Basic Criteria for Student Loan to Fund Higher Education Overseas

Sristy Sharma
Updated on Sep 05, 2022 08:37 AM IST

Education loan eligibility criteria to study abroad is dependent on varying factors. These factors can affect not only the sanction but also the loan amount. Explore the basic criteria for student loans, factors affecting them, and tips to get a loan. 

Basic Criteria for Student Loan to Fund Higher Education Overseas
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Education Loan Eligibility: Banks and financial institutions need to take certain precautions while sanctioning an education loan to any student who wants to study abroad. 

They use these eligibility criteria to decide not only the student’s eligibility for an education loan but the loan amount as well. The eligibility criteria act as a means to ensure that the student can be trusted on the basis of academics, finances, and related details to get employed after course completion and repay the loan within the repayment period.

Here are the factors affecting student loans to study overseas, the basic criteria for student loans, and so on.

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Factors Affecting Education Loan Eligibility Criteria

The eligibility criteria for student loans are decided by considering certain factors. These factors help in ensuring that the criteria are appropriate and fair to both the student and lender.

Academic Record

The academic record of a student is a common eligibility criterion for issuing an education loan. It also heavily affects the loan amount. The better your academic record has been, the more a lender can rely upon you to be sincere and dedicated to the course you wish to study abroad. 

Given that your future salary is going to have a significant impact on your loan repayment, banks would prefer your course of study to lead to the same. Hence, a consistent, and good academic record is often favoured.

Accepting University

The university, to which you have been accepted, also affects your student loan eligibility criteria. 

Your education loan eligibility is determined by the accepting university, as the employability score and rate of the graduates of the university show how well you can earn after your graduation. Hence, the more reputable the university is, the higher your chances to get a study abroad loan sanctioned successfully.

Study Destination

There are certain countries that can be opted for to study any course, and you will benefit in your career with high-paying jobs and a good number of opportunities. However, there are also certain study destinations that have a strong reputation for certain courses. Similarly, while certain destinations are known to have many high-ranking universities, others have only a handful of universities in the top 100 global ranks. 

The reputation of the education system of your study abroad destination will highly affect your education loan. Apart from the educational reputation, the rules and laws related to PR, stay back, work visa, etc., are also reviewed to decide the education loan amount.

Course Type

Graduates of some courses are paid better than other courses, such as STEM courses, MBA, etc. The course field, qualification level, duration, practical training portion, etc. are also considered while determining your eligibility for an education loan to study abroad. 

The course details help banks and lenders assess if you will be able to easily find a job after graduation, and what could be expected as the average amount of remuneration. The better the projections, the easier it is for you to get an education loan.

Debt Collateral

The asset which you have presented as a mortgage also affects the sanction of an education loan to study abroad. Banks prefer the assets to have a market value (the price at which they can sell the asset in the market on that day) higher than the education loan amount. Moreover, they also prefer that the asset is not a depreciating one, i.e. whose value decreases over time.

Co-Borrowers

The person who is acting as your guarantor along with their financial conditions is also an important factor affecting your student loan eligibility criteria in India. 

The guarantor is the person who is assuring loan repayment on your behalfs, such as your parents, legal guardian, or any third party. Your chances to satisfy a student loan eligibility in India to study abroad are stronger if your relationship with your guarantor is close, and their financial background makes them suitably capable to contribute towards loan repayment. Their financial base provides security and assurance to the bank of getting their money back, even if you fail to repay the amount due to any circumstance.

General Student Loan Eligibility Criteria to Study Abroad

The general eligibility criteria for student loans to study abroad are:

  • The student must be an Indian citizen.

  • They must have a college acceptance letter from a foreign university.

  • They must belong to the age group of 18-35 years of age.

Eligible Courses

The courses eligible for education loans to study abroad are:

  • Full-time bachelor’s, master’s, and doctoral degrees.

  • Part-time bachelor’s, master’s, and doctoral degrees.

  • Vocational courses and foundation courses.

  • Short-term courses, exceeding at least six months duration.

  • Online courses.

  • Diploma or certificate courses.

Eligible Institutions

The institutions eligible for a study abroad loan application are:

  • Universities and colleges,

  • Deemed universities,

  • Public and private universities and colleges,

  • Urban and rural institutions,

  • State recognised universities and colleges, and

  • Discipline-specific institutions.

Documents Required 

The most commonly required document to apply for student loans to study abroad are:

  • Education loan application form,

  • College Acceptance Letter,

  • Academic Transcripts,

  • Birth Certificate,

  • Residential Proof,

  • PAN Account Number,

  • Aadhar Card Number,

  • Bank Statements, salary slips, etc., for financial background,

  • Names of Co-Borrower and their Financial Details,

  • Relationship with Co-Borrower,

  • Collateral Asset and their value estimations, and

  • Passport.

Procedure to Check Eligibility for Student Loans

The education loan eligibility criteria for Indian students who wish to study abroad can be checked by following the process serialised below.

Step 1: Shortlist Banks and Loan Schemes

You must first shortlist the banks that are providing education loans. You can also check out other financial institutions which are offering education loans. In addition to loaning institutions, you must also explore the pre-decided popular education loan schemes active in the market.

Step 2: Enquire for Information

Enquire information about the loan schemes, banks, and institutions from trusted sources, such as bank websites, study abroad experts, financial advisors, bank agents, etc. You can also approach banks’ previous customers. This will help you understand how the scheme or bank works, and what is the possible eligibility criteria for the education loan. You will then be able to select those schemes and banks which are most reliable and suitable for you.

Step 3: Shortlist Applicable Schemes

After the inquiry, you must approach the institutions or banks offering loans. You will be assigned an agent who will help you throughout the education loan procedure. You must sit with them and shortlist and negotiate the pre-existing schemes. You can also inquire about the possibility of customised education loans and the scope of negotiation for the new contract terms.

Step 4: Enquire About Eligibility Criteria

Learn about the eligibility criteria for all the shortlisted applicable schemes from the agent. You must ensure to get even the slightest of doubts and queries clarified to avoid any confusion or future problems. Since there are many legal and financial technicalities involved in an education loan, being an overbearing questioner is better than being an unaware loan beneficiary.

Tips to Improve Eligibility for Student Loan Application

You can ensure to strengthen your education loan application by keeping in mind the following tips. These will help you in getting your education loan sanctioned through the bank easily.

Complete Application

The first and foremost requirement is that your loan application is complete. It must not have missing information or documents. If there is any information that needs supportive documents to get properly proven, then you must include either their description or the documents themselves. Attestation of the documents will be extremely helpful as well.

Work Experience and Achievements

Your extended work experience and extracurricular achievements can help you in ensuring an easier education loan sanction. They will help in strengthening your reputation as a dedicated and talented student, and the bank will be able to view you as a person who can easily graduate and get a high-paying job.

Letter of References

If you can get your employers or past creditors to refer you for educational and financial integrity, it will help you in getting your loan sanctioned. The letter of reference from authorised individuals with whom you have previously worked will help the bank to get an idea of how you interact with third parties. They will have a reliable source to confirm your claims and information.

Statistical Mapping

If you can find and provide the statistics and future mapping of earnings, employability, and graduation, then you will find it easier to convince the bank about the claims you made. Additionally, the bank will find you dedicated and focused on getting the course degree.

Strong Credit Record 

It is crucial that you maintain a clear and strong credit record. You must provide your previous debt details and statistics correctly to the bank. Be aware to always maintain a clear credit record with timely repayment. It will show the bank that you are a reliable and responsible person, and the chances of your conning the bank are not possible.

The education loan eligibility criteria not only ensure proper analysis on part of the banks and financial institutions but also help you get a better loan cover. If you are able to satisfy the basic criteria and establish a promising future over and above it, it will be easier for you to ensure a proper loan cover, even over 85%. 

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FAQs

What is the minimum amount covered by a loan to study abroad?

The minimum amount covered by a loan to study abroad is either the cover mentioned in the loan scheme or up to 70% of the expected financial burden. If the terms and conditions of the loan scheme are up for negotiation, you can negotiate for a better loan cover on the basis of a promising future. However, your eligibility criteria must be strong enough to support the claims.

How is the debt amount calculated for an education loan?

The debt amount is calculated for an education loan by first estimating the educational and living expenses to study abroad. The education loan eligibility criteria are used to determine the probability of a successful future for the student. On the basis of the estimation, a percentage or fixed amount is negotiated between the bank and the student.

What are the basic criteria for student loans in India?

The basic criteria for student loans in India are that the student must be an Indian citizen, and apply for a loan for higher studies abroad. They must be accepted by any foreign university into a course of study as a future student, and the course is of at least six months duration. There are many other eligibility criteria for education loans, however, these are the most basic conditions.

What is the common payback period of an education loan?

The common payback period of an education loan is three to four years in addition to the time required to complete the course for which an application has been made. For instance, if the course duration is two years, then you can get a loan for six to seven years. You will have to repay the loan before the lapse of seven years period.

What is the commonly charged education loan interest rate?

The commonly charged education loan interest rate is dependent on the eligible interest rates authorised by the RBI on loan issuance. The rates can change and differ on the basis of market conditions, contract negotiations, banks, rules, regulations, etc. Currently (September 2022), the common education loan interest rate in India is 9.50%-13.65%.

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