Clearing 2 misconceptions about education loan


Education loans have been helping students learn their choice of courses since the latter half of the last century. They have become more accessible thanks to today’s digital platforms. Even though executive education loans have become a common way of funding MBA studies, many students hold some misconceptions about them. These misconceptions stop these students from reaping the benefits of education loans. In this article, we will tell you about the 2 misconceptions that many students believe, and clear the air around those misconceptions.




  1. Lenders do not cover all higher education expenses and ask for margin money

Students believe that lenders only pay the tuition fees of their course. This is not true. Lenders understand that students may need money to travel to different cities from their hometowns to study their courses. They understand that students need money to live in that city for the duration of their course. They need money to pay mess expenses, exam fees, library fees, laboratory fees, books and stationery expenses, and so on. So, lenders cover these higher education-related expenses of students through their education loan for abroad schemes.

Students believe that lenders expect them to contribute a little from their pockets to fund their higher education. This is true but partially. NBFC lenders cover 100% of the expenses of higher education. They do not expect students to pay even a single penny for their higher education expenses. Thus, they help students to not worry about finances and focus solely on their studies.





 

  1. Tax benefits are applicable on education loans

Students believe that they get tax benefits while they repay their education loans gradually. This is true but only partially. Yes, students get tax benefits on education loan repayment, but it is limited to the interest they pay on their education loans. There is no limit on the maximum amount of tax benefit students get on education loan.

For instance, if you pay back Rs. 5 lakhs of your education loan in 1 financial year, which consists of Rs. 4 lakhs as principal amount and Rs. 1 lakh as interest levied on it, then Rs. 1 lakh will be deducted from the tax levied on your official income. If you were to pay Rs. 8 lakhs as interest part of your education loan of Rs. 40 lakhs, then you would get a full income tax deduction of Rs. 8 lakhs in that financial year.

This subsidy is available to students for up to 8 years into their education loan repayment tenure, or up to the time when education loans are paid off completely, whichever comes earlier. Usually, the education loan repayment tenure stretches up to 15 years but you are advised to repay your education loan within 8 years of the first EMI to reap the full benefits of this subsidy.

So, these are the 2 widely spread misconceptions about the education loan. We hope that after reading this article, your education loan misconceptions about education loans are cleared and that now you have more knowledge about education loans than you did before. All the best!

 

 

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