How Do Student Loans Work

In today’s age, where the world is coming ever closer due to the newest inventions in technology and innovation, especially in the media and communications field, global society is well on the way to becoming a true global village of sorts. With more tolerance and greater understanding of each other, borders of nationality are ever blurring, and the number of people transcending borders and crossing the seas to study or work overseas in an international environment are ever-increasing. For those going abroad to work, the situation may be simpler (in terms of the cost of living and everything), but in case of a student planning to go and study in an unknown country, in an entirely new culture and crowd, money is quite an important aspect – especially while considering the tuition fees of most courses. This is where Education Loans come in.


In fact, loans are quite a boon for a youngster willing to pursue higher education not only overseas, but also in India itself. Earlier, higher education was the domain of only the elite, with the cost being something a student – even if supremely talented – was hampered by the overwhelming cost of education. Now, one can always opt for an education loan. But how do these loans work exactly? Well, we’ve worked it out for you.

While inquiring for an education loan, always begin with the bank where you already have an account. They may have special plans for loyal customers. For loans up to rupees 4.5 lakhs, there are some banks who do not ask for any collateral, they will just check your past record as a student, and ask for two guarantors to sign on for you. Guarantors are the ones who will have to help you pay off the loan, if you can’t do it on your own. The word basically says it all, they are the ‘guarantee’, that the bank will get its money back and not end up with bad debts.

For loans of an amount beyond 7 lakh rupees, the bank always asks for a collateral of an equal amount. It may be in the form of gold, or it could be in the form of a mortgage on your house. Loans are also available on your fixed deposit.

This may sound daunting, especially when you are investing a tangible asset in favour of intangible returns in the form of education, especially in a job market which has seen better times, however it isn’t all doom and gloom.
Education loans are on the students own name, thus the parents need not be unduly worried about them. Another piece of advice, though morbid, would be that along with a loan, it is always good practice to take a term insurance. What it means is that in case anything fatal happens to the student who has taken the loan, the pressure of returning the money won’t be on the family, since the company with whom the term insurance has been taken will handle that. It is a case of better safe than sorry.

Also, another thing which gives students a safety net is that education loans are to be paid off after the students course is over and he or she has a job, not before that. Of course, it is advisable to work hard to get a job as soon as possible so that the interest doesn’t keep piling up.

To conclude, student loans are quite beneficial since they give students a chance to pursue higher education and move forth in their professional careers, leading to greater chances of having higher paying jobs. It is a risk, but not a gamble. Instead, it is a calculated risk, and if a student plays his cards right, it can be extremely profitable in the long run.

Note : Don’t forget to visit Banks or their official websites to know more about the education loans , formalities and current rate of interests.


  1. Students loan, as I see, is one of the best offers made by the banks to the people. On a hand, they are helping the nation building by educating the children and on the other, interests pay them fair returns. However, before applying for a student loan, it is thus advised that you read all the terms and conditions, scheme related documents and go through the interest rates thoroughly before making the deal.


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