Education Loans for Undergraduate Students

Introduction

Pursuing an undergraduate degree is a crucial step toward building a successful career, but the rising cost of education can be a challenge for many students. Education loans provide a financial bridge, ensuring that students can focus on their studies without worrying about immediate expenses. Various banks and financial institutions in India offer student loans with flexible repayment options, competitive interest rates, and minimal collateral requirements.

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What are Undergraduate Student Loans? 

Undergraduate student loans help cover tuition, accommodation, books, and other academic expenses. Offered by banks, NBFCs, and government schemes, they come with flexible repayment terms and may or may not require collateral.

Types of loans:

Secured Loans

Require collateral like property or fixed deposits.

Unsecured Loans

No collateral needed but may have stricter eligibility and higher interest rates.

Many banks offer a moratorium period, delaying repayment until after graduation. Government-backed schemes provide interest subsidies and credit guarantees for easier access.

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Interest Rates on Undergraduate Education Loans

Interest rates play a crucial role in choosing the right education loan, as they impact the total repayment amount. Different banks offer varying rates and processing fees based on factors like loan amount and collateral. The table below highlights the top banks providing undergraduate education loans to help students compare their options.

Top Banks Giving Undergraduate Education Loans

Here's a list of Banks giving Undergraduate Loans, their interest rates and processing fees:

Top NBFCs Giving Undergraduate Education Loans

​Non-Banking Financial Companies (NBFCs) in India play a pivotal role in providing education loans to undergraduate students, offering flexible financing options tailored to individual needs. Here's an overview of some top NBFCs offering such loans:​

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Key Features of Student Loans for Undergraduate Students

Undergraduate Student Loans cover tuition, accommodation, and academic expenses while offering competitive interest rates and collateral-free options.

Below are the other key features of this loan:

1. Loan Coverage

Education loans typically cover tuition fees, hostel charges, exam fees, books, and other academic expenses, ensuring students can focus on their studies without financial burdens.

2. Loan Amount & Collateral

Some lenders offer loans up to ₹50 lakh without collateral, while higher amounts (up to ₹1.5 crore) may require security. Unsecured loans often have slightly higher interest rates.

3. Moratorium Period

Most lenders provide a repayment holiday during the course and an additional 6–12 months after graduation before EMIs begin.

4. Interest Rates & Repayment Flexibility

Interest rates range from 8% to 16% per annum, depending on the lender and borrower’s profile. Some lenders offer flexible repayment options, such as step-up EMIs or income-based repayment.

5. Tax Benefits

Under Section 80E of the Income Tax Act, borrowers can claim tax deductions on the interest paid for up to 8 years, reducing the overall loan burden.

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If you're considering an education loan for international studies, understanding the eligibility criteria and application process is essential.

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Not with Propelld! Yes, You Don't Need a Collateral for an Education Loan with Propelld. Check Out Now!

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‍Eligibility Criteria for Student Loans for Undergraduate Students

Student loans for undergraduate students are a strategic move by the government. However, before diving in, it's essential to understand the eligibility criteria established by lenders. Here's a breakdown of the common requirements:

1. Nationality

Applicants must be Indian citizens, NRIs, OCIs, or PIOs, depending on the lender's policy.

2. Age Limit

Students should be between 18 and 35 years old at the time of application.

3. Academic Performance

A strong academic record and admission into a recognized undergraduate program in India or abroad are required.

4. Course & Institution Eligibility

The course must be offered by a UGC, AICTE, or government-recognized institution in India or an accredited university abroad.

5. Co-Applicant Requirement

A parent, guardian, or spouse is usually required as a co-applicant, with their financial stability impacting loan approval.

6. Loan Amount & Collateral

Loans up to ₹7.5 lakh are usually collateral-free, while higher amounts may require security like property, FDs, or insurance.

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How Do Education Loans Work in India? This guide covers the education loan process in India, including eligibility, interest rates, repayment options, and more.

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List of Expenses Covered in Education Loan

Here's a breakdown of the common expenses typically covered by education loans:

1. Tuition Fees

Covers full or partial academic costs as per the institution’s fee structure.

2. Hostel & Accommodation

Includes on-campus or off-campus housing and living expenses.

3. Examination, Library & Lab Fees

Covers exam fees, lab charges, and library memberships.

4. Books & Study Materials

Includes textbooks, laptops, stationery, and essential supplies.

5. Travel & Visa (for Studying Abroad)

Supports airfare, visa fees, and related travel costs.

6. Insurance & Miscellaneous

Covers medical insurance, project work, study tours, and thesis submission.

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‍Minimal Documentation. Higher Chances of Approval. Easy Online Processes. Check Your Eligibility.

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Undergraduate Education Loans for Online Courses

Online education offers a flexible and cost-effective way for working professionals to upskill while managing their jobs. Many banks and NBFCs provide education loans covering tuition fees, study materials, and certification costs for recognized online programs.

How Online Courses Benefit Working Professionals?

1. Flexible Learning

Study at your own pace while continuing to work.

2. Career Growth

Gain industry-relevant skills for promotions or job shifts.

3. Global Education

Access top universities and certifications remotely.

4. Cost-Effective

Lower fees compared to traditional courses.

Does an Education Loan Cover Online Courses?

Yes, lenders offer loans for online programs from recognized institutions, covering:

1. Tuition fees and study materials

2. Examination and certification costs

How an Education Loan Helps?

An Education Loan:

1. Reduces financial burden with easy repayment options

2. Enhances career prospects with better job opportunities

3. Allows upskilling without affecting savings

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No Collateral Required. Approval Based on Student Potential. Check Your Eligibility

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List of Documents Required to Avail Loans for College Students

Applying for a student loan for undergraduate students in India can streamline the process toward your academic goals. To ensure a smooth application journey, it's crucial to gather the necessary documents required by lenders. Here's a checklist to help you prepare:

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Minimal Documentation. Higher Chances of Approval. Easy Online Processes. Check Your Eligibility.

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How to Apply for Undergraduate Student Loan? 

Below, we have curated a step-by-step process for you to secure student loans for undergraduate students. 

Mistakes to Avoid While Taking an Education Loan Learn about common pitfalls students encounter when securing education loans, such as borrowing excessive amounts and miscalculating repayment capabilities. 

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Government Schemes and Subsidies for Undergraduate Student Loans

The Indian government provides various schemes and subsidies to support undergraduate students in financing their higher education. These initiatives aim to make education more accessible, especially for students from economically weaker backgrounds.

1. Central Sector Interest Subsidy Scheme (CSIS)

CSIS provides a full interest subsidy during the moratorium period (course duration plus one year) on education loans.
Available for students from economically weaker sections (EWS) with an annual family income up to ₹4.5 lakh.
Covers loans up to ₹7.5 lakh without collateral for professional and technical courses in India.

2. Credit Guarantee Fund Scheme for Education Loans (CGFSEL)

CGFSEL offers a government guarantee for education loans up to ₹7.5 lakh.
No need for collateral or third-party guarantees.
Available under the Indian Banks' Association (IBA) Model Education Loan Scheme for studies in India.

3. Padho Pardesh Scheme

Padho Pardesh Scheme provides interest subsidies for students from minority communities pursuing studies abroad.
Applicable to students from notified minority communities with an annual family income of up to ₹6 lakh.
Covers interest payments during the moratorium period.

4. Dr. Ambedkar Central Sector Scheme of Interest Subsidy

Offers interest subsidies to students from Other Backward Classes (OBC) and Economically Backward Classes (EBC) for overseas studies.
Covers interest payments during the moratorium period.

5. Jagananna Vidya Deevena (Andhra Pradesh)

A state government scheme providing full fee reimbursement for economically disadvantaged students.
Covers tuition, special, and examination fees for ITI, polytechnic, and degree programs in Andhra Pradesh.

6. National Scholarship Portal (NSP)

A central platform hosting various scholarship schemes from central and state governments.
Provides financial assistance, including scholarships and fee reimbursements, to eligible students.

Students should explore these schemes and check their eligibility to benefit from government financial assistance for undergraduate education.

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Not Just Tuition Fees, But Other Expenses Also Covered. Check Simplified Education Loans from Propelld.

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Tax Benefits on Undergraduate Student Loans

The Indian government provides tax benefits on education loans under Section 80E of the Income Tax Act, allowing borrowers to claim a deduction on the interest paid. This helps reduce the financial burden of higher education.

1. Eligibility

The deduction can be claimed by individuals who have taken an education loan for themselves, their spouse, children, or a legally dependent ward.

2. Deductible Amount

Only the interest component of the EMI qualifies for deduction, while the principal amount is not eligible.

3. Maximum Deduction Period

There is no upper limit on the deduction amount, but the benefit is available for up to 8 years or until the interest is fully repaid.

4. Applicable Loans

The loan must be availed from a recognized bank, NBFC, or approved financial institution for higher education in India or abroad.

By reducing taxable income, this benefit makes education loans more affordable and accessible for students and their families.

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No Collateral Student Loans for Undergraduate Students 

Many banks and NBFCs like Propelld, offer education loans without collateral to help students fund their undergraduate studies. These loans are ideal for students who may not have assets to pledge but have strong academic records and career potential.

This table provides a clear comparison of collateral-free education loan options from different lenders.

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Looking for an Education Loan Above 7.5 Lakhs & Without Collateral? Check Propelld. 

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Undergraduate Student Loans for Studying Abroad

‍Education loans help students cover tuition, living expenses, and other study-related costs abroad. Banks and NBFCs offer loans with competitive interest rates and flexible repayment terms.

Loan Providers & Offerings

Eligibility Criteria

• Admission to a recognized foreign institution
• Strong academic background
• Co-applicant (parent/guardian) with stable income
  

Required Documents

• Identity proof (PAN card, passport)
• Address proof (Aadhaar, utility bill)
• Academic transcripts & admission letter
• Co-applicant’s income proof & bank statements

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Pursuing an undergraduate degree, whether in India or abroad, is now more accessible with various student loan options. From collateral-free loans to government subsidies and tax benefits, students have multiple financial aids to support their education. 

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Your dream education is within reach— Propelld makes it easier with tailored loan solutions designed for your success. Secure your future with the right financial support today!

Propelld is an RBI registered NBFC that provides, hassle free education loans without any non collateral or co-applicant. 

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Why Propelld?

Here are the major benefits of Propelld education loan: 

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FAQs for Student Loans for Undergraduate Students

What expenses are covered under a student loan for undergraduate students?

Education loans cover a wide range of expenses, including tuition fees, hostel charges, travel costs, study materials, and other necessary expenses related to your education.

What is the maximum loan amount that can be availed?

You can secure education loans starting from ₹50,000 up to ₹40 lakhs depending on the bank's policy and the applicant's requirements and eligibility.

What is the typical repayment tenure for undergraduate student loans?

The repayment tenure for education loans can be up to 15 years after the completion of your course, providing flexibility and ease in managing the repayment.

Are there any tax benefits available on student loans for undergraduate students?

Yes, the interest paid on education loans is eligible for tax deduction under Section 80E of the Income Tax Act, which can be claimed for a maximum of 8 years.

How is the interest rate determined for undergraduate student loans?

The interest rates on education loans can be either fixed or floating and are often linked to the Repo rate as per the RBI guidelines. The actual rate can vary based on the bank's terms and the applicant's profile.

What happens if there is a default in repayment of an education loan?

In case of non-repayment, banks may impose penalties, which may affect the borrower's credit score. Continuous default might lead to legal actions and collateral enforcement.

Can I apply for a student loan without a co-signer or guarantor? 

Yes, some banks and financial institutions offer student loans without a co-signer or guarantor, but this depends on the applicant's creditworthiness and the specific loan program.

What are the eligibility criteria for obtaining a student loan? 

Eligibility criteria typically include academic performance, admission to a recognized institution, course type, and, in some cases, the financial background of the applicant and their family.

Are there any moratorium periods on student loans? 

Most student loans offer a moratorium period, which is the time during which repayment is not required. This period usually includes the course duration plus an additional 6-12 months after course completion.

How can I apply for a student loan online? 

You can apply for a student loan online through the bank’s official website or third-party financial service providers. The process usually involves filling out an application form, uploading necessary documents, and sometimes an online interview or assessment.

What documents are required to apply for a student loan? 

Commonly required documents include admission proof, academic records, identity proof, address proof, income proof of parents or guardians, and collateral documents if applicable.

Can I avail an education loan without collateral?

Yes, loans up to ₹7.5 lakh can be obtained without collateral under government schemes.

Who can be a co-applicant for my education loan?

Parents, siblings, spouses, or parents-in-law, depending on the bank’s policy.

Is there any concession in interest rates for female students?

Yes, many banks offer a 0.50% interest rate concession for female students.

Do I need to start repaying the loan during the course period?

Not necessarily, but some banks offer interest rate rebates if you do.

What is the process for applying for an education loan online?

You can apply through the bank’s website or portals like Vidya Lakshmi.

Are there any government subsidy schemes available for education loans?

Yes, the Central Sector Interest Subsidy (CSIS) scheme provides relief for EWS students.

Can I prepay my education loan?

Yes, most banks allow prepayment without penalties.

What happens if I discontinue my course after availing the loan?

You are still required to repay the loan, and the bank should be informed immediately.

Can I get a loan for part-time or distance education courses?

Some banks offer loans for part-time or distance education if career-oriented.

How is the loan amount disbursed?

Funds are directly disbursed to the institution as per the fee structure.

What if I secure a scholarship after availing the loan?

The scholarship amount can be adjusted against the loan, reducing the required funds.

Is life insurance mandatory for education loan applicants?

Some banks may require a life insurance policy equal to the loan amount.

Can I transfer my education loan to another bank?

Yes, you can refinance or transfer your loan for better terms.

How does an education loan affect my credit score?

Timely repayment improves your credit score, enhancing future loan eligibility.

How can undergraduate students apply for a student loan?

Students can apply through banks, NBFCs, or online portals by submitting an application along with required documents.

How can I apply for additional student loans if I need more funds?

You can request a top-up loan from your current lender or apply for a new loan with another institution based on your eligibility.

Are there specific loans available for college students?

Yes, banks and NBFCs offer student loans specifically for undergraduate college students covering tuition, accommodation, and other expenses.

What are the basic requirements for getting a student loan?

Requirements include admission to a recognized institution, academic records, a co-applicant (if needed), and financial documents.

What are the eligibility criteria for an education loan?

Eligibility is based on academic performance, admission to an approved institution, course type, and financial background.

How can I apply for a student loan?

You can apply online through a bank’s website, an NBFC, or education loan portals by filling out a form and submitting documents.

Is there a specific education loan for undergraduate students?

Yes, banks and financial institutions provide education loans exclusively for undergraduate courses in India and abroad.