Pursuing higher education, whether in India or abroad, often entails significant expenses. From tuition fees to accommodation and travel costs, families sometimes find it difficult to cover everything on their own. This is why education loans, or student loans, have become such an important part of academic planning.
But before applying, students and parents must clearly understand the requirements for a student loan. Banks and financial institutions have specific eligibility conditions, documentation rules, and financial norms. Being prepared helps ensure a smooth approval process and avoids last-minute surprises.
Citizenship & Residency
The first and most basic requirement is citizenship:
- The applicant must be an Indian citizen.
- In some cases, NRIs (Non-Resident Indians) and PIOs (Persons of Indian Origin) may also get loans if they have a co-applicant/guarantor in India.
- Most banks require proof of permanent residence in India for domestic students.
Admission to a Recognised Institution
- A confirmed admission letter is mandatory. Provisional admission may be considered, but final disbursement happens only after confirmation.
- In India, the institution should be approved by UGC, AICTE, the State or Central Government, or other statutory bodies.
- Abroad: The university should be recognised internationally, preferably listed in reputed global rankings or accredited by government authorities.
Eligible Courses
Student loans cover a wide variety of courses, but they must fall under higher education after Class 12 (10+2).
- Undergraduate courses Include Engineering, medicine, law, architecture, arts, sciences, commerce, and more.
- Postgraduate courses: MBA, MS, M.Tech, MD, LLM, etc.
- Professional programs: CA, CFA, ACCA, nursing, aviation, and hotel management.
- Vocational & diploma courses: Provided they are recognised by state or central authorities.
- Study abroad programs are especially beneficial in STEM, management, law, healthcare, and applied sciences.
Academic Record
Banks assess the student’s academic background to evaluate repayment potential.
- Most banks expect students to have at least 50–60% marks in previous qualifying exams.
- Entrance exam results, such as those for JEE, NEET, GMAT, GRE, IELTS, and TOEFL, may be required, depending on the course and country.
- A strong academic record improves the chances of approval and may even help in negotiating better terms.
Co-Applicant or Guarantor Requirement
- A co-borrower is mandatory for almost all loans. Usually, this is a parent, guardian, or spouse.
- The co-borrower’s income, employment stability, and credit score are key factors.
- For higher loan amounts, banks may also demand a third-party guarantor.
Collateral Requirements
Collateral is the security that borrowers pledge to secure higher loan amounts.
- Up to ₹7.5 lakh: No collateral required (covered by CGFSEL – Credit Guarantee Fund Scheme).
- Above ₹7.5 lakh: Tangible collateral security is usually mandatory. Accepted collateral includes:
- Residential/commercial property
- Fixed deposits (FDs)
- Government bonds
- LIC policies with surrender value
Margin Money
Margin money is the portion of expenses that the student and their families must pay themselves.
- In India:
- Up to ₹4 lakh: No margin required.
- Above ₹4 lakh: 5% margin.
- Abroad:
- Up to ₹4 lakh: No margin.
- Above ₹4 lakh: 15% margin.
Income Criteria (For Subsidy Schemes)
While banks generally do not impose strict income limits for eligibility, government subsidy schemes do:
- CSIS (Central Sector Interest Subsidy): Available if parental income ≤ ₹4.5 lakh. The government pays full interest during the moratorium period (study years + 1 year).
- Vidya Lakshmi Special Product: Families with an income of ≤ ₹8 lakh receive a 3% interest subvention on loans of up to ₹10 lakh.
- State Government Schemes: Some states provide additional subsidies or waivers for local students.
Documents Required
Banks require a comprehensive set of documents before sanctioning a loan:
Personal Documents
- Identity proof: Aadhaar, PAN, Passport, Voter ID.
- Address proof: Aadhaar, utility bills, ration card.
- Photographs.
Academic Documents
- Mark sheets & certificates (10th, 12th, graduation).
- Entrance exam scorecards.
- An admission letter from the institution.
- Detailed fee structure.
Co-Borrower’s Documents
- ID and address proof.
- Income proof: Salary slips, IT returns, Form 16, or CA-certified statements.
- Bank account statements (6–12 months).
Collateral Documents (if applicable)
- Property papers, valuation report, tax receipts.
- FD receipts, LIC policy documents.
For Abroad Studies
- Valid passport.
- Visa approval.
- Travel cost estimates (if included in the loan).
Credit Score Requirement
Since students usually don’t have a credit history, banks rely on the co-borrower’s CIBIL score.
- A score of 650+ is generally preferred for smooth approval.
- A strong score can help in negotiating lower interest rates.
- Poor credit history may lead to rejection or stricter loan terms.
Other Conditions
- Age: Many banks set an upper age limit of 35–40 years for students applying for a loan.
- Repayment Tenure: Usually 5–15 years, starting after the moratorium period.
- Loan Insurance: Some banks require a loan protection insurance policy to cover risks such as disability or the borrower.
- Processing Fees: Public sector banks often waive fees, while private banks/NBFCs may charge 0.5–1% of the loan amount.
Conclusion
Getting an education loan is very much possible for most students today, but only if they meet the requirements for a student loan. From being an Indian citizen and securing admission to a recognised course, to arranging a co-borrower, collateral, and necessary documents, each requirement is crucial in the approval process.
Government schemes like CSIS, CGFSEL, and VidyaLakshmi make it easier for economically weaker families to access loans at affordable rates. By preparing early, maintaining proper documents, and ensuring the co-borrower has a strong credit score, students can get loans faster and on better terms.
