‘Aspiration for a great career drives demand for education loans’
Education loan from Avanse -With the cost of education shooting up manifolds, an increasing number of students pursuing higher education abroad are considering education loans as an imperative option to fund their studies. While there are many banks providing education loans to students, there are also financial services companies like Avanse, which provide customized education loans to students through a faster and easier process.
Here we have Mr. Neeraj Saxena, CEO Avanse Education Loans who talks to Careers360 about the benefits of taking anEducation loan from Avanse. Mr Saxena also delves into how the education loan sector has evolved in India and what are the steps that the company is taking to make the education loan system more efficient for students.
Below are the edited excerpts:
Q: Has foreign education loan area expanded in the last few years? If so, the reasons thereof.
A: Education loan is still at the nascent stage in the country but it has great scope to grow. Overall education market is about Rs 80000 crore out of which only 16% is serviced by education loans. The education finance business in India has grown at the rate of 30 per cent CAGR over the past five years from Rs 15,200 crore in 2006-07 to Rs 50,300 crore in 2011-12.
India’s strong youth population has fueled a growing demand for higher education and the lack of quality institutes in India that can cater to this demand has meant that the number of students attempting to go to foreign destinations to pursue their higher education is constantly increasing. In fact, Indian students are the second largest group of international students in the worldwide higher education market today.
Combined with this, the sky rocketing costs of higher education and the Indian rupees’ slump in global markets have only resulted in expanding the demand for education loans for foreign studies.
Q: For what kind of programs do you offer assistance?
A: Being a new age education finance company, Avanse not only funds regular , mainstream courses that Indian students have traditionally pursued but also extends education finance to new and upcoming courses including fine arts, music, sports management, photography, film making as well as certification courses and diplomas.
Avanse has also launched finance programs for K-12 education and loan options to fund prep-courses for entrance exams, etc.
The Company funds students travelling to all key international advanced education destinations including US, UK, Australia etc.
We provide assistance to Executive education. Avanse provides financial support to working professionals who want to pursue a higher order education
Avanse funds graduation/ Post-graduation for job oriented professional/ technical courses offered by reputed universities outside India as well as courses and universities approved by Avanse for education financing.
Q: What is the loan structure for education loan to study abroad?
A: The loan structure of an education loan is described in the matrix below:
|Purpose||Education Loan for higher education abroad.|
|Eligible Countries||All Countries are Eligible|
|Eligible Institutes and Courses||All accredited, recognized, approved full-time or part-time courses at Undergraduate, Graduate and Doctoral levels|
|Eligible Streams||All streams including, but not limited to, engineering, business/commerce, medical, humanities, social sciences, fine arts, design, executive education, etc|
|Max Loan Amount Allowed||Up to the full cost of completing the degree (max 1 crore Indian Rupees or more, if required)|
|Expenses Covered||All expenses including tuition & fees, living expenses, books & study materials, insurance, travel expenses, etc|
|Margin Money Required (Yes/No)||No. Margin is not required|
|Product Tenure||A max of 144 months (12 years)|
|Repayment Type Allowed||I. Principal moratorium during course + grace period and then EMI repayments|
II. Partial interest repayment during course + grace period and then adjusted EMI repayments
III. Immediate and direct EMI repayments
IV. Ballooning or Step-Up Repayment structure
|Floating Rate Of Interest||Tied to Avanse base rate. Typically between 12%-14%|
|Processing Fee Amount||One-time processing fee of 1% (typical)|
|Insurance Cover||Avanse Protect Life insurance coverage is required|
|Collateral Security Requirement||Collateral security is required for certain loan types. Acceptable collateral includes Properties, Fixed Deposits and 2nd charge on properties mortgaged with DHFL or its group companies.|
Availability of collateral can greatly increase the possibility of loan approval.
A loan backed by collateral security generally has a lower interest rate
The value of the collateral has to be at least 50% of requested loan amount
Third party collaterals & multiple collaterals are acceptable
|Co-borrower||An income earning co-borrower is required |
Accepted co-borrower relationships are Father/Mother/Brother/Sister/Spouse/Relatives
|Acceptable Co-Borrower Occupations||Salaried, Professionals, Self-Employed, etc|
|Accepted Locations for Loan||All DHFL Locations (over 200 across India)|
|Documentation||Completed Avanse Loan Application Form along with KYC, Financial and Collateral documents|
|Disbursement||Loan is disbursed in Indian Rupees|
Tuition fee is converted into foreign currency and sent to University/Institute's account (alternatively, a foreign currency denominated DD can be issued)
Living expenses, travel expenses, etc is given to the student (borrower)
Loan is disbursed as per fee payment schedule of the institute
|Additional Facilities||Disbursement of loan before student visa clearance|
Approval (sanction) of loan before admission confirmation
Balance Transfer of existing education loan to AvanseDoor-step documentation service
Q: What are the eligibility criteria to get an education loan to study abroad?
A: At Avanse, to be eligible for a loan, the following criteria must be met:
- The student taking the study abroad loan should be an Indian citizen and 18 years old or above
- There must be confirmed admission in the Institute before final disbursement of the education loan
- The study abroad loan must be co-signed by an earning co-borrower in India.
- The co-borrower of abroad studies loan must be an Indian Citizen and could be a Parent, Sibling, Legal Guardian, or any other Relative.
- They must have a bank account in any bank in India with cheque writing facilities
- The Co-borrower would necessarily be a joint debtor.
Q: Does the Bank charge a margin? If so, how much?
A: Avanse does not charge for any margin money contribution from the applicants. Our study abroad loans are designed to provide 100% coverage of the cost of education, thus doing away with this burden, leaving the student to focus on his/her studies.
Q: Is travel expense covered in the loan amount?
A: Yes, we offer all inclusive loans.
Q: If I have some financial aid for the said programme, does the Bank consider it while calculating my loan amount?
A: Yes it does benefit. It adds to the merit of the student.
Also, the scholarship amount is deducted from the total cost to complete the course, thereby resulting in a lower loan requirement.
Q: How is my loan disbursed?
A: At Avanse we have a complete process for disbursement of loan amount. The steps are
- The Loan amount is disbursed in Indian Rupees.
- The tuition and hostel Fee will be converted to foreign currency and directly disbursed to the educational institute ,in instalments, as per the requirement of the specific educational institute
- The loan amount related to other expenses will be disbursed in instalments spread over the duration of the study, and ideally will be transferred to the co-borrower’s account
- In case the student resides outside the hostel, the related expense will be transferred to the co-borrower’s account.
- In case of abroad cases, money will be transferred as per agreement with third party FOREX vendor.
Q: Does the Bank require collaterals? If so, what is the criteria and maximum permissible amount?
A: Avanse has both secured and unsecured options available. A collateral security is generally required for loan for abroad studies. Availability of a collateral security can greatly increase the chance of loan approval and also may qualify the customer for a better interest rate.
Avanse may waive off the collateral for certain courses and/or meritorious candidates.
The value of the collateral can be less than the loan amount requested. Normally, lenders require collateral covering 100% or more of the education loan amount.
Also, Avanse can accept Fixed Deposits as collateral.
Q: What kind of documents does one need to submit?
A: A list of documents required to submit for availing an education loan are:
- Student KYC & Educational Documents
- Course & Fee Details
- Co-Borrower KYC and Income Documents
- Collateral Documents
Q: Tell us about your education loan campaigns. How have the students responded to such campaigns?
A: Avanse ‘5 Benefit Pack’ campaign was a 360 degree campaign to communicate the benefits to the prospects. The ‘5 Benefit Pack’ consists of unique and exclusive benefits offered by Avanse for a student traveling abroad. The benefits include – Telecom services, Travel Assistance & Insurance, Personality and Etiquette training, ISIC Student Card, Luggage Shopper Discounts, and Flight/ Baggage Discounts. The package aims at providing convenience to students with logistical support so as they can focus on studies.
Avanse also runs various online and offline campaigns to enlighten the Indian student community about its products and services and education loans in general. Seminars, Summits and Webinars held regularly cover various academic and education-finance and borrowing related topics.
The response to such campaigns is very heartening, pointing to the fact that numerous Indian students are keen to get access to higher education and education finance.
Q: With high interest rates, how feasible is it for students to opt for education loan?
A: Aspirations for a great career and life continue to remain the cornerstone that drives the increasing demand for education loans in India. Students now have the opportunity to pursue various offbeat courses, which provide them a vast array of career opportunities. Student interest in non-conventional programs such as music, photography, image consulting etc. is seen to be on the rise. More often than not, they wish to pursue these programs in specialized institutions overseas. However, some of these courses are quite expensive. Education loans thus help these students pursue their aspirations. Even in the case of conventional courses such as MBA, MS etc. with increasing awareness of education loans, parents and students are showing eager interest to transfer responsibility - even if it is partially - to students.
Q: What sops do you provide to attract students to education loan schemes?
A:Avanse has introduced a host of first-of-its kind services in education loans. In order to add value and provide convenience to the students going abroad for higher education, Avanse has introduced the industry's first 5 Benefit Pack that enables the overall wellness of the student, going beyond just education loan.
Avanse also offers Pre Approved Loan (PAL), designed to help students who are planning to pursue their higher education overseas especially in the USA, where admission to the institution may be secured only if the student has demonstrated “Assured Funding to Complete the Course”. PAL provides an in-Principle Sanction letter of Education loan thus improving the prospect of admission in the desired university for the student.
Avanse also provides existing education finance customers from other lending institutions the opportunity to avail of Avanse's unique proposition through Avanse Balance Transfer (BT). Its special features include competitive interest rates, along with extended repayment tenure and flexibility. Avanse provides doorstep services with zero processing charges and a hassle-free and transparent process.
With its modernized processing, Avanse approves the loan in a maximum of 4 days and provides loans upto 100 % of the application amount, even as high as Rs 1 crore or more. The Company provides students the option to repay the loan through flexible repayment plans, with repayment tenure up to 10 years.
Q: Can you give an estimate of the number of students approaching you for foreign education loans every year? How has the trend changed and what does it reflect?
A: We receive close to 2000 serious enquiries for overseas education loans per month. Students are not only sticking to conventional destinations such as US and UK. They are travelling to Germany, Canada, amongst others. Similarly they are opting for various non conventional courses.
Since its inception in Jan 2013, Avanse has received close to 4000 completed education loan applications totaling a whopping 650 crores.
Q: Students are increasingly travelling abroad for studies? Could you share some of the strategic initiatives that the bank is planning to facilitate their financial needs?
A: Company has introduced various initiatives such as 5 benefit pack, elaborated above, to benefit students traveling abroad. Similarly, we have Pre approved loans as well as the facility to disburse the loan before receiving a student visa from the high commission/immigration department of the concerned country.
Avanse has also tied up with key stakeholders including educational consultancies, institutes and has a large Research & Development vertical to keep up to date with changing trends and dynamics of the higher education and education finance sectors.