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Headed for College? Financing your education may now be easier!

Wednesday, August 22, 2012 by Rajiv Raj

Concerned by the rising number of rejections of applications for education loans by Public Sector Banks (PSBs), the new Finance Minister in office, P. Chidambaram declared in his very first meeting with the chiefs of PSBs since he took office, "No application from a deserving candidate, if he/she meets the parameters, should be turned down by the (bank) officer receiving it. If a loan is not given, the decision can be taken only at one level higher to the officer receiving the loan application." Under the new policy if an increase in education loan rejections is detected, then there can be punitive actions against the branch manager.

What does this mean? It means greater access to finance your higher education! The student loans can be a blessing for many people who couldn't have otherwise afforded college. In India, students fund 57% of tuition fees through family funds, savings or job-related income, which makes affordability a critical issue. It implies that most low-income students have to forgo higher education. 

It is not always possible for Indian students to get admission in government-sponsored colleges or avail scholarships, and private college require self-sponsorship. Students can then finance their education through banking services such as the SBI education loan, HDFC education loan and many more preferred financing services available for students.  A loan up to 4 lakhs is granted for education by the commercial banks. The repayment period is between 5 to 7 years and rate of interest is generally about 11% p.a., with additional concessions for girls. However, each bank has different policies and students must check with the banks for more favourable terms.

While primary education provides the elementary knowledge that is essential, it rarely imparts the skills required for employment in a job that ensures decent wages and living conditions. Higher education consolidates the skills acquired through primary and secondary education, making an individual more "employable," and productive in the economy. Thus, even though you may be saddled with debt immediately after throwing your graduation cap high up in the air, this may be worth it in the long run. The key is to shop around for the best terms possible!

MadanRajiv Raj

Rajiv is a credit expert with 10 years of experience in personal finance and consumer banking industry and another 7 years in credit bureau sector. Rajiv was instrumental in setting up India’s first credit bureau, Credit Information Bureau (India) Limited (CIBIL). He has also worked with Citibank, Canara Bank, HDFC Bank, IDBI Bank and Experian in various capacities.

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