Several Indian families aspire for their wards to study abroad. Acquiring education from a credible foreign university opens up several opportunities. Most of these universities have world class professors, do cutting edge research, possess excellent infrastructure and have enviable industry linkages.

However, it may not be possible for many families to arrange for the expenses from their savings. Some applicants might receive scholarships whereas most applicants may apply for an education loan whereas others may apply for a personal loan for higher education.

But one needs to keep the following do’s and dont’s in mind before securing an education loan.

What you should do?

1. Check the legitimacy of the university selected:

Newspapers and media have been often rocked with the news of students being duped of a non-existent university. Along with care in the selection, of course, the student must also thoroughly research the university to ensure their money doesn’t go to waste.

2. Select the course properly:

Students often swing between one course to the next if such a facility is available. The student must select their core subjects carefully and not follow the herd. 

3. Reasonable salary expectations:

Foreign education is often associated with a high salary and growth later in the years. However such expectations must be tempered to avoid disappointment.

What you shouldn’t do?

1. Put up the house as collateral for an education loan:

Borrowers must be careful in providing assets against their loans. The provision of a house against such a loan is generally not advisable as an issue with repayment of such a loan could leave the applicant homeless.

2. Take up an education loan with a very high EMI:

The tenure and rate of education loan must be carefully selected to avoid paying very high EMI’s and putting pressure on the user or too long to increase the amount of interest.

 While an education loan can help a student and their family achieve their dream, documents for personal loan must be carefully studied keeping in mind the above points before signing on the dotted line.

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Pursuing education abroad is a dream for several students as well as their parents. Studying abroad is not just about acquiring a degree and securing a well paying job. It is also about getting opportunities to be taught by some of the best minds and networking with peers from different parts of the globe. Funding foreign education with one’s own resources may not always be possible and hence one may have to seek an education loan. However, it is important to understand the financial implication of such an education loan before taking the plunge. Both the students and family must consider the following before taking a final decision:

1. Availability of scholarships:

Students and their parents should first enquire about the availability of scholarships or grants. Foreign universities offer a plethora of scholarships. Grants may even be provided by local trusts. Funds offered by such scholarships or grants can cover a substantial part of one’s expenses and thus parents and students can consider an education loan to cover the remaining portion. One can come across these scholarships by searching for ‘how to finance study abroad’ on search engines.

2. Is their education loan tax deductible?

 The Income Tax Act provides for deduction of the loan paid on education loan interest as against income of the person. Such deduction however is restricted to certain institutions and it must be verified if such benefit is available through your institution.

3. Student profile:

 The student profile would determine the number of fees being charged. Certain universities charge higher for foreign students as opposed to the local students. 

4. Other expenses:

Apart from the above, various other expenses such as lodging, food as well as books must be considered for foreign education loans. However, one can manage these expenses by taking up a part time job. Nevertheless, it is best to account for these expenses as combined together they can result in a substantial amount. 

Strong student performance in the past and a reputed university might serve as the eligibility criteria for personal loans (https://www.fullertonindia.com/personal-loan-eligibility.aspx) apart from the CIBIL score. These factors must be considered as the question of how to finance study abroad arises.

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