repayment experience.
Education loans play a vital role in making higher education accessible, but students must remember that repayment is equally important. A comprehensive understanding of these education loan facts will empower individuals to make informed decisions and effectively navigate the intricate landscape of student loans.
It is crucial for students to understand the basic facts of education loans to make informed decisions and manage their loans prudently. This can create a substantial difference in their education loan journey. With effective steps and basic awareness, students can be geared toward achieving their academic goals and securing a stable financial future.
Rajesh Kachave, Chief Business Officer- Student Lending and Insurance Business, Avanse Financial Services