MODEL EDUCATIONAL LOAN SCHEME FOR PURSUING HIGHER EDUCATION IN INDIA AND ABROAD (September, 2012)

The model Education Loan Scheme was developed by the Indian Banks� Association to help meritorious students pursue higher education in technical and professional courses. As the focus is on development of human capital, repayment of the loan is expected to come from future earnings of the student after completion of education. Hence the assessment of the loan will be based on employability and earning potential of the student upon completion of the course and not the parental income/family wealth.

Scheme provides broad guidelines to the banks for operationalising the educational loan scheme and the implementing bank will have the discretion to make changes as deemed fit. The scheme details are as under:

Student eligibility:

• The student should be an Indian National.
• Should have secured admission to a higher education course in recognized institutions in India or Abroad through Entrance Test/ Merit Based Selection process after completion of HSC(10 plus 2 or equivalent).

Courses eligible (Indicative list):-

• Approved courses leading to graduate/ post graduate degree and P G diplomas conducted by recognized colleges/ universities recognized by UGC/ Govt./ AICTE/ AIBMS/ ICMR etc.
• Courses like ICWA, CA, CFA etc.
• Courses conducted by IIMs, IITs, IISc, XLRI. NIFT,NID etc.
• Regular Degree/Diploma courses like Aeronautical, pilot training, shipping, degree/diploma in nursing or any other discipline approved by Director General of Civil Aviation/Shipping/Indian Nursing Council or any other regulatory body as the case may be, if the course is pursued in India.
• Approved courses offered in India by reputed foreign universities.

Studies abroad (Indicative list):-

Expenses considered for loan .

1. Fee payable to college++/ school/ hostel.(*)
2. Examination/ Library/ Laboratory fee.
3. Travel expenses/ passage money for studies abroad .
4. Insurance premium for student borrower, if applicable.
5. Caution deposit, Building fund/refundable deposit supported by Institution bills/receipts. (**)
6. Purchase of books/ equipments/ instruments/ uniforms.(***)
7. Purchase of computer at reasonable cost, if required for completion of the course.(***)
8. Any other expense required to complete the course - like study tours, project work, thesis, etc.(***)
9. While computing loan required, scholarships, fee waiver etc., if any available to the student borrower may be taken into account.
Notes:
(*)For courses under Management quota seats considered under the scheme, fees as approved by the State Government/Government approved regulatory body for payment seats will be taken, subject to viability of repayment.

Reasonable lodging and boarding charges will be considered in case the student chooses / is required to opt for outside accommodation.

** These expenses could be considered subject to the condition that the amount does not exceed 10% of the total tuition fees for the entire course.

*** It is likely that expenditure under Item Nos. vi, vii & viii above may not be available in the schedule of fees and charges prescribed by the college authorities. Therefore, a realistic assessment may be made of the requirement under these heads. However, the maximum expenses included under vi, vii & viii may be capped at 20% of the total tuition fees payable for completion of the course.


QUANTUM OF FINANCE:

Studies in India - Maximum upto 10 lakhs.
Studies Abroad - Maximum upto 20 lakhs.

MARGIN:

Upto 4 lakhs ----------- Nil
Above 4 lakhs :Studies in India 5%
Studies Abroad 15%
Margin may be brought-in on year-to-year basis as and when disbursements are made on a pro-rata basis.

RATE OF INTEREST :

Interest to be charged at rates linked to the Base rate as decided by individual banks

Simple interest to be charged during the study period and up to commencement of repayment.
Notes: Servicing of interest during study period and the moratorium period till commencement of repayment is optional for students. Accrued interest will be added to the principal amount borrowed while fixing EMI for repayment.

Security

Upto 4 lakhs (Parents to be joint borrower(s))
No security



Above 4 lakhs and upto 7.5 lakhs : Besides the parent(s) executing the documents as joint borrower(s) , collateral security in the form of suitable third party guarantee will be taken.
The bank may, at its discretion, in exceptional cases, waive third party guarantee if satisfied with the net-worth / means of parent/s who would be executing the document as joint borrower(s).

Above : 7.5 lakhs : Parent(s) to be joint borrower(s) Tangible collateral security of suitable value acceptable to bank, along with the assignment of future income of the student for payment of instalments

REPAYMENT:

Repayment of the loan will be in equated monthly instalments for periods as under:
For loans upto 7.5 lakhs - upto 10 years
For loans above 7.5 lakhs - upto 15 years

If the student is not able to complete the course within the scheduled time, extension of time for completion of course may be permitted for a maximum period of 2 years.

If the student is not able to complete the course for reasons beyond his control, sanctioning authority may at his discretion consider such extensions as may be deemed necessary to complete the course.

The accrued interest during the repayment holiday period to be added to the principal and repayment in Equated Monthly Instalments (EMI) fixed.

1% interest concession may be provided by the bank, if interest is serviced during the study period and subsequent moratorium period prior to commencement of repayment.


OTHER CONDITIONS:

Existence of an earlier education loan to the brother(s) and/or sister(s) will not affect the eligibility of another meritorious student from the same family obtaining education loan as per this scheme from the bank.
Source:Indian Banks'Association
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