Education loans are growing more and more significant as more than 1.33 million Indian students are studying overseas. Each bank has different loan rates, so prospective borrowers should weigh the benefits and drawbacks of these loans while being mindful of the dangers.
According to a recent PTI article, more than 1.33 million students are studying overseas as of late 2024. The Indian parliament was informed some time ago that this represents a significant increase over previous years. It draws attention to the rising number of Indian students seeking opportunities for higher education elsewhere.
This leads us to the topic of the importance of student loans, namely their benefits and drawbacks for studying overseas. The discussion of the benefits and drawbacks of taking out student loans in order to pursue future educational possibilities is the focus of this article.
Education Loans from NBFCs are growing at a strong rate
A recent CRISIL analysis shows that the top nonbank financial institutions (NBFCs) in India are seeing a sharp increase in their education loan portfolios. The asset under management (AUM) increased from ₹43,000 crore to over ₹60,000 crore, according to the report. This is being driven by rising inflation and greater school prices, as well as the quickly expanding demand for international education.
What are India’s current rates for student loans?
In India, different banks offer varying interest rates on school loans. State Bank of India is offering the rates, which are 9.90% annually. Rates offered by ICICI Bank range from 9.50% to 14.25% annually. As of April 2025, HDFC Bank offers loans starting at 9.50% annually. To get the most recent position in rates, it is essential to check with individual institutions for updates and changes.
What advantages come with taking out a student loan?
- Simple accessibility: Student loans are simple loans that give financial assistance to those who typically lack the funds to cover living expenses, tuition, books, and other educational costs.
- Deferred repayment: To lessen the financial strain of student loans, the majority of education loans allow repayment to begin after graduation. This is provided with the explicit understanding that students cannot work and earn money at the same time while they are in school.
- Enhances credit history: Making consistent, on-time payments contributes to the development of a positive credit history, which is highly advantageous going forward. Thus it guarantees that any future loans would be readily available, smoothly accessible, and have affordable interest rates.
- Flexibility in repayment alternatives: Depending on an individual’s income, lenders offer a variety of repayment plans and options that are reassuring. The best course of action in this situation is to keep your lender informed.
What are the disadvantages and considerations before taking out a student loan?
- Debt load: Taking out a loan entails the risk of accruing debt. Therefore, those who take out loans when they are young may have trouble paying them back later on, and it may take them decades to do so. Your credit score may be affected as well.
- Interest accumulation: If a loan installment is not properly managed, interest may accrue. Over time, interest accrues, increasing the total amount owed.
- Pressure on finances and emotions: Repayment of monthly EMIs may cause financial and emotional strain. This hinders economic stability and financial freedom.
- Severe default risk: If you don’t pay back now, you’ll default, which will harm your credit ratings and credit profiles. This will make getting a loan in the future extremely challenging.
In Conclusion
As a result, student loans can be a very important instrument for addressing financial demands, but it is important to balance the benefits and drawbacks of applying for the loans against the potential limitations and challenges.
Therefore, before submitting their loan applications, potential applicants should exercise critical thought, assess their financial situation, and familiarize themselves with the terms and circumstances of the loan.