PURSUING your graduation or post graduation overseas is not a distant dream anymore, thanks to education loans.
Once you secure the admission in a college, just give your loan application card along with the photocopy of your admission card, marksheets, and other documents like bank statements and necessary collateral (if any) and get a loan from the bank in your neighbourhood.

"Usually overseas study loans are over Rs 7.5 lakh hence, the student has to give some collateral. This can even be supported by a third-party guarantee on a case-to-case basis," says P Nandakumaran, chief general manager (personal banking), State Bank of India.

Banks do not demand collateral for loans up to Rs 4 lakh. You can do with just a third-party guarantee for loans up to Rs 7.5 lakh. The collateral could be in form of fixed deposits, NSC certificates or even property worth the loan amount. Banks could ask for an insurance policy equivalent to the loan amount as security. That will take care of the loan amount in case of the student's death.

The education loan offered by banks is based on Indian Banks' Associations' (IBA), Model Education Loan Scheme, which was formulated in 2001. This scheme has outlined the various terms related to loan amount, collateral, interest rate, and margin money and loan repayment. Various public sector banks like State Bank of India (SBI), Andhra Bank, Bank of India etc are active players in this segment. However, it doesn't matter which bank you opt for as there are subtle differences in interest rates. But, if you have been banking traditionally with any of these players you could have an edge.

You have to pay a margin amount of 15% on overseas study loans. For example, if the cost of the course is Rs 15 lakh, the bank will sanction a total loan amount of Rs 12.75 lakh. You have to pay the balance Rs 2.25 lakh out of your pocket. The repayment period varies between five and seven years, and it starts a year after completion of course or six months after securing a job, whichever is earlier of the two.

Few universities mandate students to get an insurance policy. Some insist on signing up for a cover on campus, while some institutions give you an option to avail of a cover of your choice. Insurance companies like ICICI Lombard, New India Assurance Bajaj Allianz, Tata AIG and Reliance General Insurance offer this cover.

These policies cover for medical expenses up to $500,000. Besides that, they also cover personal accident, lost baggage, personal liability and two-way tickets in case of medical emergency. Some policies also cover for study interruption on account of specified medical conditions or compassionate reasons on the family front. Students can also sign up for sponsor protection, which reimburses the tuition fees in case of his/her death. Also if the student gets hospitalised for more than 7 days, the insurer reimburses for a round trip economy class tickets for student/ family member as well as for their accommodation abroad.

Students can opt for a coverage period that ranges from 30 days to a maximum of two years. It can be extended once for an additional period of 30 days to a maximum of two years. The students have to pay a one-time premium. If the student goes either to a university in the US or Canada, the premiums are much higher given the high medical costs. For example, if you sign up for a 2 year policy for a sum assured of $500,000, the premium approximately works up to Rs 32,000 for university in US or Canada and Rs 18,000 for other universities.

There are always two stages to the loan. One is the approval stage and another is the disbursal stage. Although, the total loan amount gets approved in principle, it's disbursed on an annual or semester basis depending upon your liquidity requirement. "We don't disburse the loan unless the student gives a request," Mr Nandakumaran adds. If you get a cheaper aid, you can always stop the loan with one semester itself. That also eases your repayment burden. The repayment period varies between five and seven years, and it starts a year after completion of course or six months after securing a job, whichever is earlier of the two.

For the overseas student insurance, always sign up with an insurer who has collaborated with a global third party administrator (TPA). That will save the student from running around for reimbursement of the treatment.