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Taking student loan for the first time amid coronavirus? Keep these 6 points in mind

​Borrowers and the Covid crisisGetty Images
​Borrowers and the Covid crisis
Hard times are upon everyone. Borrowers are not far behind in this race, all categories of borrowers. The going has got even tougher for students and fresh graduates who had borrowed for further studies. This is because a beaten down economy and subsequently the job market, with hiring not looking up, have made the repayment of education loans more challenging.

While existing education loan borrowers who are already servicing the loan and are facing trouble repaying it should contact their lender to ask them for a loan restructuring option, here are six things new or first-time education loan borrowers should do.
​Opt for secured loanGetty Images
​Opt for secured loan
Most banks allow students to take education loans without collateral. But did you know that opting for a secured loan with collateral could turn out more pocket friendly? Experts say that an education loan with collateral offers lower interest rate compared to an unsecured one as the lender is not exposed to a high degree of risk of default on the borrower's part. So, if you own any assets like land, property or FD, you can use it as collateral to apply for an education loan."
​Pay interest during moratoriumGetty Images
​Pay interest during moratorium
EMIs of an education loan don't start immediately after the loan disbursement. One can begin repayment after completion of the course or when he/she has secured a job and starts earning. This is the grace period known as 'moratorium'. Although the borrower is not mandated to pay EMIs during such period, the lender does charge simple interest, which is added to the principal amount. Paying off the interest component of the loan during the moratorium will bring down the cost of repayment.
​Loan subsidy schemesGetty Images
​Loan subsidy schemes
The central as well as various state governments offer subsidy schemes to make educational loans more affordable. One such example is the Ministry of Education offering subsidies to students belonging to the Economically Weaker Section (EWS) category. The eligibility criteria requires that the student's family's gross annual income not exceed Rs 4.5 lakh. The interest accrued on the loan during the course plus one-year moratorium will be paid by the Government of India.
​Formulate repayment strategyGetty Images
​Formulate repayment strategy
Normally, unsecured education loans are available for a period of up to eight years but secured ones are available for a tenure of up to 10 years or more. The catch is that although the longer tenure decreases the monthly EMIs due but it increases overall repayment cost. It is thus advised to opt for a shorter tenure. Also, there is no penalty on prepayment of education loan, so you can repay the outstanding loan amount to save on interest cost, say experts.
​Concessions for women, students in premier schoolsGetty Images
​Concessions for women, students in premier schools
Many lenders offer concessional rates to female students. They also reserve their lowest rates for students going to premier institutions such as IITs, IIMs or universities of national importance. The eligibility varies from lender to lender.
​Income tax breakGetty Images
​Income tax break
Applying for an education loan makes one eligible for tax deduction under Section 80(E) of the Income-tax Act, 1961. Such deduction can be claimed on the interest paid towards the education loan. Note that the tax benefit can only be claimed by that individual who has taken the loan, even if he/she is not the actual beneficiary.


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