University of Alberta

Benefits of Education Loan

TCS

• Under the Liberalized Remittance Scheme (LRS), the Bank is required to collect TCS at the rate of 5% on the aggregate remittance amount exceeding Rs. 7 lakhs during a Financial Year.

• However, if the amount exceeding seven lakh has been sourced via an education loan for studying purpose, the same would attract a tax collected at source (TCS) of 0.5% under the Reserve Bank of India's Liberalised Remittance Scheme (LRS) on providing permanent account number (PAN) details.

Interest Subvention Schemes for Education Loan

• Central Scheme to provide Interest Subsidy (CSIS) for the period of moratorium of educational loans taken by students from economically weaker sections (EWS) under educational loan scheme of Indian Banks Association (IBA), to pursue Technical/ Professional education studies in India.

• The scheme provides full interest subsidy during the moratorium period on modern education loans without any collateral security and third-party guarantee, for pursuing technical/professional courses in India. Students whose annual gross parental/ family income is up to Rs. 4.5 lakhs are eligible under the scheme.

• Interest Subsidy under this Scheme shall not be available to those students who discontinue their course midstream, or who are expelled from the Institution on disciplinary or academic grounds. However, the interest subsidy would be available only if discontinuation is due to medical grounds for which necessary documentation to the satisfaction of the Head of educational institution needs to be provided.

Income Tax Benefits

• You can claim a deduction of Interest paid on loan taken for pursuing higher education from taxable* income under section 80E of the IT Act*. According to Section 80E*, the deduction is allowed on the total interest amount of the EMI paid during the financial year.

• This amount has no upper limit, you can get tax benefit on the entire amount of interest paid but not on the principal amount.

Moratorium Period

• The moratorium period is usually the course duration plus 6 months or 1 year where the lender allows a student to take adequate time to sort out their finances and prepare for loan repayment accordingly.

• This repayment holiday is applicable to education loans. During this period, the borrower does not have to make any repayments to the banks. 

Pre-Visa Disbursement

• A pre visa disbursement is required by such students to fulfill their financial prerequisites to qualify for a student visa of the respective country.

• By means you can simply get your education loan disbursement before visa within applicable financial institutions.

Repayment Period

• The standard repayment term on a federal student loan is 10 years.

• The repayment term on private student loans vary from 5 years to 15 years.

• Borrowers can choose alternate repayment terms which reduce the monthly loan payment by increasing the repayment term.

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