Higher education lays the foundation of a successful career and a happy life thereafter. But, it comes at a cost and sometimes you just can't afford it. This forces a lot of parents to take loans to support their children’s higher education. Seeing the critical need for such a product, State Bank of India or SBI has come to the rescue of parents with an education loan facility. While a lot of people might think that taking the loan is the most difficult part, repayment is often trickier. In fact, as proof, most Indian banks are having a tough time in recovering the loans sanctioned for education. 

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According to the data compiled by Indian Banks Association, bad loans or non performing assets under the educational loan portfolio rose to 8.97% in 2018 from 7.29% in 2016. Most borrowers are unable to repay the loan on time either due to shortage of time or because of the lack of awareness. The State Bank of India has various previsions that can help bring down the repayment cost and allow you to repay the loan on time.

How to reduce education loan costs?

According to the details available on the SBI website, loan repayment starts after the completion of course and moratorium period (one year after course completion or six months after securing a job, whichever is earlier). This applies to SBI student loans. It says that the repayment starts after completion of course period and moratorium period (six months after course completion) in case of SBI scholar loans.

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The borrowers are allowed to repay the interest amount during this moratorium period. The lender provides a concession of 1 per cent in the rate of interest applicable on the education loan if the borrower manages to service the entire amount during the period. As a result, the interest applied to the loan amount in this period is not added to the EMIs. 

The other benefit you get is that any education loan is eligible for tax benefit under Section 80(E) of the Income Tax Act. 

Apart from this, borrowers falling in the economically weaker section (EWS) can avail the Central Scheme for Interest Subsidy on Education Loans upon fulfilling the eligibility. As part of the scheme, borrowers from EWS with annual gross parental/family income up to Rs 4.5 lakh are given interest subsidy. 

Not mention, the timely repayment of EMIs can help you reduce the overall interest charged.