Studying abroad is no longer just a dream for Indian students. It has become one of the biggest aspirations for Indian students today. A degree from a global university is no longer just about education. It is about exposure, confidence, global careers, and long term growth.
For parents, it is an emotional decision.
You want to give your child the best opportunities possible. At the same time, you worry about finances, risks, and repayment pressure.
The truth is simple.
Global education is expensive. Even middle and upper middle income families feel stretched when they see the real numbers.
- Tuition fees are rising every year
- Living costs abroad are high
- Currency fluctuations add uncertainty
This is where education loans for studying abroad become critical.
An education loan is not just borrowed money. It is a structured way to invest in your child’s future without draining family savings or selling assets in a hurry.
This guide is written especially for Indian students and parents. It explains everything in clear and simple language.
- What education loans really are
- Who can apply and how eligibility works
- What costs are covered and what are not
- How much you can borrow
- How repayment actually feels in real life
If you are planning to study abroad or support your child’s dream, this guide will help you make a confident and informed decision.
What Are Education Loans for Studying Abroad
An education loan for studying abroad is a loan taken specifically to fund higher education outside India. It is meant only for education related expenses and not for personal spending. These loans are structured differently from personal loans or credit cards.
Key features include:
- Lower interest rates compared to personal loans
- A moratorium period where repayment does not start immediately
- Longer repayment tenures, often up to 10 to 15 years
- Tax benefits on interest paid under Indian tax laws
The main purpose is simple. To ensure that a deserving student does not miss out on quality education due to lack of funds.
How Education Loans Differ from Other Loans
Many families compare education loans with personal loans or loans against property.
Here is the difference between simple terms.
Education loans:
- These loans are linked to a specific course and university
- They offer time to settle into a job before repayment
- These are evaluated on student potential and co applicant strength
Personal loans:
- These loans have higher interest rates
- They require immediate EMIs
- They do not offer tax benefits
That is why education loans are usually the smarter option for overseas studies.
Why Students in India Need Education Loans
The cost of studying abroad has increased sharply in the last decade. Some real numbers parents often see:
- USA masters programs can cost around ₹50 to ₹80 lakhs
- UK MBA programs can cross ₹60 lakhs
- Even countries like Canada and Australia require ₹35 to ₹50 lakhs
At the same time, aspirations have grown. Indian students are applying for:
- Business and management courses
- Specialised masters and research degrees
So, education loans bridge the gap between ambition and affordability. They allow families to:
- Avoid liquidating long term investments
- Spread education costs over future earnings
- Give students access to better universities
Who Can Apply for An Education Loan
Basic Eligibility Requirements
Most Indian lenders follow a standard eligibility framework. To apply for an education loan for studying abroad, you generally need:
- An Indian citizenship
- Confirmed admission to a recognised foreign university
- A valid offer letter with course details
- A satisfactory academic background
The university must be recognised by the lender. Top ranked and accredited institutions usually face fewer issues.
Academic Requirements Explained Simply
There is a common myth that only toppers get education loans.
But in reality:
- Consistent academic performance matters more than perfect scores
- Course relevance and career prospects are evaluated
- University reputation plays a major role
Role of Co Applicant or Guarantor
In India, education loans always require a co applicant, typically a parent or a guardian.
The co applicant can be:
- A parent
- A legal guardian
- In some cases, a close blood relative
Why lenders insist on this:
- Students usually do not have income during studies
- Co applicant provides financial security to the lender
The lender evaluates:
- Co applicant income stability
- Employment type or business continuity
- Credit score and repayment history
A strong co applicant profile can:
- Increase approval chances
- Reduce interest rates
- Enable higher loan amounts
Age, Course, and Country Specific Rules
Some lenders apply additional filters.
These may include:
- Minimum and maximum age at application time
- Different limits for undergraduate and postgraduate programs
- Preference for certain countries
Countries like the USA, UK, Canada, Australia, and Germany are considered lower risk.
Courses with strong employability have better approval outcomes.
What Expenses Can an Education Loan Cover
One of the biggest advantages of education loans is the wide cost coverage. It covers expenses like academic fees, accommodation, study materials, examination fees, and travel costs.
Tuition Fees
Education loans generally cover:
- Full tuition fees
- Semester wise or annual academic charges
- Mandatory institutional fees
This amount is usually paid directly to the university.
Living and Miscellaneous Expenses
Living expenses form a large part of overseas education costs.
Most lenders include:
- Accommodation or hostel charges
- Food and daily living expenses
- Books and study material
- Health insurance premiums
These costs are estimated based on country norms.
Travel Costs
Most education loans cover:
- One way economy class airfare to the host country
Some lenders may include return airfare under specific conditions.
Visa and Pre Departure Costs
Loans often cover essential pre departure expenses such as:
- Visa application fees
- SEVIS fees for the USA
- IELTS, TOEFL, GRE, GMAT exam fees
Other Covered Costs
Depending on the lender and course:
- Laptop or computer purchase
- Laboratory and library fees
- Course related equipment
- Entrance test or application related charges
Always ask the lender for a detailed coverage list before finalising.
Types of Education Loans
Secured vs Unsecured Education Loans
Education loans are broadly divided into two types.
- Secured education loans
- Unsecured education loans
Secured education loans usually require collateral. Collateral can be a residential or commercial property. Fixed deposits or insurance policies in some cases. One can get benefits like lower interest rates, higher loan amounts, and longer repayment tenures.
Unsecured education loans do not require collateral. The approval depends on the co applicant’s income, credit score, and the university and course quality.
Interest rates are usually higher compared to secured loans.
Government Backed Loan Schemes
Public sector banks in India offer education loans under government supported schemes.
Key benefits include interest subsidy for eligible families, lower processing fees and standardised repayment terms.
The loan eligibility often depends on family income and course type.
Loans from Banks vs NBFCs
Understanding the difference between loans from Banks and NBFCs helps in choosing the right loan.
Public sector banks offer lower interest rates, strong regulatory backing, slower processing timelines, and strict documentation requirements.
Private banks and NBFCs offer faster approvals, more flexible eligibility, higher interest rates, and better digital experience.
Your choice should depend on urgency, profile strength, and cost sensitivity.
How Much Education Loan Can You Get
Typical Loan Amount Ranges
Loan limits vary based on lender and loan type. General ranges are:
- Without collateral up to ₹40 lakhs
- With collateral ₹50 lakhs to ₹1 crore or more
Factors That Determine Loan Amount
Lenders evaluate multiple factors like:
- Total cost of the course
- Country and city of study
- University ranking
- Co applicant income and liabilities
- Credit history
Better profiles receive higher coverage.
Margin Money and Upfront Costs
Margin money means the borrower contributes a part of the total cost. Typical margin requirements are 5 percent to 15 percent. This amount is usually paid before loan disbursement begins.
Interest Rates, Fees and Charges
Understanding Interest Rates
Interest rates can be floating, which changes with market rates or fixed, which stays constant. Interest generally starts from the date of disbursement. During the moratorium period, interest may accumulate.
Processing Fees and Other Charges
Common charges include processing fees, legal and valuation fees for collateral and insurance premiums if applicable. You should always request a full cost breakdown from the lender.
Tax Benefits on Education Loans
Under Section 80E of the Income Tax Act, the interest paid on education loans is tax deductible, and the benefit is available for up to 8 consecutive years. This applies to loans taken for self, spouse, or children.
Step by Step Loan Application Process
Before You Apply
Keep these documents ready:
- University admission letter
- Detailed fee structure
- Passport and visa documents
- Academic records
- Co applicant income proof
Application Submission
You can apply:
- Online through lender websites
- At bank branches
- Through the EduFund Study Abroad portal
You should always compare multiple offers before committing.
Sanction and Disbursement
The process usually includes credit evaluation, loan sanction letter and disbursement in stages. The funds are mostly paid directly to the university.
Importance of Loan Sanction Letter for Visa
Many embassies require proof of funds. A loan sanction letter strengthens visa applications and builds credibility.
Repayment Explained
What Is a Moratorium Period
Moratorium refers to the period during which repayment is not required.
It usually includes course duration plus 6 to 12 months after completion. This allows students to find jobs before EMIs begin.
Equated Monthly Instalments
EMIs start after moratorium. They depend on loan amount, interest rates and repayment tenure. Planning early makes repayment manageable.
Prepayment and Penalty Options
Most lenders allow part prepayment or even full early closure. Some may charge penalties. So, it’s important to always confirm terms and conditions before your education loan disbursement.
Pros and Cons of Taking an Education Loan
| Aspect | Pros | What This Means in Real Life | Who It Helps Most |
| Access to Global Education | Makes global education accessible | Students can choose better universities and courses without being limited by current savings | Talented students from middle-income families |
| Immediate Financial Relief | Preserves family savings | Parents do not need to break fixed deposits, sell property, or exhaust retirement funds | Parents planning long-term financial security |
| Structured Repayment | Predictable EMIs after studies | Repayment starts only after course completion and moratorium period | Students who need time to settle into jobs |
| Lower Interest Than Personal Loans | Education loans are cheaper | Interest rates are significantly lower than personal or credit card loans | Families comparing multiple funding options |
| Long Repayment Tenure | Flexible repayment period | EMIs are spread over 10 to 15 years, reducing monthly burden | Students entering early-stage careers |
| Tax Benefits | Interest qualifies for tax deduction | Interest paid can be claimed under Section 80E for up to 8 years | Parents or students paying income tax |
| Career ROI Alignment | Pay after you earn | Loan repayment aligns with future income, not present finances | Courses with strong job outcomes |
| Credit History Building | Builds financial discipline | Timely repayment helps students build strong credit scores early | Students planning future financial independence |
Tips to Improve Loan Approval Chances
A strong co applicant profile plays a crucial role in education loan approval. Lenders look for stable income, employment continuity, and a clean credit history to assess repayment ability. A financially disciplined co applicant not only improves approval chances but can also help secure better interest rates and higher loan amounts. Along with this, clean and complete documentation is equally important. Even small errors, missing papers, or mismatched details can lead to delays or rejection, especially when timelines are tight for visa and admission. Applying early makes a big difference. Early planning gives families time to compare offers across banks and NBFCs, understand true costs, negotiate better terms, and choose a loan that fits both the student’s future income and the family’s financial comfort.
Alternatives to Education Loans for Studying Abroad
- Scholarships and Grants
Scholarships can significantly reduce the total loan amount and long-term interest burden.
Students should research and apply early, as most scholarships have strict deadlines and limited seats.
- Part-Time Work and Internships Abroad
Many countries allow international students to work limited hours during studies.
This income can help manage living expenses and reduce dependence on family support.
- Crowdfunding and Education Funds
Some students turn to crowdfunding platforms or education-focused funds for support.
These options should be used only as supplements and not as a replacement for structured education loans.
Frequently Asked Questions
How much education loan can I get for studying abroad
Loan amounts depend on the course cost, country, university, and co applicant profile.
With collateral, higher amounts are possible compared to unsecured loans.
Is a co applicant mandatory for an education loan
In most cases, yes. Indian lenders usually require a parent or guardian as co applicant. A strong co applicant profile improves approval chances and interest rates
Does the bank pay the loan amount directly to the university
Yes, most lenders disburse tuition fees directly to the university. Living expenses are usually released in stages to the student or co applicant.
What happens if I do not get a job immediately after studies
Many lenders offer a moratorium period after course completion. If needed, repayment schedules can sometimes be adjusted with prior discussion.
Can I switch or refinance my education loan later
Yes, education loans can be refinanced if you get better interest rates or terms. This is usually easier after you start earning and build a stable repayment record.
Education loans for studying abroad are not liabilities when planned wisely. They are enablers. They help Indian students access global education without compromising family stability.
The key lies in understanding costs clearly, comparing lenders carefully and planning repayment early. With the right guidance, an education loan becomes a steppingstone and not a burden.
If you want personalised support, structured planning, and unbiased advice, platforms like EduFund can help you take the next confident step towards a global future.
