Education loan is a special type of loan designed for students hoping to further their education, particularly post-secondary school students, helping them to fulfil their dreams. It is designed to help cover expenses incurred during education, partially or totally. It may cover fees such as tuition fees, books and stationeries, living expenses, feeding expenses, transport fares etc. The features of an education loan may, however,differ from one country to another.
In Australia, it operates under the name, HECS-HELP Scheme. There are different types of loans. Undergraduate loans and graduate loans are different types of loans.
Although, education is not necessarily an end to a means but rather a means to an end. For a successful life, some people consider quality education as being paramount. However, not everyone is capable of funding their education. Some families are unable to feed properly and sponsoring their child’s education maybe pressuring. As a result of that, one will have to source for funds. Sometimes, some education loan providers might list one or more requirements that must be met.
Education loans can be a good source of fund and its benefits will be discussed below.
- Payment time: Repayment of the loans does not necessarily need to be afterschool. The loan provider may give the student much time for repayment, eventill the student secures a job. This brings relief to most students as they worry less about repayments.
- Interest rate: Interest rates of education loan are mostly at the lowest rate. They are fixed and do not change over time. Another benefit of the education loan is that interest pay on the loan is deductible. Under the income tax act, the entire interest paid on education loan qualify for income tax deduction. It can be deducted from your income and can be deducted from taxable income even up to more than 5 years.
- Reduced financial burden: Parents unable to fund their child’s expenses will find it easy to educate them. Families with lower income can now divert funds to other important things such as feeding. It also helps secure savings thus helping to ensure financial stability. With a good financial stability, financial goals can be reached.
- Credit history: If after collecting the loan and the student pays up the loan intime, the student can be rewarded with a positive credit rating. Sometimes the education loan payment is the start of the financial history for most students, early payment, which means a good credit rating, will prove very beneficial in the future. A very important benefit is that it is very easy to secure a home loan in the future.
It is very easy to obtain as large number of agencies and banks are available to offer education loan. It is also a very good opportunity for students to take responsibilities of their early life. Students, planning to utilize the scheme, should watch for bank charges such as processing fees. Sometimes, education loan providers may charge about 0.15 percent for its loan amount. With scheme, education can be available for all.