Education loans are expected to come up with a feature that is going to light up the hopes of students. The repayment tenor of these loans is expected to be increased to 15 years. Presently the repayment period for the same has been set at 5 to 7 years.
With the repayment period getting extended, the pressure of instalments is going to be lightened.
This is also going to benefit the banks as with the reduced load of repayment on the part of the borrower, the chances of loan defaults is also expected to decline.
According to Mr K. Unnikrishnan, Deputy Chief Executive, Indian Banks' Association, this increased repayment tenor is very much like the repayment tenor type followed in the UK.
"The UK education loan scheme allows for an extended repayment period, till almost the time the borrower nears retirement. The loan repayment does not start until the borrower earns more than 2,100 pounds a month. Once the borrower starts earning more than this, his employer is duty bound to cut the education loan instalment and remit the same to the bank," he said.
Under this scheme, the maximum loan permissible to a student is Rs 10 lakh for education in India and Rs 20 lakh abroad. Margin money is exempted for loans upto Rs 4 lakhs. Upto Rs 4 lakh, there is no collateral needed with the loan though parents bear co-obligation.