Education loan abroad – Indian Government banks, issues & solutions
While thinking of applying for an education loan abroad, public-sector banks are the first option that comes to mind. However, many still hesitate to approach them for loan purposes. People have a lot of misunderstandings about nationalized banks and their regulations regarding student loans. While many are worried about the longer processing time, others are concerned about the amount of paperwork demanded by these banks. But, did you know that this is not the case?
The main motive of this article is:
- To dismiss certain false claims made by certain private banks and NBFCs about the government banks’ policies regarding education loan abroad.
- To suggest practical solutions for some commonly reported issues faced by a lot of loan applicants for education loan abroad.
This article is taken from the 8th episode of the web-series Loanfilx- Abroad education loans simplified. In case you are comfortable watching the episode, click on the video below. You can hear our experts at WeMakeScholars dismissing many myths surrounding government banks and their policies regarding education loan abroad.
The Story of WeMakeScholars
Before we start with the details, here is a small peek into the reason behind the founding of WeMakeScholars.
Every year, countless students who are in the final year of their studies, search for scholarships from international universities. WeMakeScholars is the brainchild of two such scholarship aspirants, Arjun and Damini, who also studied abroad on a full scholarship. During their journey, they had to search for scholarships on individual university websites, which was a tedious and time taking process. Out of the 300 scholarships they came across, Arjun and Damini found out that they were eligible for only about 40 of them. That was how they felt the need for a single online source that provides complete information about international scholarships to students.
In 2015, they co-founded a scholarship-finder website– WeMakeScholars that had information about several scholarships offered by institutions all over the world. These institutions included trusts, foundations, government bodies, universities, etc. Our founders were under the impression that for students, securing an education loan abroad was not a complicated process. Within a year of starting the scholarship-finder, they realized that many students who were unable to secure scholarships struggled to secure an education loan abroad from banks.
After a year of dealing with the issues faced by many aspirants, and closely monitoring the processes of various education loan abroad applications, our team realized two things;
- It is not easy for applicants to get their education loan sanctioned from nationalized banks on time.
- Applicants need appropriate guidance regarding the terms and conditions of nationalized banks for education loans
The sole purpose of this article is to provide practical solutions for certain common issues faced by loan applicants in every step of the loan process. The points being covered here will also help students clear a lot of doubts surrounding education loan policies of government banks.
Myth 1: Nationalized banks do not offer a 100% Loan for education loan abroad
Certain public-sector banks do provide 100% education loans. However, most of them offer a maximum of 90% of the total expenses as an education loan. Before we get into details, it is essential to get familiar with certain important terms related to education loan abroad.
Total Expenses: This term refers to the loan applicant’s complete living expenses for the duration of the chosen course. These expenses may include the tuition fee, living expenses, health insurance, travel, educational aids like books, laptop, etc.
Loan margin: Nationalised banks mostly do not provide 100% coverage of an applicant’s total expenses. The candidate may have to pay some portion of the loan amount. Loan margin may be roughly defined as the ratio of the amount contributed by individual applicants towards their total expenses to the amount contributed by the bank loan.
The maximum limit of loan margin varies from bank to bank. Generally, the maximum limit for the loan margin set by government banks is 90%. However, there are public banks who cover 100% of the total expenses.
For example, let’s imagine that you got a 45 lacs loan sanctioned and you need the first disbursement of Rs. 10 lakhs. Then the bank will release a maximum of 9 lacs and tells the student to bring in the rest 1 lac from his/ her end, making it 10 lacs totally. So, the student margin has to be added on a pro-rata basis. Thus, the ratio of the amount provided by a government bank to the candidate’s personal contribution becomes 90%:10%.
Sometimes, banks may reduce the loan margin further due to insufficient collateral pledged by the applicant. In such cases, the banks may reduce the loan margin to a lower figure like 60%. This means that the bank would provide for about 60% of the required disbursement amount and the applicant will have to pay the rest of the 40%. The loan margin is never constant. It differs on the basis of individual cases.
Certain NBFCs and private banks have been claiming to provide 100% loan. That might be true, but we advise you to not fall for such claims as they are made by private banks to attract candidates. They further add that all public banks don’t give 100% loans, which is wrong info misguiding marketing gimmick. As these terms tend to confuse candidates and hence they may end up spending much more money than required by approaching NBFCs/private banks for their education loan needs.
Myth 2: Government banks do not release living expenses
The Truth: Until a couple of years ago, it was true that nationalized banks would refuse to release living expenses. They would insist on transferring the loan amount directly only to the account of the respective university. This happened because banks were under the impression that loan applicants would opt for university-provided accommodation. Most banks were not aware that many students opt for cheaper private accommodation in order to save money. Although most nationalized banks have revised this policy even before WeMakeScholars collaborated with them, many bank branches are still not aware of this revision.
Myth 3: Nationalized banks demand proof before disbursing the loan amount
The Truth: This statement is often made by NBFCs to their loan applicants. Please note that this is false information. No government bank asks for any such proof. If your branch demands any such proof, please get in touch with us for clarification on this; or better yet, choose WeMakeScholars for education loan purposes.
Myth 4: What comes first? I-20 form or Loan sanction?
Often, students are confused about this policy during the education loan process. There have been many instances where banks have refused to sanction applicants’ loans because they failed to submit the I-20 form from the intended university. In other words, until recently, nationalized banks were under the impression that an I-20 form (for US Aspirants) is mandatory from the university to sanction the loan amount.
The Truth: The truth is that before sanctioning the I-20 form, universities require proof of the candidate’s financial status. However, banks also made it mandatory for a candidate to submit their I-20 form from the respective university before sanctioning loan.
- This became a catch-22 situation.
- In 2017, our team of experts at WeMakeScholars were successful in convincing our partner banks to issue loan sanction letters to the applicants without the I-20 form.
- As of today, all our partner banks issue sanction letters without the I-20 form. We have also convinced them to release loan letter even without the college I-20.
Myth 5: Banks do not release your loan amount before your visa approval
The Truth: Most loan applicants have a fear that banks may not release the loan amount before their visa is approved. Listed below are some of the most common requirements by the university or the embassy:
- Australia requires a 1-semester fee and 1-year living expenses to be paid before the visa.
- Germany requires money before a visa for a blocked account
- Canada requires money for GIC before visa.
But, on the other hand, the branch authorities refrain from releasing the funds before the visa. Since ages, they have been following to release the funds once the visa is approved for the candidate. But, as said above, these days, universities/ embassies have the requirement of fund release to get the visa approved. The major reason for this is that branch managers and authorities at local head offices are not the final decision makers. It is decided at the Head office of the banks, where students hardly have any contacts/ approach. Here, again, it is more beneficial to apply for loans via WeMakeScholars.
Our team acts as the bridge between applicants and bank branches. This accelerates the loan process.
In December 2017, our team brought up this issue with our partner banks and managed to clear the confusion regarding pre-visa loan disbursement. Now, pre-visa loan disbursement is no longer an issue for our candidates. Please feel free to reach out to our team for more information regarding the same.
Apart from the major issues mentioned in this article, there are many other general issues faced by abroad education loan aspirants. For example;
Policy revisions made by University/Embassy: Embassies and universities keep revising their fee payment policies from time to time. And it is necessary for nationalized banks to keep up with the changing policies.
Policy revision made by the university
A few years ago, many universities in the US stated that they would accept fee payments only through Flywire, a third party software. Our banks were not aware of this development. As per their policy, fees are supposed to be directly transferred only to the university’s account. Due to the rise in the number of applicants facing this problem, our team approached our partner banks and they released a circular containing the updated information in 2016.
Any problem faced by our candidate during the loan procedure is not taken lightly by our team. If you are facing any similar issue, please feel free to contact our financial officers for further assistance.
Also, we recommend that instead of facing a problem after approaching a nationalized bank, you apply for your desired education loan through our financial officers. We promise to make the process a good experience for you.
It was essential for us to write an article that solely focused on dismissing certain myths related to government banks. The major reasons for writing this article are as follows:
- In many cases, most of the private banks and lenders have misguided students by saying that nationalized banks like SBI, Canara Bank, etc do not inform their applicants correctly about education loan abroad. We are not against private banks. However, many private banks and NBFCs have been trying to lure candidates by spreading false information about nationalized banks. Our team believes that applicants must be well informed about the terms and conditions of education loans.
- Another reason for our decision to write this article was to inform our readers about why we take our students seriously. Since WeMakeScholars is an initiative funded by the Government of India, our team insists on solving many complicated terms and conditions laid out by government banks. Convincing the banks to revise their policies in order to suit the loan applicants’ needs is not an easy process. However, our main aim is to make the loan sanctioning an effortless process for those applying for an education loan via us.
Why approach WeMakeScholars for education loan abroad?
Terms like ‘Loan Margin’, ‘Insufficient collateral’, etc. mostly scare and confuse the applicants, especially when they don’t have somebody to guide them. This is when WeMakeScholars comes into the picture. Below highlighted are a few reasons why approaching WeMakeScholars is recommended.
- Our financial officers explain basic concepts of education loans in an easy, understandable language to our candidates. They also provide useful tips to applicants on how to get higher loan margins from banks by smart calculation of numbers.
- We share a closer association with nationalized banks, and we have also contributed to their policy-making decisions. This doesn’t mean that we are not close to private lenders/ NBFCs. We work pretty closely with them too. Especially with their head offices rather than local offices and hence we can negotiate better for your education loan terms and conditions.
- So far, we have been successful in changing the banks’ mindset regarding many terms and conditions of abroad education loans.
- Being an initiative supported under the Digital India initiative, we accept applicants from all over India. Hence we offer our assistance without charging anything.
In conclusion, we would like to say that nationalized banks are the most reliable when it comes to securing an education loan abroad. With changing times, the banks have also changed their policies and now, obtaining an education loan abroad is no more a difficult process, as far as you apply via WeMakeScholars.
Don’t forget to check out our web-series, Loanflix on YouTube. It is the most comprehensive web-series explaining every detail of a study abroad education loan. It’s an initiative started to spread awareness and educate the abroad education loan aspirants and their guardians.
If you have any other questions regarding education loan abroad or any other loan-related topic, please request a callback from WeMakeScholars support team for clarifications. We are very active online and would love to answer your comments. So, feel free to leave your comments at the end of this article or on our YouTube page.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it is free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others.