Unusual Advantages of Taking a Students Loan.

Regardless of location, field, or stage, the simple fact is that education has become expensive. However, that does not eliminate the need for it. As a parent, this leaves you in a tricky situation. One of the biggest questions is where to get the necessary funds for higher education.

The first instinct that many have is to dip into their lifelong savings or selling valuable assets. In their defence quality higher education in India can cost you a minimum of Rs. 10 lakh. Moreover, if you choose to send your child overseas for higher studies, it can cost you above Rs. 30 lakh. Paying these amounts may only be possible for people that have maintained fixed deposits of higher amount. Alternatively, taking a students loan is better regardless of having adequate funds or not.

How does a student’s loan work?

A student’s loan, as the name suggests, is applied in the name of the student pursuing higher education. However, the application also includes the details of a parent, guardian or a third-party guarantor. The primary purpose of the loan is to pay for the college fees including admission, tuition fees, and examination fees etc. However, many lenders also provide packages including expenses such as lodging, study material, travel expense, and living expense.

What advantages does a student’s loan offer?

Protects savings:

As mentioned above, many people shy away from a student’s loan and choose to use available funds to pay for higher education. However, one of the biggest advantages that taking a student’s loan would is that obviates the need to access your lifelong savings. This ensures that your investment portfolio continues to serve you well in preserving your financial goals.

Tax benefit:

Taking a students loan not only helps a student with his/her education, it also provides a significant tax benefit. As per Section 80E of the Income tax Act, unlimited tax deduction can be claimed on the interest you pay for the students loan for 8 years. However, you should know that the tax benefit is not applicable on principal repayments.

Delayed repayments:

Setting itself apart from other types of loans, a students loan allows you to choose a period of time after your education is completed to start making repayments. The average time that most lenders allow borrowers is 6 to 12 months after completion of the course. This can be a relief for the students that the loan was taken for. It helps them be prepared for the monthly repayment of the student loan.

Build credit history:

Many people have a wrong notion that the best way to maintain your credit score is to not take any credit at all. Not taking any credit means that any lender does not have information on you for risk assessment if you apply for a loan in the future. On the other hand, taking a student’s loan and making timely repayments strengthen your credit history and credit score.

This helps you in being eligible for any future credit you might apply for.