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Manisha Talwar had always dreamt of becoming a doctor, a heart surgeon to be precise. After securing 92 per cent in her XII class board exams last year Talwar, she applied to various universities abroad to study. Her sound and impressive academic background helped her get a number of calls from various universities. "I'd applied to a lot of countries in Europe. I was particularly interested in a Hungarian college because of its course and lesser fee compared with other European institutes. I wanted a loan of Rs 20 lakh but could not get it as the course wasn't recognised by UGC. I'd written to a number of banks but they denied saying that since the course was not recognised, they couldn't fund it," says Talwar.She later homed in on a college based in London and is now pursuing her studies there. She has also managed to secure a scholarship for the course.While this is just one story, there are cases galore of students who wish to pursue higher education but are hamstrung by a lack of funds. If public banks are infamous for doing work at snail speed, private ones do not offer education loans that aggressively. "Public sector banks have a mandate from the government to disburse education loans. Therefore, it is easy to get a loan from a PSU rather than a private bank. While the government has done a lot to improve the condition, there is a lot that still needs to be done," says Harsh Roongta, chief executive officer, apnaloan.com.BasicsEducation loan is broadly classified into two categories: For studies in India and studies overseas. These loans are available for all types of education: preliminary schooling, undergraduate programme, post-graduation and above. Even though there is no limit or upper ceiling prescribed by the Reserve Bank on loans, banking system has a self imposed limit of Rs 10 lakh for studies in India and Rs 20 lakh for studies abroad. However, on case-to-case basis, banks do sanction higher amounts of loans as well. "We usually adhere to the ceiling of Rs 20 lakh for courses in foreign universities. However, if somebody wants more loan than this, we do look at such cases on merit basis. However, loans of such huge amounts require commensurate security papers," said a senior official with the Bank of India.Depending on the amount, these loans fall into three slabs: loans of up to Rs 4 lakh, loans between Rs 4 lakh and Rs 7.5 lakh, and loans above Rs 7.5 lakh. Loans below Rs 4 lakh do not require any collateral or third party guarantor and, therefore, are by far the easiest to secure. Loans between Rs 4 lakh and Rs 7.5 lakh require third party guarantor and loans above Rs 7.5 lakh need to be backed by tangible collateral security like government securities, property, gold, shares, or a third-party with assets matching the loan amount."The real problem is the third party guarantor or collateral for students who cannot furnish any. Apart from the admission letter they do not have anything. There should be some scheme to help those students," said Roongta.Interest rates. Apart from banks, Credila, a non-banking finance company also gives education loan. Banks and Credila, both, offer fixed and floating rate of interest. As of now banks cannot charge a rate that exceeds their prime lending rate by more than a percentage point. However, the scenario will change post July 1 when the base rate is going to come into effect. "For now, our interest rates are linked with the prime lending rate but after the base rate model kicks off, rates for personal loans, education loans, and other will be different. We are still working out the modalities, but they will be cheaper," said TM Bhasin, CMD, Indian Bank.Special discount for girl students. Most of the banks offer discount between 50 basis points and 100 basis points to female students. As on May 3, education loans are offered in the range of 9.75 to 14 per cent.Repayment. Most of the banks allow a breather of six months to one year after the completion of the course or till you get a job, whichever is earlier, before repayments begin. However, if you pay the interest amount during the moratorium period, then you can bargain for a lower rate of interest. Usually banks offer discount of 100 basis points on interest rate. "We give a lower rate of interest to students who pay during the moratorium period. The discount can be up to 100 basis points," said a senior official at the Union Bank of India.Courses. A good course from a reputed institute is likely to be approved easily. However, if you have secured admission in a low-rung institute, then you might have to do a lot of running around. Banks are wary of providing loans for undergraduate generalist courses because the chances of getting placements are weak. Moreover, there are no loans for distance learning or online education. Courses that are not recognised by the AICTE or UGC often do not get funding from banks. Students also encounter problems for getting funds for a newly introduced course. "If the course is not mentioned in our list, we request students to write to us about that course and after doing our due diligence, we usually approve the loan," said a senior official at the Bank of India.Inadequate funding. Foreign education is usually costly. For a management course abroad, the fee can be well above Rs 20 lakh a year. In such cases, if banks in India are not able to fund the education, then students should look at foreign banks. "Students can try foreign banks of that country too. There are, at times, special deals available for foreign students. They can look at a mix of loans, scholarships and funding from various corporates to meet their needs," says Pervin Malhotra, director, Career Guidance India.suneeti.ahuja@expressindia.com
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