A common misconception is that overseas education is expensive. This often destroys dreams of studying abroad. Another prevalent misconception is that studying abroad is only for the wealthy. While studying abroad has its costs, it is not out of reach with proper planning, as evidenced by data on overseas education. According to a recent Redseer research, more than 7,50,000 Indians studied in overseas colleges before the pandemic, spending $24 billion in economies other than India. This student population will grow to roughly 1.8 million by 2024, resulting in nearly $80 billion in spending.
The ROI on schooling overseas globally recognized degrees and educational quality makes it an appealing option. Foreign education has grown accessible with loans and more options as demand soars. Previously, Australia, the UK, the US, and Canada attracted the majority of students; however, Germany, Spain, France, the Netherlands, Italy, Dubai, and Malaysia, among other countries, have now become popular choices.
Financial Planning for Higher Education
Tuition fees, club and activity fees, health insurance, housing, meals, transportation, books and supplies, and personal and incidental expenses are all part of the cost of attending universities abroad. The other heads typically amount to an additional price nearly equal to the annual tuition fee charged by the university. Student loans fund the university’s prescribed tuition fee. It also includes the total cost of attendance and the economic class airfare to the destination country.
Savings, scholarships, and loans are typically used to fund higher education abroad. While scholarships are uncontrollable, savings and loans are factors that people must plan for and self-assess. Higher savings reduce the aspirant’s debt load, lowering the EMI and length of payments.
Higher education funding overseas
Education loans relieve the immediate financial load of higher education. Various banks and Non-Banking Financial Companies (NBFC) in India provide student loans for higher education. These organizations offer students both secured and unsecured loans. While public sector banks provide unsecured (non-collateral) loans of up to Rs 7.5 lakh with a co-applicant, NBFCs such as Avanse and Credila offer huge unsecured loans for courses that run less than two years. Other NBFCs provide students with higher unsecured loans with no collateral. On the other hand, these organizations support students who have obtained admission offers from tier 1 colleges in the US, Canada, the UK, and some institutions outside North America.
Indian banks or Indian-based banks offer a higher secured loan amount (Rs 15-20 Lakh) to applicants who seem to be co-applicants with a monthly salary of at least Rs 50,000. Prodigy Finance and MPower Financing are online lenders examining student profiles for collateral-free loans with no co-signers.
Co-applicants and collateral assist lending banks in reducing risk. A co-applicant who co-signs the education loan agreement is typically required for secured or unsecured higher education loans. Though banking organizations prefer parents, siblings, grandparents, and first-blood relatives as primary co-applicant for education loans, secondary applicants (financial co-applicant) are allowed in some instances. Multiple co-applicants are permitted where the primary co-applicant does not have a stable or permanent income.
While co-applicants must be creditworthy, collateral must have a monetary value. Built property with clear ownership is an appropriate collateral instrument. Immovable property and liquid securities are acceptable as collateral for secured education loans. Bank-approved assessors evaluate the collateral assets based on fair market value, realizable value, and deferred value.
Banks accept fixed deposits, LIC policies, and government bonds as liquid securities, while the sole approved immovable property is a house, flat, or non-agricultural land with a boundary wall. Different parameters are used to evaluate liquid securities, such as the face value of government bonds, the surrender value of insurance policies, and the principal value of fixed deposits. Official documentation and deeds are handed over to the lending bank following loan application evaluation.
Education Loan Feasibility
Education loans have longer repayment terms, and lending institutions provide a moratorium period of six months to a year for the aspirant to begin earning before beginning with their EMI. On the other hand, unsecured loans do not have a moratorium period; hence, repayment begins immediately after the first payout. Furthermore, interest rates vary depending on various parameters such as the destination country, academic institution, program, co-borrowers repayment capacity, credit history, and collateral.
Thus, self-assessment of loan requirements becomes a vital feature for all candidates who wish to pursue their academic goals. With proper planning, studying abroad is not a pipe dream for anyone! Education loans enable students to pursue their goals of studying abroad while earning a 150-200 percent return on their educational investment.