Top 9 Advantages of Education Loan You Need to Know

In today's competitive and financially challenging environment, securing an education loan has become essential for many students pursuing studies abroad. Previously, parents often relied on their savings, such as assets like Gold, Fixed Deposits, and land, to fund their children's education. However, there has been a notable shift towards the importance of education loans as a means of financing higher education.

This change is driven by the growing awareness among students and parents regarding the myriad benefits offered by education loans. Understanding the advantages of opting for an education loan over a personal loan or any other types of funding for educational purposes has become increasingly clear.

While you may already be familiar with some of these advantages, this article aims to help you in exploring all the benefits that students can get through an education loan when pursuing higher studies either abroad or in India. By going deep into the specifics of these advantages, students can make informed decisions about their educational financing options.

When seeking personal loans for financing education abroad, interest rates are typically higher than those for study loans. However, government banks offer an additional concession of 0.5% to all female students, making study loans a more affordable option. This can help reduce the overall cost of higher studies and make it more accessible to a wider range of students.

When it comes to education loans, one standout benefit of the loan is the Moratorium Holiday feature, offering a unique advantage compared to personal loans. Unlike other types of loans that require immediate repayment, education loan schemes provide a moratorium period.

During this moratorium period, students are not obligated to start repaying the EMIs or make any payments to the lender. Typically, this period spans the duration of the course plus an additional 6 months (which can be extended to 12 months). This setup allows students to focus on their studies without the financial burden of loan repayments. This flexibility makes education loans a favorable option for many aspiring students seeking financial assistance for their education.

When pursuing education abroad, an education loan can be a complete solution covering a diverse range of expenses essential for a student's academic journey. This financial support includes tuition fees, travel expenses including tickets, accommodation costs such as house rent, university fees, daily sustenance like food expenses, living expenses, as well as provisions for educational tools like laptops and other necessary equipment. This complete coverage ensures that students can focus on their studies without financial concerns stopping their educational dreams.

With a motive to empower students from economically disadvantaged backgrounds, the Government of India has rolled out a series of impactful education loan interest subsidy schemes. These schemes aim to reduce the financial burden on loan applicants seeking higher education. Here are some key subsidy schemes:

1. Central Sector Interest Subsidy Scheme
2. Dr. Ambedkar Central Sector Scheme of Interest Subsidy

One of the significant benefits offered by these schemes is the exemption from paying education loan interest during the moratorium period. This crucial support provides students with financial relief as they pursue their academic aspirations. However, it is important to note that once the moratorium period ends, beneficiaries are required to start repaying EMIs independently, marking a step towards financial independence and responsibility.

In Section 80E of the Income Tax of 1961, the loan applicant or the co-applicant can avail of the education loan income tax exemption. In simple terms, the loan applicant or the co-applicant can proclaim a certain percentage of the interest paid towards their education loan as deductible from the total income.

Sending money abroad for educational purposes has become increasingly common. However, recent changes in tax regulations impact these transactions. Let’s delve into the advantages of education loans and how they relate to Tax Collection at Source (TCS).

TCS Simplified Starting from October 1, 2023, the Tax Collected at Source (TCS) rates for foreign remittances have been revamped. While most overseas transactions attract a hefty 20% TCS, there are exceptions.

• Below Rs 7 lakhs: No TCS applies.
• Equal to or above Rs 7 lakhs (via loan): TCS rate is 0.5%.
• Equal to or above Rs 7 lakhs (without a loan): TCS rate is 5%.

One of the key advantages of taking an education loan is that it can help you build your CIBIL score. A CIBIL score is a measure of your creditworthiness generally ranges between 300-900. A score above 750 is considered a good score and it is used by lenders to determine whether or not you are a good candidate for a loan. By taking an education loan, you are demonstrating to lenders that you are responsible and able to manage your finances. This can help you build a good CIBIL score, which can make it easier for you to get loans in the future like a home loan, car loan, etc.

Additionally, having a good CIBIL score can help you get better interest rates on loans, which can save you money in the long run. Overall, taking an education loan can be a smart financial move that can help you build your credit and improve your financial future.

Education loans offer a significant advantage by eliminating the necessity to liquidate valuable assets to fund education expenses like FDs, insurance, and Government bonds as security and grant you a loan against that security. This benefit ensures that individuals can pursue higher education without the burden of selling assets. By availing an education loan, students and their families can secure financial support specifically tailored for educational purposes, allowing them to retain their valuable assets for future needs or investments. This financial flexibility not only eases the immediate financial strain but also preserves long-term financial stability and growth opportunities. Education loans serve as a strategic financial tool that empowers individuals to access quality education without compromising their existing assets, encouraging personal and professional development seamlessly.. 

Taking an education loan can liberate parents from all financial burdens as the student is responsible to repay his education loan after the completion of his studies and the moratorium period. 

So, these are a few benefits of an education loan. Borrowing an education loan will help you meet the total costs of studying abroad. 

Student loan benefits a lot as it provides invaluable aid to students to support their higher education. If you are looking for an abroad education loan, apply through WeMakeScholars as our team will explain to you the education loan uses and will guide you through the entire process of student loans.

Our team has closely helped 25000+ students to process their education loans in a cost-effective way. We value students’ time and efforts because of which we provide you with all the required details and will guide you through the entire process of applying for your study abroad. We connect you with the best education loan lenders across India who can fund your education. Our team shares a special affinity with the education loan lenders because of which it is possible to help our students with the entire loan process with legal formalities done in the stipulated time frame. 

To conclude, students must now be aware of the advantages of education loans and how they can avoid exhausting their savings. However, even at WeMakeScholars our financial experts suggest taking an education loan to fund one’s higher education as there are innumerable uses of education loans. If you find yourself in such a situation where you are hesitating to avail of an education loan, or thinking that it can become a financial liability on your parents, we are just a call away. Connect with our team to get professional advice on education loans.