The Challenges With Traditional Education Loans

In India, education loans turn out to be a very effective support or assistance for their path.

Poorvi Gaur


Higher education is posing a new challenge for the determined students by emerging as an untouchable dream to them. Because the cost of getting education is too much to bear for a mediocre family. Students are struggling nowadays to pay education expenses in renowned institutions.

In India, education loans turn out to be a very effective support or assistance for their path. A large portion of students apply for education loans to meet their needs.

Education loans were made available to the public back in the year 2001 by the central government. The government of India launched the scheme after consulting with the Reserve Bank of India (RBI) and the Indian Banks’ Association (IBA). Since then, by lending almost 95% of the total student loans of the country, the public sector banks have been the dominating players in the education loan sector. As per the guidelines prescribed by the RBI, students studying within the country can avail maximum ₹10 lakhs as an education loan. While for those who go abroad for their education, the maximum limit is ₹20 lakhs. Furthermore, through its guidelines, RBI also establishes that an amount of up to ₹4 lakhs can be sanctioned to education loan seekers without requiring them to put any collateral. However, any amount exceeding the ₹4 lakhs limit would require a third-party guarantor and collateral security.

The Challenges with Traditional Education Loans

Student loans are impactful for accumulate costs of studying in the home country or abroad but it is a complicated process to get the funds. Approval of the loans scheme consists of so many steps and formalities. Additionally, the interest rate is quite high and can be a burden for the students. There are not only problems but also hurdles experienced by students to get the traditional education loans.


As said earlier, up to ₹4 lakhs can be allocated without any mortgage or security money. As a result, students are pushed to get the admission in premier institutions. Besides, students have no choice remaining except for applying for higher than ₹4 loans. Then, they start facing problems because they could not manage a guarantor or something like that. It, finally, does not work for them or their ambitious parents.

Highly Risky for Both Parties

Education loans involve high risk for both lenders and borrowers. Student loans are full of uncertainty than any other loans because repayment of education loans is highly dependent on the likelihood of students completing the course and securing a job. If students don’t finish the course or get a job on time, lenders may face loan default while students get bad remarks on their credit profile. On the other hand, high interest rates on education loans puts a lot of pressure on students and may affect their repayment capacity.

New Opportunities

In the era of higher interest rates and other complex conditional loans, students can start to think of new opportunities. Emerging loan lending apps like EarlySalary may be a new platform for the students who are searching for funding. It offers school fees, which reduces the continuous burden for the parents and the students managing their own expenditures. Challenges like collateral, high risk, short sanction can be replaced by EarlySalary. It pays school fees by collaborating with institutions and directly pays in the form of EMIs. Interested students or parents can apply and get loans up to 5 lac rupees with flexible repayment options. So, you just follow the application steps and get the facilities provided by EarlySalary.