Financing IPMAT – Education loan

Studying at an IIM can be expensive and not everyone can finance it on their own. In the following article, we will talk about the financial assistance available in terms of scholarships and education loans.

Starting with the scholarships offered by the individual institutes:  

Scholarships at IIM Indore

IIM Indore provides Need Based Financial Assistance on the basis of family income and assets. The assistance provided is divided into the following two categories:

Scholarship
  1. If Family income is up to Rs. 4,50,000 and other assets criteria are met: The institute reimburses 100% of the interest accrued on the sum of money borrowed from the bank.
  2. If family income is between Rs. 4,50,001 and Rs. 9,00,000 and other assets criteria are met: The institute reimburses 50% of the interest accrued on the sum of money borrowed from the bank. (To check the assets criteria and other details, check the following document https://www.iimidr.ac.in/wp-content/uploads/NBFA2020-21_Scheme.pdf)

Scholarships at IIM Rohtak

The following scholarship provisions are for the MBA students but the setup is very similar for the IPM programme:

1. Merit cum Means (MCM) scholarships

This scholarship is awarded on the basis of CGPA and family income. A minimum CGPA of 6.5 and parental income of Rs. 2,00,000 or less are essential conditions to be eligible for this scholarship.

2. SC/ ST need-based scholarship

This scholarship is awarded to the SC/ST students, on the basis of the income status of the student. The scholarship amount can go up to the amount of tuition and certain other fees.

 Other IPMs are yet to announce their terms of the financial assistance.

Assistance provided by the Government

The National Scholarship Portal (NSP) is a one-stop solution for applying for scholarships under different Ministries from the Govt. of India and State Govt.

Loan

Apart from this, different State Governments offer scholarships/ student credit card schemes to the eligible students. Students who wish to apply can go through the details of scheme documents on the respective State Govts. Website.

One can’t completely rely on scholarships, so incase, someone does not have the means to finance their education, they can look into an education loan.

Key terms associated with education loan

  1. QUANTUM: the principal amount for which the loan is availed.
  2. COLLATERAL: the security against which the loan is acquired.
  3. REPAYMENT PERIOD: time period within which the loan has to be repaid (once the degree is completed)
  4. MORATORIUM PERIOD: the time during a loan term when the borrower is not required to make any repayment.
  5. MCLR (Marginal Cost of Fund Based Lending Rate): the minimum lending rate below which a bank is not permitted to lend.

Loan option available

Starting with collateral-free loans, loans up to Rs. 7,50,000 can be availed for any institute. Collateral-free loans for a higher amount can be availed for premiere institutions. (IIMs included)

Looking into bank specific loans, State Bank of India and Central Bank of India offer country’s most availed loan options.

SBI Scholar loan

Under this option, IIM Indore falls in the AA category, and hence IIM Indore students can avail loan of up to Rs. 40 lakhs without any tangible collateral security. (Interest rate= 6.85%)

Whereas, the other 4 IIMs fall in the A category, and hence students of these institutes can avail loan of up to Rs. 20 lakhs without any tangible collateral security and of up to Rs. 30 lakhs with tangible collateral security. (Interest rate= 7%)

Repayment

  • Repayment period of up to 15 years after Course Period
  • 12 months of repayment holiday

For now, this scheme only recognizes IPM Indore and IPM Rohtak but it is expected to integrate the other 3 IPMs soon.

Central Bank of India

Central Bank of India offers collateral-free loan for up to Rs. 40 lakhs. Under this scheme, all the IIM IPM programmes are recognized. (Interest rate=7%)

Repayment

  • Maximum repayment period upto 10 years for loans upto Rs.7.50 lakh
  • Maximum repayment period upto 15 years for loans above Rs.7.50 lakh. 
  • 12 months of repayment holiday

How is the INTEREST RATE determined?

  • The interest rate is tied to MCLR which varies from bank to bank.
  • The interest rate depends on various factors such as
    • Loan amount
    • Security offered: the degree of protection provided by the collateral can lower the interest rate.
    • Educational Institute: The interest rate is comparatively lower for IIMs.
  • The interest rates are low for public sector banks (7-9%) and high for private banks. (10-14%)

Application Process for education loan

  1. The application process can start once the offer letter has been received and the commitment fee has been paid. Once the loan is processed, the paid amount is reimbursed. For this purpose, it is advised that certain amount of money is set aside in advance.
  2. The application is done through the Vidya Lakshmi Portal.
  3. Certain documents of student (PAN, Aadhar, marksheets, offer letter) and the parents (PAN, ITR, income statement and others) are required. For more details regarding the required documents, please visit the respective website.
  4. CIBIL Score (a 3-digit numeric summary of one’s credit history, rating and report): A score of 750+ is preferrable but it should not be less than 650.

Is it easy?

The ability to avail a loan depends on the following factors:

  • Education Institute: The process is expected to be easier for IIM students but again, it varies for different categories (AA and A).
  • CIBIL score: A higher CIBIL score may increase the chances of loan approval.
  • ITR value: A certain level of annual income might be preferred for a specific principal amount.
  • Loan amount: Availing a loan for a smaller principal amount is easier.
  • Collateral: Acquiring a collateral loan is easier than a collateral-free loan. As the collateral provides security to the bank incase of any default in loan repayment.

Which bank to prefer for education loan?

Loan Bank
  • Public sector banks should be preferred over Private sector banks because of the lower interest rate.
  • Check if your institute has ties with any banks. Availing loan from a bank the institute is connected with simplifies paperwork and document verification. (IIM Indore has ties with SBI bank, IIM Rohtak with ICICI bank and IIM Ranchi with Central Bank)
  • If your parents are already associated with a bank, asking there might enable availing a loan of a higher quantum because of the already documented financial position.

Processing time

Private sector banks can process a loan in 3-7 days whereas public sector banks may take more time (2-4 weeks). The processing time is probably the only downside to availing loan from public sector bank but if planned accordingly, it should be manageable.

To sum up, adequate financial assistance is available. One should explore their options and choose wisely.

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Saksham Chauhan

Saksham Chauhan

IIM Rohtak IPM'22, Marketing @ AceIPM. Explored my interest in Digital Marketing early and turned it into a passion. Delved deeper into the ed-tech industry in 2018 and went all-in with my startup OneGyan.

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Book a free counselling session with one of our experts and have all your career related doubts cleared. Also receive a special discount in case you wish to enroll.