Know about expenses covered by your education loan

In a densely populated country like India, a good education is your ticket to a better life. Unsurprisingly, many individuals aspire to get their graduate and postgraduate degrees from top institutions in India and abroad. However, with fewer seats available in top colleges, the competition and costs for them have risen exponentially over the years. Education loans can make studying in such institutes affordable for people from all walks of life.
But many applicants wonder if an education loan covers all the costs associated with higher education. For instance, does education loan cover living expenses in India and abroad? Let us find out in this article. 
 

How does an education loan work?

The education loan application process only begins after you receive an acceptance letter from the university to which you applied. Next, you must research the various lenders to determine which one offers financing at the best interest rates. Once you have settled on a lender, you must submit with them a letter for education loan application. This letter should outline your academic history and funding requirements, along with the respective supporting documents.
 
If the lender accepts your education loan application, you will have to meet its executives in person. At that time, you can discuss with them the interest rate, documentation process, eligible loan amount, etc. in more detail. Once the education loan is approved, the tuition fee will be paid directly to your college in full or in instalments, according to the payment schedule.

What expenses are covered in an education loan?

 

1. Tuition Fees

   Tuition fees make up the biggest portion of your total educational costs. It is the amount you must pay to attend classes conducted by your college or university. The tuition fee amount may vary from one semester to another. The actual amount would depend on the course and number of hours of classes held in a specific semester. Paying the high tuition fee from your own savings would be difficult for most students. Hence, every lender includes the tuition fee component in the education loan amount.
    

2. Cost of living

   Although not directly related to educational expenses, living expenses can put a major dent in your wallet. Food, rent, travel, and other necessities fall into this category. If you plan to enrol in a college in India, you may be able to cover these costs. However, if you are studying abroad, such as in Europe, where a rupee roughly equals 0.0123 Euros, managing your living expenses may become extremely difficult. However, with easy access to education loans, you will not have to worry about these costs. But remember that education loans are not meant to cover all your living expenses. Depending on your profile, they may cover only up to 30%-40% of the total living expenses.
    

Also Read: 8 Reasons Why LAP is a Better Choice to Fund Your Kid’s Education
 

1. Health and travel insurance

   Many countries around the world do not allow foreigners to enter their territory unless they have adequate insurance coverage. Schengen countries, the United States, the United Arab Emirates, Qatar, Turkey, Russia, and Ecuador are among the countries where insurance is mandatory. These countries require you to have insurance to cover your treatment costs in the event of a medical emergency. If you want your lender to include the insurance cost in the education loan amount, you must inform them about it.
    

2. Air Fares

   If you wish to study abroad, you must be aware of the expenses that will be incurred for flight reservations. Airfares can range from Rs 30,000 to Rs 1,50,000 and more, depending upon the location. A normal middle-class individual may not be able to afford such excessive costs on their own. As such, various financial institutions also include this expense in the education loan amount. But in case they do not, you can always take a personal loan for meeting your additional funding needs.
    

3. Other study-related expenses 

   When you enrol in any college, there are several significant expenses that you may overlook. These include the cost of books, examination fees, extracurricular activity fees, laptop costs, and a few others. Financial institutions, through education loans, can assist you by covering these expenses entirely or partially.
    

What are some of the expenses that an education loan does not cover?

 
Other than some essential costs, financial institutions typically do not cover leisure expenses. Among them are: 
 

• Travelling expenses for exploring new places
• Cost of movie tickets
• Clubbing
• Sightseeing charges

 

Key considerations for calculating the expenses covered by an education loan

 
When applying for an education loan, especially for studying abroad, you must carefully estimate your total costs. By default, the lender only covers the cost of tuition. But here are a few more things you need to consider:
 

• If you are not staying on campus, you should look for shared rented accommodations or private hostels available near your college. Compare the prices and see what services they provide. 

 

• When calculating your living expenses, consider whether you will cook for yourself or order food from outside.

 

• Consider the cost of using public transportation from your hostel to college.

 

• When studying abroad, check to see if your visa includes a work permit. If so, you can apply for part-time work even before you arrive in a foreign country. This would help reduce your reliance on the loan amount.

 
Now that you are aware of the various charges that your loan will cover, the next important thing to know is what to do and what not to do when applying for an education loan.
 

Do's

• Choose your course wisely and check to see if it is in high demand. Pursuing a degree with limited career opportunities will make loan repayment difficult.
   

• Prior to applying for admission, always check the college placement record. Financial institutions are more likely to lend to a university that guarantees good placements.

 

• Always be realistic about your future salary expectations. Avoid applying for an amount that may exceed your repayment potential in the future.

 

Don'ts 

• Never enrol in a course solely because funds are readily available.

 

• Many people take an education loan for their undergraduate studies. However, after finishing the course, they apply for a post-graduate education loan without paying off the existing loan. This only adds to their liabilities and may pose financial problems for them later.

 

To conclude

 
Education loans can assist you in meeting various study-related expenses whether you are studying abroad or in India. Unfortunately, many lenders only cover the tuition costs for the course. In such a case, the best option is to obtain funds through a personal loan. The minimal personal loan documents and simplified eligibility criteria ensure that you have quick access to funds for any financial need.