Decoding the Eligibility Criteria for Education Loans

Education loans are often considered the key to a brighter future and extend a lifeline for students and their families. They bridge the financial gap between the cost of education and the available resources. Whether you’re pursuing a degree, diploma, or specialised course, these loans can make your dreams achievable by:

Providing Access to Quality Education: Education loans enable students to choose the best educational institutions and courses, irrespective of their financial background.
Building a Brighter Future: A quality education is an investment in your future, increasing your earning potential and career prospects.

However, the cost of higher education can be a significant barrier for many. This is where education loans come into play, providing financial support to aspiring students. Like any financial assistance program, education loans have specific eligibility criteria that applicants must meet. We are here to guide you on the essential eligibility requirements for education loans, helping you understand the path to securing your educational dreams.

Eligibility Criteria for Education Loans in India:

In 20223-23, around Rs.17,000 Crores were disbursed as education loans by lenders in India. This indicates that the demand for these loans is very high, which is why lenders carefully evaluate the following criteria before providing education loan approval:

1. Educational Qualifications:

Most education loan providers require applicants to have secured admission in a recognized institution or course. This ensures that the loan is utilised for educational purposes.

2. Age Limit:

Applicants typically need to be within a certain age bracket, often between 18 and 35 years, although this can vary among lenders.

3. Academic Performance:

Some lenders may consider your past academic performance as a criterion for eligibility. This can include minimum grades or percentage requirements.

4. Citizenship:

In many countries, education loans are primarily available to citizens or permanent residents. International students may have separate loan options.

5. Co-borrower or Guarantor:

For undergraduate courses, a co-borrower, often a parent or guardian, may be required. They share the responsibility for repaying the loan if the student cannot.

6. Income of Co-borrower:

The co-borrower’s income may also be considered. It demonstrates the ability to repay the loan if the student faces challenges in the future.

7. Loan Amount:

Some lenders have a minimum and maximum loan amount limit. Ensure your loan requirements fall within these limits.

8. Collateral or Security:

Depending on the loan amount, you may be required to provide collateral or security. This can be in the form of property, fixed deposits, or government securities.

9. Credit Score:

A good credit history and score can enhance your eligibility and loan terms. Lenders assess your creditworthiness to determine the risk of lending.

10. Course and Institution Eligibility:

Certain courses and institutions may be eligible for specific government-backed loan schemes or have different eligibility criteria.

Are You Eligible For an Education Loan?

There are a lot of myths and misconceptions surrounding education loans in India. Considering that education loan application can be a challenging and long process, here are some situations to help you better understand education loan eligibility criteria:

Situation	Approval	Reason
You have not secured admission in an institution.	✕	You cannot get an education loan without an official admission offer letter.
You have scored good marks in your previous educational record.	✕	While previous academic scores can affect your loan terms, only good marks will not guarantee you an education loan.
The educational institution you have secured admission in is not formally recognized.	✕	No, most lenders require the educational institution you have secured admission in to be formally recognized by the Indian government.
You are willing to pledge collateral for your education loan application.	✓	Having collateral ready, along with fulfilling other basic requirements, will greatly increase your chances of getting an education loan.
Your credit score is above 700.	✓	A credit score of above 700 is considered excellent by most lenders and they will be willing to provide your good education loan terms.
You are not a citizen of the country your educational institution is situated in.	✓	Even if you have secured admission in a foreign educational institution, as long as it is formally recognized, you can get an education loan.

Education Loan Application: Documentation Checklist

If you have made up your mind to apply for education loan for your further education, use this checklist to ensure that you have all the following paperwork in order before you begin the application:

Admission Letter: A formal admission letter from the educational institution where you have been accepted for the course. This letter confirms your enrollment.
Loan Application Form: The lender’s prescribed application form, filled out completely and accurately.
Identity Proof: Proof of identity, which can include a copy of your passport, Aadhar card, driver’s licence, or any government-issued ID.
Residence Proof: Proof of your current address, such as a utility bill, rental agreement, or any document issued by the government.
Academic Records: Copies of your academic records, including mark sheets, transcripts, and certificates from your previous educational institutions.
Proof of Admission Fees: Receipts or invoices from the educational institution confirming the cost of tuition fees and other expenses.
Co-Borrower’s Documents: If a co-borrower (typically a parent or guardian) is involved, their income and identity documents may be required. This can include PAN cards, income tax returns, proof of residence, and bank statements.
Income Proof: Your income certificate or that of your co-borrower to demonstrate the ability to repay the loan. This can include salary slips, income tax returns, or business financial statements.
Collateral Documents: If the loan requires collateral, documents related to the collateral’s ownership and value will be needed. This can include property deeds, land records, or fixed deposit certificates.
Passport-size Photographs: Recent passport-size photographs of the borrower and co-borrower.
Statement of Cost of Education: A detailed breakdown of the estimated cost of your education, including tuition fees, accommodation, books, and other related expenses.
Loan Repayment Schedule: A document outlining the repayment schedule, including interest rates, EMI (Equated Monthly Instalment) details, and the loan’s tenure.
Loan Agreement: A formal agreement between you and the lender specifying the terms and conditions of the education loan.

Conclusion

Education loans are powerful tools that can turn your academic aspirations into reality. Understanding and meeting the eligibility criteria is the first step toward securing the financial support you need. Don’t let financial constraints hold you back from pursuing your dreams. With the right education loan and a clear understanding of the eligibility criteria, you can invest in your future and unlock a world of opportunities.

AMIT ARORA

I am a seasoned retail banker with over 21 years of global experience across business, risk and digital. In my last assignment as Global Head Digital Capabilities, I drove the largest change initiative in the bank to deliver the end-to-end digital program with over US$1 billion in planned investment. Prior to that, as COO for Group Retail Products & Digital, I implemented a risk management framework for retail banking across the group.