Studying abroad is a dream for many Indians. The same provides the student exposure to leading technologies as well as grooms the student in an integrated global world. With this in mind we see an increasing trend of students looking to pursue education abroad with the help of education loans.
Some of the top reasons that parents opt for education loans are :
- Its Expensive to study abroad – Yes it is, most indian parents find it hard to save the amount and spend a large chunck of the hard earned income to finance study abroad. The cost ranges anywhere between INR 8 lakhs to INR 20 lakhs per year which includes Tuition cost, Book & Stationary and Living Cost.
- Very Low interest rate – Education loan falls under the priority sector lending. Reserve bank of India has made it mandatory for Indian Banks to lend . . . . % to priority sector. This makes Education loans come at a very economical price.
- 80E Tax Benefit – Government of India has made a provision under Income tax exemptions – Titled 80E under which an individual who is standing as guarantor for the loan can reduce his taxable income by the amount of Interest accrued and paid on the loan for a particular financial year. Further, there is no upper cap on the exemption which makes this a very good incentive to take a loan.
- Flexible Payment terms – Most of the financial institutions have completely or partially waived of paying the monthly installment at the time of study. The student further gets generally up to a year to search for a job and start paying the equated monthly installment after one year or after finding a job which ever is earlier. This makes it extremely easy for the student to borrow and very favorable terms of the loan.
- Flexible Loan Options – Education loan is one of the very few loans that are based primarily on the future earning potential of the student. There are loan players in the market who are purely relying on the students earning potential and do not insist on any security from the student in the form of collateral or even a guarantor.
- Loan Available even if Guarantor earning is low – As the loan is based on the future earning potential of the student and not the present family income students from economically weak backgrounds can avail the loan. You would be able to avail the loan even if your parents are retired or are not earning.
- Easy to Repay – Yes its easy to repay and as per our analysis most students are able to repay the loan taken on there studies with in 2/3 years of graduation. In most countries there are 2/3 years stay back option. The student during this time earns in dollars and is easily able to save 30% of his salary. So in case you do Masters in the US and get an average salary of USD 60,000 per month you would be able to save USD 60,000 during your 3 years of OPT. This would more than offset what you might have spent on your studies.
With the changing landscapes of world order where developed economies have an aging population and are seeking young minds and brains from across the world this trend would continue for some time to come. Indians fit in perfectly in this global dynamics where India has one of the most young and bright minds and hence they are choosing to go abroad.