Top things to know about education loan repayment

With over 7.7 lakh Indian students opting for international education, the demand for education loans is increasing steadily. As the average loan amount is nearly Rs 25 lakhs in most cases, education loan repayment becomes a crucial topic.

Being a parent, it is imperative to teach your children how to pay education loan EMIs efficiently. This is one of the most important financial lessons for kids and helps them lead a financially responsible lifestyle.

Let’s explore the different facets of education loan repayment and its impact on the lives of your children. 

There are several noteworthy benefits of availing education loans for higher education, such as -

• Access to quality education at leading colleges and universities
• Repayments start after completing the education.
• Income tax benefits available under Sec 80E of the Income Tax Act 1961
• Coverage for additional expenses like travel, books, living expenses, and more
• Lower interest rates than personal loans

Also read - Education loan eligibility for students: Challenges and solutions

Financial lessons for education loan repayment

An education loan proves beneficial for kids wanting to study abroad to pursue their dream of higher education. But the responsibility of timely education loan repayment is equally important. Here are some crucial financial lessons on how to pay education loans. These lessons will help you teach your children to formulate effective repayment strategies –

Budgeting

One of the most important financial lessons for kids is to learn about budgeting. Here are some tips to help with the task -

• Financial education - You must start their financial education from an early age. This strategy will help them develop financially responsible behaviour that will prevent excessive spending.
• Maximise available funds - Children must strive to maximise the funds that they have access to while studying at the university. For this, they must allocate a specific amount towards books, accommodation, commuting, food, and other vital costs. For instance, they can follow the 20-30-50 rule. Here, 20% of the funds go for loan repayment, 30% for leisure and entertainment, and 50% for essential costs like rent. 

Part-time jobs

One of the best ways to ease your child’s education loan repayment is to find viable sources of income. This means taking on part-time jobs or internships to cover living expenses. Here are some tips that may help - 

• Part-time jobs - If your child can pursue a part-time job after college hours, then it will create an additional source of income. For example, some universities provide 20 hours a week for part-time jobs. 
• Internships - Many companies offer work-from-home internships for students. This can be a good way to not only earn some money but also gain crucial work experience. 
• Teaching assistant - Many lecturers hire their students to work as teaching assistants. Such opportunities can help them make some money while also gaining practical work experience.

It is crucial to ensure that the part-time job hours are within the permissible limit for students in a specific country.  

Scholarships or grants

You must encourage your child to apply for scholarships or grants. If the application is approved, they can receive a substantial sum from relevant organisations or individuals. These tips may help -

• Scholarships - Many universities offer  scholarships to students on a merit-cum-need basis. While some scholarships are available at the time of admission, others are available after the first year of the course. 
• University grants - Several universities also offer grants to deserving students based on their academic performance.
• Private grants - Many private organisations provide grants to students pursuing select courses from various universities.   

Getting a scholarship or grant would reduce the dependence on a loan, making education loan repayment easier. 

No new loans

Loans like personal loans, instant loans, or credit cards have higher interest rates than education loans. Availing these facilities might derail the education loan repayment plans. Here are some tips that may help - 

• Prioritise EMIs - Any spare income or windfall earnings must go towards the repayment of EMIs.  
• No new debt - Say no to new debt while studying, including consumer loans or online personal loans. Any new debt might act as a distraction and impact educational performance.
• Credit limit - If you want to give an add-on credit card to your child, set a cap on the credit limit. This will help avoid any overspending on non-essential items.     

Any irresponsible borrowing behaviour can adversely impact the credit score. This can make it difficult to secure any loans or credit cards in the future.

Managing the EMIs

Your child will be managing the education loan repayment for several years after starting a job. Here are some useful tips to help manage the EMIs in a better way - 

• Do not opt for mortarium - Most education loan repayments start 12 months after graduation. You or your child can opt to pay partial interest during the mortarium period to save a considerable sum later.
• Pay the interest - Lenders add the accrued interest for the mortarium period to the outstanding loan amount. This results in higher EMIs that act as a strain on the financials of a new graduate. The best strategy would be to begin paying the interest cost right after joining the university and continue doing so till the regular EMI payments start. 

Serving interest cost during the mortarium period can help reduce the financial burden on your child. Any savings on interest can be used for other essential purposes.  

Metra Trust Education Loan – your reliable partner
 

Metra Trust Education Loan offering - FIRST UNI - provides an incredible opportunity to secure admission to a dream college. Attractive features, low-interest rates, and flexible education loan repayment plans make FIRST UNI a trusted partner for higher education.

Here are some of the salient features of education loans from Metra Trust -

• High-value loans – With Metra Trust, you can avail education loans of up to Rs 1Cr* .
• Easy processing - Metra Trust offers a seamless online application process for FIRST UNI. The doorstep loan fulfilment team ensures that you enjoy a hassle-free education loan experience. You can get up to 100% financing for your kids’ higher education with an Metra Trust Education Loan. 
• Flexible repayments - Metra Trust offers flexible education loan repayment options. With maximum available tenure of 15 years, you enjoy excellent flexibility with your repayments.
• Affordable interest rates –, You can enjoy attractive interest rates for a hassle-free education loan repayment experience with affordable EMIs. 
• Simple eligibility criteria – Education loans from Metra Trust have simple eligibility requirements. You can avail of the loan for over 25k+ courses at 3200+ universities worldwide. 

Also read - Education loan essentials: Documents needed before and after loan sanction

To conclude
 

To realise your dream of a quality higher education, Metra Trust Education Loan is your true partner. Every Metra Trust Education Loan offers perks like low-interest rates, long repayment tenure, 100% funding, and much more. These benefits enable you to maximise your learning experience and enjoy hassle-free education loan repayments. With a simple online application process, realising your higher education goals has never been easier.

Click here to apply for an Metra Trust Education Loan.

Disclaimer

The contents of this article/infographic/picture/video are meant solely for information purposes. The contents are generic in nature and for informational purposes only. It is not a substitute for specific advice in your own circumstances. The information is subject to updation, completion, revision, verification and amendment and the same may change materially. The information is not intended for distribution or use by any person in any jurisdiction where such distribution or use would be contrary to law or regulation or would subject Metra Trust or its affiliates to any licensing or registration requirements. Metra Trust shall not be responsible for any direct/indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information mentioned. Please consult your financial advisor before making any financial decision.