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Education Loan
What does an education loan cover? Find out now
Discover what education loans truly cover—from tuition and living expenses to travel and supplies. Plan smarter for your child's education journey.
Key takeaways
- Education loans cover far more than just tuition fees—they include living costs, books, travel expenses, and health insurance too.
- These loans are structured to ease the financial pressure on families without tapping into savings. Plus, with tax benefits and moratorium periods, they offer both flexibility and relief.
- Think of an education loan not as a burden, but as a smart investment in your child's future success.
Gone are the days when sending your child to college meant just paying their fees. The education landscape now comes with a price tag that includes everything from laboratory fees to flight tickets if your child is studying abroad. You may find yourself staring at numbers that make your head spin.
But here is the good news – an education loan can help you. These financial instruments are designed to handle a whole world of expenses. It can make the educational journey smoother for both parents and students. Let us learn how that works.
Breaking down the expenses – What is covered?
Tuition fees
Tuition is the first thing that comes to mind when talking about education loans. But this is not just limited to just the basic tuition fees. That loan amount also stretches to cover exam fees, library charges, and even specialised laboratory costs.
Living costs
Your child needs a place to sleep and food to eat while studying. Education loan understands this fundamental need and typically cover accommodation expenses. They could be PG rent, meals, and even utilities in many cases.
Books and supplies
Textbooks, stationery, laptops, and project materials fall under this category. The "just one more notebook" can turn into a ₹2,000 bill and the loan covers it too.
Travel and insurance
Is your child studying abroad? The airfare is typically covered by education loan. Many loans also include local commute allowances and health insurance premiums. Some even cover emergency travel expenses for family visits in case of medical emergencies.
What is not covered?
Education loans are comprehensive, but there are a few things they might not cover.
These include- weekend shopping sprees, luxury gadgets, or non-essential expenses. Banks expect loan amounts to be used strictly for education-related expenses.
Some other exclusions might include-
- Recreational club memberships (unless mandatory for the course)
- Non-academic events or celebrations
- Personal shopping beyond necessities
- Vehicle purchases or rentals
- Luxury accommodations above standard options
| Expense Category | Typically Covered | Not Covered |
|---|---|---|
| Academic Fees | Tuition, exam fees, library fees, lab costs | Repeated exam fees due to failures |
| Accommodation | Standard hostel/PG, basic utilities | Luxury apartments, housekeeping services |
| Equipment | Course-required laptops, scientific calculators | Gaming setups, premium smartphones |
| Travel | To/from university, one annual home visit | Vacation travel, weekend trips |
| Living Expenses | Basic meals, essential toiletries | Restaurant dining, designer clothes |
| Health | Basic health insurance | Cosmetic procedures, fitness memberships |
Note: The list of covered and non-covered expenses is indicative and may vary by lender and loan scheme. Please check with the specific bank or financial institution for detailed eligibility and coverage terms.
Why take a Loan instead of dipping into savings?
It might be a good idea to preserve your retirement fund instead of using it for your kids' higher studies. You have worked hard for it for years – don't drain the savings you will need later when a structured loan can help manage education costs.
Under Section 80E of the Income Tax Act, interest paid on education loans is tax-deductible with no upper limit for deduction. For a loan of ₹20 lakhs at 8% interest, that's an annual tax saving of approximately ₹50,000 if you are in the 30% tax bracket. (Provided you opt for the old tax regime.)
Most banks offer a moratorium period where repayment starts only after the course ends, or the student finds employment. This breathing room helps students establish themselves financially before tackling loan repayments.
How to pick the right Loan?
It would be ideal to look for loans that cover all expenses and not just tuition fees. Some institutions advertise attractive interest rates but limit coverage to academic fees only. It can be beneficial to compare interest rates. However, you must also look into the nitty-gritties such as processing fees and prepayment penalties.
Conclusion
Education loan is an investment, not debt.
They aren’t a burden; they can rather be seen as a bridge to your child's future. With average starting salaries for graduates from premier institutions ranging from ₹5-12 lakhs annually, the return on investment is quite good.
So, the next time someone says, "Education loans are just for fees," smile and tell them, there is a lot they need to unlearn. This financial tool is designed to support the complete educational journey. It covers admission to graduation and everything in between.
Disclaimer: This article is for information purpose only. The views expressed in this article are personal and do not necessarily constitute the views of Axis Bank Ltd. and its employees. Axis Bank Ltd. and/or the author shall not be responsible for any direct / indirect loss or liability incurred by the reader for taking any financial decisions based on the contents and information. Please consult your financial advisor before making any financial decision.
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