Students enrolling at Massachusetts Institute of Technology, Imperial College London, University of Oxford, Harvard University and University of Cambridge can access collateral-free loans up to the new limit, the bank’s website showed. Though SBI has not announced the higher loan limit and did not respond to an emailed query, consultants working with the bank said the cap was raised in November-December.
The cost of studying abroad can cross ₹1 crore in tuition fees and accommodation expenses. Given that more Indians head out to foreign colleges every year, other lenders too are expected to follow suit, non-banking financial companies (NBFCs) and sector analysts said.
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“SBI’s decision to offer loans without collateral for select universities abroad is a progressive step that will significantly ease access to education financing for students. This move aligns with the broader industry trend of increasing availability of unsecured loans,” said Ankit Mehra, co-founder and chief executive officer of GyanDhan, a non-bank lender.
Over 1.3 million Indian students were pursuing overseas education in 2024, the government informed parliament in April. Greater availability of big-ticket, collateral-free loans would help more students study abroad regardless of their family’s financial background and broaden access to quality education.
Banks generally use the Model Educational Loan scheme developed by the Indian Banks’ Association (IBA) to set eligibility criteria, quantum, security, margin, and interest rate for study loans. Loans of up to ₹7.5 lakh require no collateral, but parents must be joint borrowers with the applicant; for loans above ₹7.5 lakh, not only do parents need to be co-borrowers, banks also require “tangible collateral security of suitable value”. Repayment moratorium is allowed up to a study period plus one year in all cases, and the loan can be repaid up to 15 years after the end of the moratorium.
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However, banks are free to set their own loan caps in some instances, like in SBI’s case.
Apart from SBI, HDFC Bank also offers education loans of up to ₹50 lakh without collateral. As per HDFC Bank’s website, students can get loans up to ₹1.5 crore, and those looking for up to ₹50 lakh can get it without collateral if they enrol at select institutes.
Arjun Chowdhry, group executive and head of retail assets, payments and affluent banking at Axis Bank said that the private sector lender currently offers collateral-free education loans up to ₹1 crore to students eligible for admission into various prestigious institutions like Harvard, Oxford and MIT. “This is offered across countries for post-graduate STEM (science, technology, engineering, and mathematics) and management programmes,” said Chowdhry.
According to GyanDhan, the average education loan size increased from ₹32 lakh in FY22 to ₹40 lakh in FY25, reflecting the rising costs of education and currency depreciation, as well as higher loan limits. “With the SBI unsecured limit set at ₹50 lakh, we expect this trend to continue in the coming fiscal,” Mehra highlighted.
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Banks’ education loans stood at ₹1.3 trillion at the end of November, 17.5% higher than in the same period the previous year, Reserve Bank of India data showed. Education loans accounted for 2.3% of aggregate retail bank loans in the same period. At 2.7% as on 30 September, bad debt in education loans is higher than several other retail loan categories.
Banks charge higher interest rates on collateral-free education loans due to the increased risk associated with lending without any security against the loan amount. This higher interest rate compensates the bank for the potential loss if the borrower defaults on the loan repayment. For instance, SBI charges an interest of 10.15% for collateral-free student loans of over ₹7.5 lakh and up to ₹50 lakh for those going to select institutions, whereas the interest rate on collateral-backed loans of above ₹7.5 lakh and up to ₹3 crore for similar institutions is 9.65%, its website showed.
According to Suchindra Kumar, partner and leader, education at PwC India, the study loan demand from rural markets has increased, and banks are queuing up with better offers. “However, one has to ensure that the risk profile of the loan-taker is looked into. In many cases, families do not have a credit history, and the ability to pay back the loan may get impacted in the future,” said Kumar.
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The US, Canada, Australia and European countries are preferred destinations for students pursuing science, engineering and medicine. The intent to study abroad has gone up despite both Australia and Canada curbing their student intake over the past year and a half through stringent background checks and increased guaranteed investment certificate (GIC). A GIC is similar to a secure investment, and acts as proof that the student has the means to live and pay for expenses in the host country.
The battle for students will play out more in the smaller towns like Guntur, Ongole (Andhra Pradesh), Khammam, Warangal, Nalgonda, and Karimnagar (Telangana) or from smaller cities of Punjab and Haryana, which typically see a large number of students heading abroad.
“If the unsecured collateral amount increases, the competition between the NBFCs and lenders will increase as well. All are targeting smaller towns and tier-2 and 3 cities where the penetration for student loans is high,” said Akshay Chaturvedi, chief executive officer of Fly Finance, a service platform catering to students’ financial needs and education loans for studying abroad.
Financial sector watchers said there should be a greater focus on providing education loans to those in rural and semi-rural areas as well, and to those without good financial backing.
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“The premier institutions any way get students who have stronger financial backing than peers,” said K. Srinivasan, convenor of Educational Loans Task Force, a public awareness institution. Srinivasan said that since education costs have shot up even in India, banks should sanction more loans without asking for high-value collateral.
“At the government level, there should be a greater focus on education loans, which seems to be lacking at the moment. One must not see spending on students as an expenditure but an investment in future economic growth,” he said.
