New Delhi: There is a considerable proportion of people who are looking to avail credit facilities for their children’s higher education and students who are willing to take educational loans for the purpose of higher studies abroad. State Bank of India (SBI), India’s largest bank, provides the facility of education loan for higher studies in India, as well as, abroad. The most critical part of the education loan is repayment. It happens with a sizeable number of education loan borrowers that they weren’t able to service the loan on or before the time.
The situation of delay in education loan repayment may happen either due to the shortage of funds or because of the lack of awareness among the education loan borrowers. We take a look at the repayment structure, EMI generation, prepayment or partial payment of the SBI education loan and ways to reduce the education loan costs.
SBI education loans: Repayment and EMIs
According to SBI, the repayment starts after the completion of course and moratorium period (one year after course completion or six months after securing a job, whichever is earlier) in case of SBI student loans, while the repayment starts after completion of course period and moratorium period (six months after course completion) in case of SBI scholar loans.
The equated monthly instalments are generated on the basis of accrued interest during the moratorium period and subsequently, the repayment is divided into EMIs. If full interest is serviced before the commencement of repayment; EMI is fixed based on the principal amount only, SBI said. Interestingly, SBI doesn’t charge any penalty charges for prepayment of education loan, a borrower can prepay the education loan anytime.
How to reduce education loan costs
As mentioned above, a borrower is free to service the interest amount in the course period and the moratorium period. SBI provides a concession of 1 per cent in the rate of interest applicable on the education loan for the entire tenure if the borrower has serviced the full interest amount during the course and moratorium period.
Following this, the interest applied to the loan amount during the course and moratorium period will not be added to EMIs. The interest paid on educational loans is also eligible for tax breaks under Section 80(E) of the Income Tax Act. People who are not able to service the education loan interest during the course and moratorium period can repaying the EMIs religiously on time that will help in keeping your account in good condition and will save avoidable additional interest costs.
Borrowers falling in the economically weaker section (EWS) can avail the Central Scheme for Interest Subsidy on Education Loans upon fulfilling the eligibility. The Scheme provides interest subsidy on education loans for students from EWS with annual gross parental/family income up to Rs 4.5 lakh. Eligible students may contact the SBI branch concerned for any further details along with Income Certificate from the Certifying Authority, SBI said.