Since students are typically first-time borrowers, it is imperative to delve deep into this subject to unravel the intricacies and gain a comprehensive understanding of education loans for informed decision-making.
Quality higher education is essential for developing the academic rigour required to shape one’s domain-specific skills to build a successful career trajectory. Education stands as a transformative force, empowering students to make substantial and meaningful contributions to the advancement of a robust economy. According to the latest reports, education inflation has surged to 12%, overshadowing the 6% consumer price inflation (CPI).
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Consequently, the most pragmatic approach for financing higher education is seeking educational loans from financial institutions. However, the landscape is clouded by numerous misconceptions about education loans, creating confusion within the student fraternity. Since students are typically first-time borrowers, it is imperative to delve deep into this subject to unravel the intricacies and gain a comprehensive understanding of education loans for informed decision-making.
Let’s debunk some myths prevailing about education loans
Education loans are always a better way of funding education than self-financing: Students may deplete their family savings through self-financing, exposing families to unforeseen events such as a pandemic or health emergencies. Opting for education loans empowers students to shoulder the financial responsibility themselves, relieving their parents from the financial worry of not having funds for a rainy day. They can become Atmanirbhar, which allows them to build a robust credit score and unlock multiple benefits when opting for other financial products such as car loans, home loans, and credit cards.
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There are collateral-free education loans designed for enabling students to earn the self-made badge: Financial partners offer both secured (with collateral) and unsecured (without collateral) education loans. The decision between the two options is up to students and their parents, contingent upon their specific financial needs and preferences.
New-age lenders design customised financing as per the need of the student: Parents assume that there is one type of education loan, but it differs from student to student. Each student possesses a unique profile and set of preferences. New-age education-focused NBFCs design hyper-personalised student loans to cater to the varied financial needs of the student fraternity.
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A student’s credit history is not mandatory for applying for an education loan: Students are first-time borrowers and usually have no work experience. Therefore, education-focused lenders prioritise the student profile to determine their future employability potential. So, they examine parameters such as students’ academic scores, entrance exam scores, continuity in education, the pedigree of educational institutions, and more. Additionally, as a part of the process, the financial background of their co-borrower will be examined too. If the students meet the set criteria of the financier, secured/unsecured education loans will be sanctioned.
Education loans cover the holistic cost of education: Higher education abroad can be an expensive affair as there are several costs to be considered beyond tuition fees. However, student loans cover the holistic cost of education, including tuition fees, travel expenses, accommodation charges, living expenses, the cost of learning devices, and other associated educational expenditures.
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Student loans are available for non-conventional & skilling courses as well: In the rapidly changing job market where emerging work opportunities have replaced several obsolete job roles, skilling courses have taken centre stage. To empower the youth, financial lenders offer education loans for conventional courses such as STEM and MBA, non-conventional study programs such as Game Designing and Music Production, and other skilling, upskilling, reskilling, vocational, and certification courses.
Various repayment options are available for education loans: While the majority of student loans include a moratorium period, students must recognise that it is not an interest-free period. Interest begins accruing shortly after obtaining a student loan. Consequently, it is recommended to make contributions in the form of simple interest or partial interest during this grace period. Furthermore, this practice fosters financially prudent habits among students.
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Education loans serve as gateways to numerous opportunities for students, yet their optimal utilisation relies on thoughtful decision-making. A thorough exploration of the intricacies surrounding these financial instruments empowers students to dispel common myths and arm themselves with the knowledge necessary to shape a thriving academic and education loan journey. Therefore, it is crucial to make well-researched choices. Successfully navigating the realm of education financing depends on the ability to make informed decisions, thereby unlocking the complete potential of resources.
