There is a higher demand for higher education more than ever now. The number of education institutes that have emerged over the last decade and the majority of banks now offering a new product called the ‘education loans’ to enable prospective students’ finance their education is proof that this trend is here to stay.
Nation visited five banks in its neighborhood, at random, to find out more about this loan facility offered. Out of the banks visited, Bank of Ceylon, Commercial Bank, and Hatton National Bank have loan schemes that specifically lent money to borrowers to pursue their higher education. Sampath Bank, and People’s Bank do not have education loans as a separate category, but instead offered general personal loans to their clients for them to fund and pursue an academic or professional qualification preferred.
Bank of Ceylon has two types of education loans. One is their Comprehensive Educational Loan Scheme and the exclusive loan scheme for IBSL students. In order to apply for the comprehensive loan, the applicant should be a student with a minimum of three passes for GCE (A/L), or should have completed a foundation course in a reputed educational institute accepted by the University Grants Commission sufficient enough to start the next phase of the Degree level course. Under this scheme, one can borrow up to four million rupees and the borrower gets up to seven years to repay, including a grace period of four years. In the case of the special loan granted to IBSL students, the students can borrow up to Rs.75,000, subject to borrower’s equity of 25% of the full course fee. In order to apply, one has to be a member of the IBSL and over 18 years of age. He or she has to produce the Letter of Confirmation from the IBSL for the course fee in order to proceed. If employed, Letter of Confirmation from the employer has to be produced and if the applicant is unemployed, the loan will be granted jointly with the parent or a blood relation. The borrower gets a repayment period of 18 months maximum and two Personal Guarantors acceptable to the Bank are required as security.
Commercial Bank, meanwhile, promises to offer prospective students a choice between fixed or floating interest rates, while providing them with the option of customizing the loan to suit the payment requirements of the course one wants to follow. In order to apply for the loan, the applicant has to be a student preparing for a professional examination or a parent or guardian of such student. One should also have an adequate regular income to repay the loan. If the applicant is a parent or guardian, the student must be a joint applicant and the maximum loan amount you can ask for will depend on the course of study and your repayment capacity. Com Bank provides borrowers with the option of drawing funds within the loan amount, as and when one needs to meet one’s course fees.
Commercial Bank, however, releases proceeds of the loan applied by one only to the Governing Body of the Professional Certification Institution (e.g., CIMA/CIM) or the tuition provider in the form of a Bank Draft. These proceeds can be spread on installment basis as per the borrower’s request, as and when payments to the respective institution are due.
Hatton National Bank’s student loan was open to permanent staff employed in the capacity of executives and/or registered businessmen such as sole proprietors, partners and directors with a minimum net income of Rs.30,000 or above. The age limit of applicants for education loans is between 18 and 50 years. For locally-conducted educational courses, the loan covers registration, tuition and exam fees while for courses conducted abroad, the loan takes care of registration, tuition, examination fees as well as hostel/living expenses. Loans can be applied for in the name of the student or jointly with a co-borrower to support the repayment.
Before applying for an education loan, however, having a clear idea as to what you want and then exploring whatever options available is the best way to move forward.