Applying for an education loan in India is a long process. There are several requirements that you may need to fulfil like an offer letter from the university, having a co-applicant, and a good CIBIL Score (I’ve covered this later in this article).

Being an educational counsellor, I’ve guided Indian students to apply for an education loan for several years. I’ve often been asked about who can be a co-applicant for an education loan.

Parents, siblings, friends or any other blood relatives with a secure financial profile can be a co-applicant for an education loan. Additionally, the co-applicant must be an Indian citizen with a local bank account to meet the eligibility.

What is an Education Loan And How Does It Work?

An education loan is a financial assistance provided by banks and financial institutions in India to help student loan applicant cover the costs of their education, both within the country and abroad. These loans typically cover tuition fees, accommodation, books, and other related expenses.

The maximum loan amount depends on the course and educational institutes, with maximum limits set by the lender. Repayment options typically offer a moratorium period during the course duration and a specified tenure post-completion.

Note that interest rates and repayment terms differ among lenders, and collateral or a co-applicant may be required depending on the loan amount and the borrower’s profile.

Factors that primarily determine the type of education loan you can apply for:

• • Course Type

Depending on which stage of your educational career you are, consider opting for an undergraduate or postgraduate loan. If you’re a working professional looking to boost your career prospects, opting for a career development loan is also a great idea.

• • Location

For students who have applied and secured a seat in an Indian college/university, a domestic education loan is available. On the other hand, if you’re a student who has acquired a seat in a foreign university, you’ll have to opt for an overseas education loan instead.

Note: Before applying, always make sure that your institution is on the bank’s approved list and meets all the other lender’s eligibility criteria.

• • Collateral

It goes without saying that a bank is unlikely to approve a loan without some security. You can apply for an education loan against collateral like property, security, deposit, or a third-party guarantee.

This does not mean that you cannot get an education loan without collateral. Depending on the loan amount and the borrower’s profile, certain banks and financial institutions offer non-collateral education loans under specific conditions and eligibility criteria

How Exactly Does It Work?

As you must’ve already understood, education loans are offered to students to help them achieve the best education without having to worry about money.

If you are availing of an education loan, you aren’t required to pay a set amount for the particular course period immediately, as the bank does it on your behalf.

Once your loan is sanctioned, the bank makes a direct payment to the educational institution you’re enrolling in and also covers other expenses related to your study such as accommodation, travel, Visa expenses and so on.

Only after you’ve completed the course, do you have to start with the repayment process. Some banks even provide a grace period of six months. Simply put, your repayment period starts when you bag a job or after a year from your course completion, whichever is earlier.

This completely varies on the lending institution and it’s best that you check with a few before settling for one.

Who Can Apply For An Education Loan?

Indian citizens who have been accepted into accredited colleges or universities in India or abroad are eligible to apply for student loans from public and private banks. A variety of academic programmes, including undergraduate, postgraduate, professional, and vocational courses, are eligible for an unsecured or secured loan.

If you are applying to a foreign lending institution, the rules can be tweaked.

Different financial institutions may have different qualifying conditions, but in general, a loan applicant should be in good academic standing and be between the ages of 18 and 35.

In order to establish their ability to repay the loan, the applicant or a co-applicant like their parents or legal guardians must also have a reliable source of income.

Note that most banks might additionally take into account a guarantee or collateral security. Moreover, it is crucial to keep in mind that precise eligibility requirements, interest rates, and payback schedules may vary. Make sure to carefully read your education loan agreement to find more details.

Education Loan Eligibility Criteria For Applicants

As an Indian resident, you need to fulfil the following criteria to become eligible for an education loan:

• • The applicant should be an Indian national.

• • The applicant’s age must range between 18-35 years when applying for the loan. If you are under 18 years, your parents must apply on your behalf.

• • At the time of application, the candidate must have an acceptance letter from a university.

• • If pursuing education within India, the applicant must have an acceptance letter from an institution affiliated with University Grants Commission (UGC), the All India Council for Technical Education (AICTE)/Govt, and the like.

• • When seeking loans from international lenders, Indian applicants will have to present an offer letter from a recognised university and have an impeccable academic record. Most importantly you need to have a co-signer/ guarantor from the same country where you are applying for the loan.

• • For students pursuing a full-time course, it is mandatory to have a co-applicant when applying to Indian banks for an education loan. This can be the candidate’s parents, or guardian. In case the applicant is married, they can even have their spouse or a parent-in-law as their co-applicant.

Education Loan From International Lenders Without Co-Applicant

If you are reaching out to an international lender for an educational loan, some banks will allow you to just have a primary co-applicant. They can excuse you for not presenting a financial co-applicant. So, it is best that get in touch with the individual lenders to know their eligibility criteria.

• • It is mandatory for the co-applicant to have a regular source of income (this can be proved using bank statements, a high credit score, or a salary slip.

• • Pro Tip: Having an excellent academic record speeds up the process.

However, a co-applicant is not mandatory for education loans when you borrow from an international lender. They can excuse you for not presenting a financial co-applicant. So, it is best that get in touch with the individual lenders to know their eligibility criteria.

• • It is mandatory for the co-applicant to have a regular source of income.

• • Pro Tip: Having an excellent academic record speeds up the process.

Eligibility Criteria For A Co-applicant In An Education Loan

An applicant can have their parent, guardian, or in-laws as their co-applicant. But that’s not enough to get an education loan approved. Here are the basic criteria that a co-applicant must fulfil:

• • As they are the primary debtor, the co-applicant must have a bank account in an Indian bank that allows them to issue cheques.

• • When applying for an education loan from international lenders, you will need to have a financial co-applicant. When banks say that they don’t need a co-applicant to approve an education loan, they simply mean that they do not need a financial co-applicant but having a primary co-applicant is essential.

• • Moreover, it is important that the co-applicant has a proper ITR (Income Tax Return) filed. This allows the lender to understand the financial situation of the co-applicant better.

• • Also, the co-applicant should have a proper CIBIL score to ensure that the education loan gets sanctioned. The higher the score, the better the chances of the loan getting approved.

• • Income proof of the co-applicant is also an essential criterion. For salaried individuals, disclosing the salary slip for the last three months is necessary. On the other hand, submitting certain documents for income proof is essential for people who are self-employed.

Documents Required From Co-Applicant For Education Loans

Identity Proof Documents (Required For KYC)

1. Pan Card

2. Adhaar Card

3. Driving License

Financial Proof Documents Of Co-Applicant

1. Bank Account Statement

2. Salary Slips Of the Last 3 Months

3. Copy of Form 16 or Copy of IT returns

Can I Get an Education Loan Without a Co-Applicant Or Guarantor?

When applying to Indian banks, getting an education loan without a co-applicant or guarantor is difficult. However, a great workaround is to get your education loan from international lenders as they do not require a co-applicant like a parent, guardian or a blood relative.

However, for lesser loan amounts, there might be an exception, and some education loan providers might provide school loans without a co-applicant. So, it is best you speak directly with particular banks to explore any potential options for student loans without a co-applicant.

Does A Low CIBIL Score Of A Co-Applicant Effect The Education Loan Process?

The simple answer is- Yes It Does! CIBIL score is what determines the eligibility of the co-applicant for an education loan. If the CIBIL score is low, it reflects that the co-applicant does not have a good history/ repayment behaviour.

Hence, the chances of loan approval for an application with a low credit score may be affected. This means, managing your education expenses and hostel expenses might get difficult due to lower credit scores.

As the lender takes the CIBIL score of the co-applicant into consideration to understand the risk associated with issuing an education loan, a low CIBIL score or credit history is not good, to begin with.

The average CIBIL score required to get an education loan in India typically falls within the range of 650 to 750, although the specific score requirement may vary depending on the lending institution and other factors such as the loan amount and applicant’s overall financial profile.

A low CIBIL score simply means a higher risk for the banks to issue an education loan, thus reducing your chances of securing one. Even if the loan gets approved, the chances are high that there will be a steep interest rate when the co-applicant has a low CIBIL score or poor credit history.

UPDATE– Recently, Kerala High Court ruled that banks should not reject education loans to students based on low CIBIL scores. They also suggested banks have a humanitarian approach while dealing with education loans for meritorious students.

Education Loan- What are the alternatives?

If you cannot manage to find a co-applicant for your education loan, international lenders might come to your rescue- but at the cost of currency rate fluctuations and higher interest rates (this should be your last option).

I’ve found a few alternatives to education loans which could help you finance your education that is less likely to burn your savings.

Best Education Loan Alternatives

1. Loan against property/ Mortgage loan

2. Loan against fixed deposits

3. Personal loans

4. Credit card

5. Gold loan

Frequently Asked Questions

Can I get an education loan if my parents are unemployed?

Yes. Even if your parents are unemployed, you can still secure an educational loan. To avail this, you will have to find banks that offer loans against collaterals such as property, fixed deposits, and other investments. Moreover, you can also furnish other proof to show your repayment capacity.

Can a friend be a co-applicant?

When applying for an educational loan in India, you cannot make your friend a co-applicant. Only people like your parents/ guardians or in-laws, who can guarantee that the loan will be repaid can be a co-applicant.

A friend does not fall under this criteria and cannot function as a co-applicant.

Can a retired person be a co-applicant for an education loan?

Yes, if you have a retired parent or guardian, they can be a potential co-applicant when you’re trying to secure an educational loan. However, keep in mind that since they are your guarantor, they will need to disclose a stable source of income or a steady pension after retirement.

Who are the most common co-signers for student loans?

It is mostly the parents of the applicant who act as co-signers when seeking a student loan. Banks prefer the candidate’s parents to be the co-signer because they share a close relationship with the candidate and will most likely help with the loan repayment in case things go south.