Education Loan Disbursement Process in India
An education loan disbursement basically refers to the final phase of the abroad student loan process. The term, ‘Disbursement’, refers to the transfer of the education loan from the lender to the borrower. However, in India, the loan disbursement process of different lenders is carried out in different ways. This article aims to educate you about the loan disbursement process of the two major types of education loan lenders in India in a detailed manner.
Loan Disbursement Process: Government Bank Education Loans
All the episodes in the Loanflix web-series begin with an elaborate explanation of the two major types of education loans in India. Since government bank education loan is the most sought-after category of abroad study loans, let us try and understand the education loan disbursement process of secured education loans from government banks.
The loan disbursement process followed by most government banks like the SBI education loan disbursement or the Bank of Baroda education loan disbursement is more or less, similar. Once the education loan is sanctioned, the steps adopted by the above banks for disbursement of education loan take place in the following sequence.
- Government banks approve the education loan by issuing a sanction letter to the respective students. On receiving the sanction letter, students and their co-applicants are expected to visit their respective branches for creation of mortgage and signing of the education loan agreement. Once the agreement has been signed by the students and their co-applicants, the education loan is ready to be disbursed.
- However, the education loan disbursement process does not commence immediately after students have signed the education loan agreement. In the next step, students are required to submit an education loan disbursement letter to their lending bank stating the method of payment of the tuition fees preferred by their respective universities. At certain times, international universities, especially those in the USA, prefer the payment of tuition fees via third-party payment services like Flywire, Globalpay, etc. Similarly, many students who are in need of an early disbursement of loan to study in countries like Germany and Canada also prefer paying their living expenses through third-party payment services. For the purpose of getting their education loans transferred at the right time, students are required to mention details of the preferred payment method to their respective government banks in an education loan disbursement letter which has to be submitted to their respective government banks post signing the loan agreement.
- On receiving the education loan disbursement letter, most government banks disburse the tuition fee component of the abroad studies education loan either directly into the university’s tuition fee accounts or via a third-party payment software the credentials of which are to be mentioned in the education loan disbursement letter by the students.
- All students need to bear an important point in mind. Government banks do not transfer tuition fees for the entire course at one go. The money is released as and when students submit a request to the bank which is either yearly or semester-wise, whichever is the interval preferred by universities for tuition fee payment.
- Coming to the loan disbursement process one of the most important parts of the study abroad loan, the living expenses, most government banks transfer a student’s living expenses into a FOREX card. This FOREX card is issued to students to make it easier for them to withdraw money during their stay abroad. However, the FOREX card comes with an expiry date.
- Most banks, like the SBI and Bank of Baroda, lease this FOREX card to higher education aspirants for a period of three months. Students are expected to open a savings account in their country of stay within this time period. Their respective government banks will then disburse the education loan into this savings account, as per the directions mentioned by students in the education loan disbursement letter to the bank, for the remainder of their course of higher studies.
If you have any further doubts regarding the education loan disbursement process, do get in touch with the financial team of WeMakeScholars at the earliest possible instance. Our financial officers have a good grip on the topic and will be able to guide and assist you along the entire process.
Common Problems Encountered By Students In the Education Loan Disbursement Process
One of the biggest flaws of the education loan disbursement process of government banks is the fact that many officials are unaware of the financial obligations which students have to fulfil before getting their student visa in time. For example, countries like Canada, Germany, New Zealand and Australia require international students to make payment of their living expenses before applying for a student visa. This clause is one of the major parameters of qualifying for a student visa to study in the countries listed above.
In the education loan disbursement process, when borrowers submit an education loan disbursement letter to the bank requesting them for early disbursement of loan to fulfil this requirement, there have been a lot of incidents where bank officials have refused to fulfil such requests without seeing a valid proof that mentions the need of an early education loan disbursement.
At other times, the local branch officials of certain prominent government banks also turn down requests for payment of their tuition fees to third-party services. Although many banks have issued multiple circulars which state that students are allowed to avail a pre-visa disbursement to fulfill their financial obligations, a lot of branch officials are still unaware of its provisions.
After having helped many students, the WeMakeScholars team realised that such practices by government banks were putting more and more students in trouble and in return, they would end up missing their tuition fee payment deadline. Our team happened to raise this issue with our associate banks which include prominent government banks such as the Bank of Baroda, SBI, etc. and today, it is finally possible for students to pay their tuition fees to their respective universities through third-party payment services. In this way, the education loan disbursement process has become even easier.
Despite the modifications made in education loan policies with respect to the loan disbursement process, many bank officials still refuse many students to approve the payment of tuition fees through third-party payment services. If you happen to be one of those students, please do not hesitate to request a callback.
Also, read about Education Loan Disbursement Before Visa (Know the Complete Details)
Education Loan Disbursement Process of NBFCs
The disbursement of education loans by NBFCs is pretty simple and easy to understand. Unlike government banks, which require loan applicants to submit an education loan disbursement letter to the bank, NBFCs do not require a disbursement letter. The education loan disbursement time of NBFCs is way faster in comparison to public banks. Since there is no involvement of collateral, the education loan disbursement time taken by NBFCs is way shorter.
NBFCs disburse the education loan amount according to the candidates’ convenience. If candidates require the entire education loan amount to be credited to their accounts, NBFCs comply with the requirement and transfer the loan amount directly to the student’s account or to the university’s account. As mentioned above, it depends on the student’s preference. Since they do not necessarily have to comply with the norms laid down by RBI for disbursement of education loans, NBFCs do not have subsidized interest rates for education loans, and they do not exactly have to worry about the way in which students use the education loan amount.
The education loan disbursement process is not exactly complicated. However, there are a lot of myths going around regarding the exact procedure. Through this article, we aim to dismiss these myths and give you a clear picture of the whole process. Do keep reading our blog to get answers to some of the most complicated questions related to the abroad education loan process.
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’s at 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