Literature review on education loan in India - Study24x7
Social learning Network

Default error msg


New to Study24x7 ? Join Now
By continuing, you agree to Study24x7 ? Login

Literature review on education loan in India

Updated on 20 February 2021
Bcom Exam Guide
6 min read 55 views
Updated on 20 February 2021

An Education Loan or a Student Loan is a kind of financial service provided by the banks in order to help students gain good and quality education. This loan includes book supplies, tuition fee, secondary education and many more things. This loan is different from the other kinds of loan as this loan has a lesser interest rate. The repayment also varies for these loans i.e. when the child is still in school the repayment is relatively less. It also differs in many countries as it is subjected to rules and regulations of that particular country. Countries like Australia, Canada, France, Germany, India, South Korea and the United States have different policies on education loans. There is an effective impact of education loans as this loan is accessible to everyone and such loans help people in getting quality education from reputed schools and colleges.  

Impact of Education Loan in India

Education is one of the most important factors which lead to the development of the country. Often it is believed that education is the first step to the country’s development. Therefore, the government of various countries including India started providing education loans to poor and middle-class people. Educated generation adds on to the economy of the country. Many times the lower class people and kids are exploited, that is why this education loan scheme was passed so that these children from lower class can gain quality education without being humiliated or exploited. Some of the positive impacts of education loan are given below:

  1. Education loans have low rates of interest and the repayment is also easier than other loans.
  2. People and children from the lower class can gain quality education through this loan. 
  3. The Education loan was passed in 2016, and from then banks have been providing loans to poor and needy ones. 
  4. The Education loan was passed in order to educate the maximum number of children possible in and around the world.
  5. Also, through this education loan, many students are provided with good education and a mid-day meal. 

Types of Education Loan

There are several types of education loans provided in India. But majorly these education loans are divided into two categories i.e. Federal Loan and Private Loan. Private Loans are provided by the banks for personal reasons. These loans can either be used for education or any other work or investment. On the other hand, Federal Loans are provided by the federal government. These federal loans are further classified into four categories.

Direct Subsidized Loan:

This loan can be taken up to six months to cover the financial need of the students. The students can take different amounts of loans in every year of their college. The interest rate of these loans is 4.66%. But the interest rates and the amount of loans to be taken are revised every year.

Direct Unsubsidized Loan:

You can apply for this loan while you are in school without stating the financial need. However, the interest rate remains the same i.e. 4.66%. The new rate of interest is released every year. 


These loans are granted to the undergraduate and graduate students who are in the urgent need of money. The interest rate for such loans is slightly high i.e. 5% with a borrowing sum of Rs. 2 – 3 Lakh. 


These loans are available to the parents or their children with a high interest rate of 7%. Parents can apply for this loan while the child is still in school or college and has no means of earning. Once the child starts earning, he can begin to repay these loans with the interest rate applied to them. This loan is available in the US, Australia, Canada, France and other countries. 

People often wonder what is the difference between education loan and private loan? There is only one difference between the two i.e. private loans can be either used for education purposes or for any other purposes. But education loans can only be used for educational purposes. You cannot do any other work by applying for an educational loan. The rates of interest also vary in terms of private and education loans.

There are various banks in India which provide these education loans. Some of the best banks are HDFC Bank Education Loan, Axis Bank Education Loan, Union Bank of India Education Loan, Punjab National Bank Education Loan and State Bank of India Education Loan to name a few. There are several other banks providing these education loans and other financial services. Therefore the impact of education loans is quite positive as everyday more and more numbers of people apply for such loans to gain quality education. 

Write a comment...
Related Posts