Education Loan: Yeah! or hell NO?!

Education: finishing our studies from the best of best university puts us on much higher frontier in the financial world giving us the major advantage when we go for fishing out for jobs. But the drawback is these institutes that we aim for may be out of league in terms of money and our parents cannot support us financially through every step (considering the average population of course!). Or for the student who want to be independent and think it’s time for them venture out on their own without any obstacles on their way (financially of course!)

So, that’s where the education loans step in!

Why is it good you ask?

  1. Financially, it doesn’t restrict you in getting the best education the student wants in his/her life, by providing you the means that can make their base stronger and help them achieve their dreams. It makes a student more independent, instead of depending on their parents for financial support, they can venture out and pay back on their own when they get their jobs.
  2. The easy availability of education loan for student has motivated many students to pursue higher education outside India, opening up their future to wide range of possibilities
  3. Payment of interest of Education loan is only after one year after completion of course or six months after getting a job. The moratorium period gives you the relief that you need, to focus on your studies and to find a good job once you complete your course
  4. There are tax benefits on the interest component of your loan for eight years or till you pay off the loan, whichever is earlier. The interest rates in education loans provided by most Indian banks are less and can be paid of easily over a duration of time. It destroys the idea that “Only the rich can afford the best”
  5. Whether you want to study abroad or in India, do a professional course or a vocational training program, attend a government college or a premier private institution, you can find an education loan that suits your needs. Banks offer a wide range of loans for different courses and institutions with different interest rates, tenures and loan amounts. In case you want to extend your studies, you can even opt for top-up loans.
  6. Education loan does not burden your parents or put you in debt in the hands of loan sharks as it is the easiest, most convenient way to get the money that is needed to complete your education!

Why is it bad you ask?

  1. The biggest disadvantage of student loan is that it is a loan and it carries interest and therefore when one takes this loan he or she should bear in mind that it will lead to him or her being in debt for long period of time because due to interest loan amount will keep on accumulating until one start repaying it.
  2. Getting a good job is very important if one wants to repay the student loan on time and without default. Defaults will ruin the credit history.
  3. An individual is getting into debt at very early age and due to it all focus of an individual shifts towards repaying the loan rather than focusing on career. Student loan leads to individual being in constant stress and therefore his or her creative abilities takes backseat and chances are that an individual will sacrifice long term growth in his or her career for short term financial benefit.
  4. For loans above Rs.4 lakhs, you need to arrange money for the margin amount to be paid by you, which can go up to 15% of the loan amount. Although interest rates are lower than personal loans, they can still be pretty steep for some borrowers (they usually range from 11-17%). The simple interest adds up during the moratorium period which is added to your principal amount when you start repaying the loan. If you have a floating interest rate and the interest rate rises, then your debt burden also increases.
  5. Student loan defaults are not removed from your credit history after seven years and are not wiped away. They are not discharged during bankruptcy proceedings and can lead to wage garnishments if not paid as agreed.
  6. Some people have student loan debt 20 to 30 years after graduating from college. This can make it very difficult to build up an emergency savings account and to save money

So, what do you have in mind now. Yeah.? or hell NO?! 

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