Many parents may worry about the high cost of education, especially if their home budget is already tight. There are several possibilities for education loans on the market, so one should not worry too much about filling the gap.
The Reserve Bank of India (RBI) in its monetary policy meeting on June 08 this year hiked the repo rate again by 0.5 per cent to 4.9 per cent. This hike is steep considering how people had anticipated the RBI to go slow on its rate hikes. The last repo rate hike by 40 bps was announced on May 04, 2022. And, this is just the beginning of a hardening interest rate cycle in the country.
For students preparing for higher studies, particularly those aspiring to go abroad in August/September, this couldn’t have come at a worse time. However, at present, there are few banks that offer interest rates of under 7.3 percent.
The table below summarises the interest rates on loans by different banks.
|Name of Banks
|Punjab National Bank
|Up to 16.90%
|7.30% to 9.30%
|State Bank of India
|Up to 9.05%
|Bank of Baroda
|8.85% to 10.85%
|5% to 9% p.a.
|Bank of India
|One Year MCLR + 1.70% to One Year MCLR + 2.50%
|Tamilnad Mercantile Bank
|8.45% to 10.95%
|9.55% to 13.25% p.a.
|UCO Float Rate + 2.40% to UCO Float Rate + 2.80%
|Karur Vysya Bank
|10.60% to 11.60% p.a.
|13.70% to 15.20%
|Kotak Mahindra Bank
|Up to 16%
Note: In India, most banks offer zero processing fee for courses, contact the bank for details.
It is safer to use investments to pay for your or your children's educational needs. You can apply for student loans if you haven't been able to save enough money to support your children's rising higher education costs. For a length of 7-8 years, student loans are offered.
In light of this, it is preferable if you choose a bank that, in accordance with your eligibility, provides you with cheap interest rates and a manageable tenure.
Himanshu Panchmatiya Co-founder & CEO at Switch My Loan, says “There is a lot of uncertainty whether the student will be able to complete the course & will he be able to secure a good job. Lenders have even observed on a few occasions that even after securing good jobs, the borrower doesn’t consider the education loan as a primary objective and defaults on the repayment.”
“If you need lower ROI, then Nationalised bank offers the lower ROI but the services with Pvt Banks & NBFC is superior. Plus, the ROI depends on what kind of course you are applying for, which university you will be studying and what is the credit score of the borrower/ Guarantor. Moreover, secured loans which are backed with collateral such as house, plot of land may lessen the ROI as compared to unsecured education loan,” he added.