How to get an education loan abroad without parental income

In India, the landscape of studying abroad has evolved over the years, it changed from just a chosen few going abroad to study, to almost every graduate wanting to pursue their higher education abroad.

According to the Economic Times, an increasing annual influx of 2.5 to 3 lakh Indian students pursue education abroad, driven by a desire for quality education and international exposure across various destinations like the USA, UK, and Canada.

Despite this surge, managing expenses remains a significant hurdle for many. Studying abroad entails many expenses, making financial considerations a critical aspect. 

To overcome this hurdle, students often turn to education loans, a viable funding option. Education loans become a practical solution to ease the financial burden and make international education more accessible.

However, the loan process involves various factors, with the co-applicant's profile emerging as a crucial element. The co-applicant plays a pivotal role in loan repayment if the primary applicant faces challenges. Eligibility criteria, including demonstrating parental income or having a suitable financial co-applicant, pose challenges, particularly for unsecured loans. 

This is the part where many students start asking questions such as can I get an education loan without my parents? can I get an education loan if my parents are unemployed? can a student get an education loan without parents in india? how to get an education loan for abroad studies without collateral? 

New-age lenders and banking institutions assess academic performance and future earning potential as primary eligibility criteria, offering larger unsecured loans. The schemes provided by these institutions include merit-based collateral and co-signer-free loans, offering alternatives to traditional loan options. Some lenders are willing to take higher risks, providing collateral-free or unsecured loans based on a candidate's merits and potential. 

Before knowing the alternative options for obtaining an education loan for studying abroad with low or no parental income, it is crucial to understand the significance of the co-applicant's role, often filled by a parent. 

The parent's profile holds a lot of importance in the loan application process, and having a financially strong co-applicant, typically a parent, improves the chances of loan approval.

However, situations may arise where parents are not eligible due to financial constraints or non-filing of income tax returns.

• Financially, parental income serves as a measure of stability, providing lenders with assurance of repayment capability. 
• It contributes to the overall creditworthiness of the loan application, as lenders evaluate the parents' income and credit history.
• Demonstrating parental income also signifies the borrower's financial responsibility and ability to handle commitments, instilling confidence in the lender. 

In the context of overseas education loans, there are two types of co-applicants: primary and financial. If parents lack income options, they can still serve as primary co-applicants, but a separate financial co-applicant is required. 

In the table below you can find the list of people who are eligible to be your financial co-applicant. Financial co-applicants are accepted by most financial institutions to meet loan application requirements, providing a suitable alternative when parental income is unavailable or insufficient.

Alternative Options For Education Loans With No Parental Income

If your parents are ineligible or unable to fulfill this role due to limited or no income, there are alternative factors that can still enable you to secure an abroad education loan without relying on their financial conditions.

Public banks 

When applying for an education loan from public banks, it is typically necessary to provide collateral as security for the loan. 

Taking a secured education loan provides an accessible financing opportunity for students who may not have parental income as the collateral serves as a guarantee for repayment. 

This allows you to access the funds needed for studying abroad without relying on parental financial support. 

Note: There is an exception with Vidya loans, which present an option for unsecured loans of up to 7.5 lakhs

Here are the top 2 public banks you can approach if you do not have parental income to show.

1. State Bank of India (SBI)

• SBI provides secured overseas education loans in India and structures its loan offerings based on the project cost. 
• Students can secure a large loan amount, reaching up to Rs 1.5 crore and beyond provided that a collateral of equal or more amount is offered. 
• In situations where the security pledged outweighs the cost of education, the applicant is eligible for an overseas education loan with collateral security. 
• SBI's collateralized loans do not require financially robust co-applicants. They simply require a co-applicant who can be contacted in case the primary applicant is unreachable. 
• SBI adopts a flexible approach by considering a person as a co-applicant even if they do not file income tax returns (ITR). In such cases, an income certificate from the co-applicant serves as proof of income, eliminating the requirement for ITR submissions.
• The SBI education loan allows individuals with low or no income, such as parents, to serve as co-applicants and facilitate access to education loans without the need for income-proof

2. Union Bank of India (UBI)

• Union Bank of India (UBI) has recently launched the "Special Union Education Loan Schemes for Premier Institute Abroad Studies."
• This initiative allows applicants to study in the top 159 premier institutes listed by the bank if they are eligible for overseas education loans without the necessity of parental income. 
• Under this scheme, applicants have a chance of securing a collateral-free loan, extending up to Rs 40.00 lakhs, and for amounts exceeding this, collateral loans are available. 
• The most striking aspect of this scheme is the absence of income criteria, making it particularly advantageous for students with limited or no parental income. 
• This initiative by UBI opens doors for aspiring students to pursue education abroad without the financial constraints associated with parental income requirements.
  

Private Banks and NBFCs 

When it comes to private banks and Non-Banking Financial Companies (NBFCs), the evaluation process determining eligibility for higher unsecured education loans is meticulous and considers various factors. 

These criteria include:

• Academic performance
• Continuity in education
• Entrance test scores
• University Reputation
• Course alignment with existing skills. 

Unlike traditional loans, unsecured education loans from private banks and NBFCs do not require collateral or a co-signer; instead, eligibility is based on the student's profile, course selection, and school choice. 

For individuals seeking education loans abroad with low or no parental income, unsecured education loans from private banks and NBFCs emerge as a viable option. These loans typically range between INR 30 Lakhs - 1.5 Crores, depending on factors such as the applicant's profile, chosen course, and selected university or college. 

While a financial co-applicant is commonly required, it need not be restricted to financially strong parents; a close blood relative meeting the lender's income criteria can serve as a co-applicant. However, the co-applicant must not have any existing EMI obligations, and any such obligations would increase the minimum income criteria set by the lender. 

Importantly, private banks and lenders offer the flexibility for the same person to serve as both the financial and primary co-applicant, streamlining the application process.

1.    ICICI Bank 

• ICICI Bank offers education loans without it depending on parental income. 
• Instead, the bank evaluates loan eligibility based on the student's academic profile, job history, and salary package. 
• With a minimum of 3 years of professional experience, individuals can easily secure a loan amount of up to Rs 50.00 lakhs or more by providing essential documents of the parent during the application process. 
• This unique loan product eliminates the need for a co-applicant, offering a convenient option for those with work experience. 
• To qualify, applicants should have a minimum monthly salary of INR 35,000, although this requirement may vary depending on the desired loan amount. 
• While there are restrictions on eligible universities or colleges, the loan allows for a moratorium period during which no payments are required, provided the applicant makes a fixed deposit (FD) as security. 
• During this period, regular interest accrues on the FD, and the locked amount becomes accessible after the repayment period.
• Individuals with over 3 years of work experience, enrolled in a PG program at A1 or A2 universities with a monthly income exceeding 35k, can avail themselves of this education loan. 
• In this case, the applicant becomes a co-applicant for the loan, eliminating the need for an additional financial co-applicant, though a primary co-applicant is still required for contact purposes in the applicant's absence.

2.    Avanse Financial Services Limited

• Avanse Financial Services Limited provides unsecured overseas education loans, offering up to Rs 50 lakhs. 
• Specifically, for students applying to study in the USA, these loans are sanctioned based on the student's GRE score, making them eligible for unsecured loans if their GRE score exceeds 300. 
• An exceptional feature of Avanse is that no parental income proof is required for loan approval, but applicants must submit a 6-month bank statement during the application process. 
• Avanse offers 100% funding, providing comprehensive financial support. Moreover, certain lenders, like ICICI Bank, adopt a unique approach to abroad education loans by considering the applicant's professional experience as a primary basis for approval. 
• This eliminates the need for a traditional co-applicant and, consequently, does not require any consideration of parental income.
• With ICICI Bank's emphasis on professional qualifications and work history rather than parental income, this approach allows individuals to secure education loans independently, offering a flexible and inclusive financing option for those with low parental income or no income at all.
  

Grants and scholarships 

Securing grants and scholarships for the substantial costs associated with studying abroad, particularly at Ivy League colleges, proves challenging for many deserving Indian students. Despite the availability of financial assistance, including grants and scholarships, the overall expenses can reach into the crores, rendering the net cost unattainable for a significant number of aspirational students.

Recognizing this challenge, Arijit Sanyal, MD&CEO of HDFC Credila, emphasizes the restricted nature of grants and scholarships from overseas universities, serving only a relatively small student base. As the aspirational student population continues to rise, these resources may become thinly spread, making higher education financially daunting for a substantial segment of this population.