NEWS & ADVICE : EDUCATION LOANS
Education Loan for B-Schools
By Neelima Shankar
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Higher education in India is becoming costlier in past few years especially management education. IIMs have increased their fees drastically in last few years. A two-year management course in IIM- Ahmedabad is around Rs 13.7 lakh whereas in IIM- Calcutta, the fee structure is around Rs. 13.5 lakh and in some premiere institutes it can also soar up to Rs 30 lakh or more. These amounts are quite heavy on the pockets of a middle class or higher middle class family. Even if a student has worked before and saved all the money, he/she may just fall short of the basic tuition fee for an MBA course. However, one should not allow the high fee structure to keep them away from the coveted B-School degree. MBA aspirants should select the right loan and pursue their dreams.

Today, loans for MBA course are available with almost all major banks. Some banks also have tie-ups with some of the premier institutes, where they offer the students a special rate of interest which is normally lower than market rate of interest.

There are certain key points that one must know when while applying for education loans:

Margin

Margin is the amount of fee which students are supposed to pay through his/her own pocket. A bank can either pay 100 per cent of the cost of education or a certain percentage of the total cost. Margin money is not covered by the bank for the payment of the essential and necessary fees. Generally, students are not required to pay any margin money for loans up to Rs 4 lakh. For loans above Rs 4 lakh, the margin money is 5% for studies in India and 15% for overseas studies. There are few schemes provided by certain banks in which margin money is completely scrapped out. For instance, Union Bank of India and Central Bank of India do not ask for any margin money under their special education loan schemes.

Collateral Security

Under a regular education loan scheme, a student borrower doesn't have to provide collateral for loans up to Rs 4 lakh. The bank asks for collateral in the form of a suitable third-party guarantee along with assignment of future income for loans between Rs 4 lakh and Rs 7.5 lakh. For loans above Rs 7 lakh, the student has to offer tangible collateral security equal to 100% of the loan amount along with assignment of future income. However, State Bnak of India's Scholar Loan for students of certain premier business school (except Indian School of Business) as well as the Central Bank of India's IIM scheme does not ask for any collateral security.


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