Context:
SBI has increased the limit for collateral free education loans under its Global Ed-Vantage scheme from 7.5 lakh to 50 lakh. This is for students admitted to select international universities and institutions.
SBI’s Global Ed-Vantage Scheme
The SBI Global Ed-Vantage scheme is an education loan by the State Bank of India (SBI) for a student who wishes to pursue higher education abroad. It covers the amount for pursuing a full-time course at a foreign university or college.
- Launch
- April 5, 2024.
Key Features of the Scheme
- Eligibility
- Those students who wish to pursue full time studies abroad at universities or colleges are eligible for this loan.
- Repayment
- EMI (Equated Monthly Installment) repayment begins six months after the completion of the course.
- Interest Rates
- The SBI Global Ed-Vantage loan comes with a flat interest rate with no additional hidden charges.
- Benefits of education loans
- Tax benefits: The interest paid on an education loan is eligible for tax relief under Section 80E of the Income Tax Act of 1961.
- Moratorium period: Education loans have a moratorium period until the student finishes his studies.
- Credit history: A student can enhance his credit history by making regular loan repayments.
Key Benefits of the Initiative
- Access for Economically Constrained Families
- Collateral demand has been an important hindrance for students with assetless backgrounds to pledge it as security.
- This will decrease the student loans with low collateral.
- Options of No Collateral Loans
- Even Nonbanking financial companies (NBFCs) have provided high-value non collateral loans to those students from good rated colleges and creditworthy students who get good ratings.
Student Loans Problems Education Loans
- Interest Rate
- Collateral free loans have high interest rates, processing fees and other hidden charges. Students are advised to compare loan options across lenders and negotiate rates if admitted to reputed institutions.
- Collateral Requirements
- Many students struggle in terms of meeting collateral requirements most especially those that come from the middle class and from the lower class who do not have assets, or any property to gold.
- Undervaluing or Overvaluing the Loan Amount
- Either over or underestimation in terms of the amount needed for loans may happen. That is why calculations regarding tuition, living costs and miscellaneous expenses, need to be very accurate in its computation.
- Margin Money
- The banks may require a margin of 1025 of the entire cost In this different expenses such as application fee for visa health insurance and dwelling are paid.
- Loans for Non STEM Courses
- Loans for non STEM courses or for students of lower-ranked universities could be issued at a higher rate of interest with stricter collateral and margin calls.
- Documentation and Processing
- Number of papers needed to give loan application for admission proof academic reports KYC and the applicant along with salary slip of co-applicant.
