Are you dreaming of studying abroad but afraid of the cost? You are not alone. Every year, thousands of Indian students can achieve their higher education overseas, partly due to education loans offered by various banks and lenders. An education loan taken for studying abroad not only supports tuition fees but also covers living expenses, travel, health insurance, and more.
In this article, we are taking you through the journey of getting an education loan, types of education products available, eligibility criteria, required documents, tips and tricks from experts, and frequently asked questions.
Why Take an Education Loan for Studying Abroad?
Higher education in countries such as the USA, UK, Canada, Australia, and Germany provides world-class options, but they come with costs. Education loans allow students to:
Experience education using quality resources without financial burdens upfront.
- Build their credit history while they are young.
- Enjoy tax exemptions under Section 80E of the Income Tax Act.
- Reduce reliance on family savings or property.
Types of Education Loans Available in India
There are two main categories of loans:
1. Secured Education Loan (With Collateral)
- Offered by public banks like SBI, Bank of Baroda, etc.
- Requires collateral such as property, FD, or LIC policy.
- Lower interest rates (around 8.5%–10%).
- Higher loan amounts (can go up to ₹1.5 crore).
2. Unsecured Education Loan (Without Collateral)
- Offered by private banks like ICICI, Axis, and NBFCs like HDFC Credila, Avanse.
- No collateral required, but higher interest rates (10%–14%).
- The loan amount is typically capped at ₹40–50 lakhs.
- Based on the student’s academic profile, the co-applicant’s income, and the university ranking.
Step-by-Step Process to Get an Education Loan
Step 1: Research and Compare Loan Options
- Use aggregators or directly visit bank websites.
- Compare interest rates, repayment terms, margin money, and processing fees.
Step 2: Check Eligibility Criteria
Most banks require:
- Indian citizenship
- Confirmed admission to a recognized foreign university
- Co-applicant (usually a parent/guardian) with a steady income
- Academic performance (minimum 60% in previous education)
Step 3: Gather Required Documents
You’ll typically need:
- Admission letter from university
- Academic records
- KYC documents (ID & address proof)
- Income proof of the co-applicant
- Property documents (if applying for a secured loan)
- Passport and visa copy
Step 4: Apply Online or Offline
- Fill out the application form and submit it along with the required documents.
- You may be called for an interview or a counseling session by the lender.
Step 5: Loan Approval and Disbursement
- Upon verification, the bank issues a sanction letter.
- The loan is disbursed directly to the university (tuition fee) and/or your account (for living expenses).
What Are Some Common Mistakes to Avoid?
- Not researching multiple lenders—Compare options to get the best terms.
- Ignoring hidden charges—Processing fees, prepayment penalties, etc., can add up.
- Skipping tax benefits—Claim deductions under Section 80E.
- Late application—Apply well before your visa interview to avoid delays.
Can a Student Avail Tax Benefits on Education Loans for Overseas Study?
Absolutely. Under Section 80E of the Income Tax Act, the interest paid on an education loan is fully deductible for up to 8 years. This applies to loans taken from banks or approved financial institutions (not private lenders or relatives).
How Much Loan Can One Typically Avail for Overseas Education?
Loan limits vary depending on the lender and whether the loan is secured or unsecured:
- Secured Loans: Up to ₹1.5 Cr or more, depending on collateral value.
- Unsecured Loans: Generally capped around ₹40–50 lakhs.
- For premier institutions (Ivy League, G5, Group of 8), unsecured limits might be higher.
Your loan can cover:
- Tuition fees
- Living expenses
- Travel
- Insrance
- Laptop, study material
- Exam and visa fees
How Does the Repayment Process Work for Overseas Education Loans?
Education loans usually come with a moratorium period — a grace period during which you are not required to make repayments. This typically includes the course duration plus 6–12 months.
Repayment Terms:
- Repayment starts after the moratorium.
- Tenure: 5 to 15 years, depending on the lender.
- EMIs are calculated on the total loan plus accrued interest.
Tip: You can opt for partial interest payments during the study period to reduce the EMI burden later.
Can a Student Avail Tax Benefits on Education Loans for Overseas Study?
Yes! Under Section 80E of the Indian Income Tax Act, students or their parents (who are the co-applicants) can claim a tax deduction on the interest paid on education loans.
Key Points:
- Applicable for 8 consecutive years from the year you start repayment.
- No cap on the maximum amount claimed.
- Only available for loans taken from recognized financial institutions.
Also, read the article by The Times of India
Can a Student Avail Tax Benefits on Education Loans for Overseas Study?
Yes! Under Section 80E of the Indian Income Tax Act, students or their parents (who are the co-applicants) can claim a tax deduction on the interest paid on education loans.
Key Points:
- Applicable for 8 consecutive years from the year you start repayment.
- No cap on the maximum amount claimed.
- Only available for loans taken from recognized financial institutions.
What are Some Common Mistakes to Avoid When Applying for a Study Abroad Loan?
Avoiding the following mistakes can save you from unnecessary stress and rejections:
- Not comparing lenders – Interest rates and benefits vary greatly.
- Ignoring hidden charges – Processing fees, forex charges, etc.
- Not planning for exchange rate fluctuation – Especially relevant for loans disbursed in INR.
- Missing documentation – Incomplete applications lead to delays.
- Overestimating your repayment ability – Don’t borrow more than you can repay.
FAQs for Applying for an Educational Loan for Study Abroad
Q1: Can I get a loan before getting an admission letter?
No, most lenders require a confirmed admission letter from a recognized institution.
Q2: Can I get a loan for foundation or pathway programs?
Some NBFCs and private banks offer loans for such programs, but government banks usually don’t.
Q3: Is a co-applicant mandatory?
Yes, especially for unsecured loans. Co-applicant must have a regular income.
Q4: Will the loan cover living and travel expenses?
Yes, most comprehensive loans cover tuition + living + travel, + insurance.
Q5: Can I prepay the loan without penalty?
Many lenders allow prepayment without penalty, but confirm this upfront.l
Q6. Can I get a loan without collateral for studying abroad?
Yes, many private banks and NBFCs offer unsecured loans based on your academic profile and the co-applicant’s income.
Q7. What is the repayment period for education loans?
Repayment generally starts 6–12 months after course completion and can stretch up to 10–15 years.
Q8. Will I get a loan if I have a low GPA or backlogs?
It depends on the lender. Some may consider your overall profile, test scores, university reputation, and co-applicant’s income.
Need Expert Help with Your Study Abroad Loan? Orient Spectra Can Guide You!
Confused by the paperwork and endless options? Orient Spectra is here to simplify your loan journey.
At Orient Spectra Consultancy, in collaboration with trusted partners like Orient Spectra, we help you:
- Choose the best loan provider based on your profile
- Get pre-admission loan approvals
- Compare interest rates, processing time, and loan coverage
- Navigate the documentation and application process
- Secure approval faster with expert guidance
Our experienced counselors have helped 15,000+ students finance their dream education abroad. And the best part? We offer free consultation and end-to-end support — from university admission to visa and loans.
Conclusion: Turn Your Dream into a Reality with the Right Financial Plan
Getting an education loan for studying abroad is a crucial step in your global education journey. With the right guidance, a clear understanding of your loan options, and a bit of planning, you can easily secure funds without putting your family under stress.
Let your finances fuel your future, not hinder it. And remember, you don’t have to do this alone. Reach out to Orient Spectra Consultancy and let our expert team make your journey smoother.
Attend Our Free UK & Germany Education Fair 2025!
Date: 8th June
Venue: Hyatt Place, Hyderabad
Time: 10 AM to 5 PM
Get on-spot guidance from university delegates, learn about scholarships and loan options, and kickstart your journey to studying abroad—all in one place!
