Education Loan Disbursement Process: Know the Complete Details
Those of you who look forward to funding your higher education abroad with the help of an abroad education loan must be familiar with the term ‘Loan Disbursement’. And you may also have come to observe that there are not many resources on the internet that can provide you with sufficient information on the loan disbursement process. The education loan disbursement process is quite a mystery to everyone. For those who are unaware, an education loan disbursement basically refers to the process of release of the education loan amount by lenders to the eligible candidates.
In the abroad education loan process, the sanctioning of the education loan marks the last phase of paperwork for the bank and the loan applicant. But does getting your education loan sanctioned mean that the education loan process has come to an end? What happens after your education loan is sanctioned? When does disbursement happen? What are the steps involved in the education loan disbursement process? Do you have to request your bank for disbursement of loan? Too many questions, right?
The purpose of this blog is to help you put all your loan disbursement related worries away by explaining, in a step by step way, how an education loan disbursement takes place. This article majorly focuses on the education loan disbursement process of government banks. A brief description of the disbursement process of NBFCs has been mentioned towards the end of the article.
Or better yet, hear all about it from our education loan expert, Damini Mahajan, in the 28th episode of Loanflix, an informative web-series on education loans, on YouTube. Click on the video below to watch the 28th Loanflix episode.
We will be explaining the education loan disbursement process in the following terms.
- How your government bank disburses tuition fees? If required, will they support tuition fee payment to universities via third-party payment services like FlyWire or GlobalPay?
- How your living expenses are disbursed by banks? Do they cover other miscellaneous costs like health insurance, travel costs, educational aid costs?
- And, finally, If you have made any payment towards your tuition fees or living expenses by yourself before your education loan sanction, then how you can reimburse the money from your bank.
Education Loan Sanction to Loan Disbursement – a brief look
Many loan applicants are under the impression that once sanctioned, their lending bank transfers the entire loan amount at once. This is not the case.
Another myth doing the rounds is that banks charge interest on the sanctioned loan amount. In reality, banks charge interest on the disbursed amount and not the sanctioned amount. It is not mandatory for candidates to utilise the entire sanctioned amount. In certain cases, they manage some part of their living expenses independently and do not utilise the entire amount sanctioned by their banks. In order to cater to such exceptions,
government banks charge interest only on the actual loan amount utilised by the candidates (disbursed amount) and not on the entire sanctioned loan amount.
Let’s take a look at the transition of an education loan sanction to an education loan disbursement.
- Once the education loan is sanctioned, you will be given a sanction letter.
- On receiving the sanction letter, applicants will be required to visit their lending bank again to sign the loan agreement. Till this point, the loan amount is not released to the applicant by their lending bank.
- It is extremely important for candidates to read their loan agreement carefully and thoroughly. Because once signed, none of the clauses in the loan agreement can be changed. Certain common things which applicants generally reconsider are loan margin, loan amount, university, course, etc.
- In most cases, banks do not entertain any modifications in the loan agreement if you apply through them directly. This is where you get to gain when you apply through the team. Any details in the final loan agreement can be modified until it has not been signed by the candidate. The WeMakeScholars team has been successful in helping our students regarding the same. So request a callback today and get access to our efficient assistance.
- Once the loan agreement is signed, the loan is ready to be disbursed.
Education Loan Disbursement: How Do Government Banks Disburse Tuition Fees?
Once the education loan is ready to be disbursed, loan applicants will be notified about the same. Formally, loan applicants will be required to fill and submit an education loan disbursement letter to the bank. Loan applicants are only required to fill the education loan disbursement letter to bank at the time of their first disbursement.
For the remaining education loan disbursements, students may directly send an email to their respective banks requesting their tuition fee disbursement. They should include the following parameters while requesting for further disbursements.
- University account/ third party services account details.
- The exact amount to be disbursed for the respective semester/year.
Once sent, it generally takes 2 days for the tuition fee payment to reflect on the university/third party account.
Government Bank Issue: Do Banks Approve of Third-Party Payment Methods?
Off late, a few universities in the USA and Canada have been asking their students to make their tuition fee payment with the help of third-party services like the FlyWire, TransferWise, etc. As mentioned above, most government banks are instructed to transfer the tuition fees directly to the university. When students would approach their respective banks to disburse tuition fee through such services, the banks would instruct them that tuition fees can only be paid to the university directly. As a result, many students would end up paying their tuition fees by themselves and then apply for loan reimbursement from their respective banks.
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.
What is the process of getting your living expenses released from the bank?
Living expenses are an equally important part of the education loan disbursement process along with tuition fees. When you submit your application for disbursement of education loan, your living expenses are also disbursed by banks along with the tuition fees. The living expenses generally consist of your rent, any money that needs to be deposited in advance for rental purposes, travel allowances, the cost of study aids like books, laptops, health insurance, if any, that may be required by your respective university, etc.
These living expenses are deposited by lending banks into a FOREX card, with the help of which you will be able to withdraw the money for your monthly expenses. Candidates can use this FOREX card for the first three months only. Post that, they will have to open their own savings account with a foreign bank.
One major hurdle that candidates are likely to face when they request their banks to release these living expenses is that the respective banks would ask them for relevant proofs (bills, invoice,) showing these expenses. It is only after candidates have provided these proofs that banks would agree to approve the loan disbursement. At WeMakeScholars, our team understands that it is physically impossible for students to collect each and every receipt and submit their copies to the banks. Even if you can manage to produce the rent bill, the remaining expenses cannot be accounted for. If you are facing a similar issue, get in touch with our team today and resolve your education loan disbursement-related issues.
Education Loan Disbursement of Government Banks: How Are The Funds For Miscellaneous Expenses Disbursed?
Miscellaneous expenses refer to expenses other than rent and tuition fees. These expenses include:
Health insurance: If your university requires you to purchase health insurance along with your tuition fee payment, then your lending bank will disburse this amount along with your tuition fees, to your university. If you are required to purchase one from another insurance lender, then you may have to purchase it separately and then present the bill to the bank. The amount will be reimbursed to you.
Books: If candidates need money to purchase study aids like books and laptop, they will have to conduct the purchase of these products first and then apply for a reimbursement.
Travel and other costs: Similar to health insurance and books, candidates will be required to first spend money for these expenses by themselves and then apply for reimbursement.
Education Loan Disbursement Process of NBFCs
The disbursement of education loans by NBFCs is pretty simple and easy to understand. Unlike government banks, who require loan applicants to submit an education loan disbursement letter to 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 own savings 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 to 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.
Education Loan Reimbursement From Banks
When it comes to the higher education process, students may be required to make certain payments way before their education loan is sanctioned, this can be their tuition fee payment, payments made towards their living expenses, etc. In such occasions, students are compelled to spend from their own pockets.
For such students, government banks allow a reimbursement, after their education loan has been sanctioned. Candidates are required to present receipts of these transactions and the spent amount will be reimbursed by the respective banks from the candidate’s education loan amount.
If you are facing any difficulty with regards to your loan disbursement process, do reach out to the WeMakeScholars team for support. Our team has an excellent set of financial officers who can guide you and provide you with the appropriate assistance in your education loan process.
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. The next Loanflix episode is going to focus more on the education loan repayment procedure to be followed by candidates who have borrowed education loans. So stay tuned and look out for the 29th episode of the Loanflix web-series.
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