Nowadays, the cost of higher education has increased significantly compared to the past. Professional courses like engineering, medical, and MBA cost lakhs of rupees, which is difficult for every family to afford. In such a situation, education loans help many talented students.

But the thought of a loan brings to mind the fear that it could become a lifelong burden after completing studies. So, what's the truth? Is taking an education loan a good decision or not? Let's explain it in simple terms on the occasion of International Students Day.

Why do students take education loans?

An education loan is a loan that banks provide to students to cover the entire cost of their studies. It covers tuition fees, hostel expenses, books, laptops, and other essential items. It proves beneficial in many cases.

Benefits of an education loan
Talent is not limited by a lack of funds.
The biggest advantage is that students don't give up on their dreams due to financial constraints. They have the opportunity to study at top colleges in India and abroad.

Tax Deduction on Interest
The interest you pay on an education loan is eligible for tax deduction under Section 80E of the Income Tax Act. There is no upper limit on this deduction, meaning you can claim a tax deduction on the entire interest amount.

Strengthens Credit Score
Paying EMIs on time instills financial discipline and improves your credit score, making it easier to obtain a home loan or car loan in the future.

Reduces Burden on Parents
The loan takes care of your career expenses, reducing financial stress on the family.

Moratorium Period
The biggest advantage is the moratorium period. EMIs don't start until 6-12 months after the completion of the course. This gives you enough time to find a job and settle in.

Disadvantages of Education Loans
Responsibilities as soon as studies are over: The worry of EMIs starting as soon as the course ends can cause mental stress.

EMIs for 10–15 years: The loan repayment period is long, resulting in a portion of your earnings going toward EMIs for years.

A low-paying job is a challenge: If you don't find a well-paying job after completing your course, EMIs can become a significant burden.

Delayed EMI payments can damage your credit score: Failure to pay EMIs on time can lower your credit score, making it difficult to secure a loan in the future.

Is taking an education loan a profitable deal? (ROI calculation)
The key to making the right decision is understanding your return on investment (ROI). This means, will the job yield more income than your current spending?

Case 1: MBA
Average Fee: ₹10-15 lakh
Loan: ₹12 lakh
Interest: 9%
Tenure: 7 years
Total Repayment: Approximately ₹16.21 lakh
Starting Salary: ₹7-9 lakh/year
Here, you can repay your entire loan within the first 2-3 years. The average salary for an MBA from top IIMs is above ₹20 lakh, making this decision even more profitable. Therefore, taking a loan for an MBA is a very good investment.

Case 2: B.Tech
Fees (Private College): ₹8-12 Lakh
Loan: ₹10 Lakh
Interest: 9%
Tenure: 7 Years
Total Repayment: ₹13.51 Lakh
Starting Salary: ₹4-6 Lakh/Year
Studying at IITs or top colleges offers significantly higher salaries. In such cases, this could be a good option. However, if you are pursuing engineering from a regular college, you should make a careful decision. In such a case, it may take 4-5 years to repay the loan.

Case 3: MBBS
Fees (Private College): ₹50 lakh–₹1 crore
Loan: ₹60 lakh
Interest: 9%
Tenure: 7 years
Total Repayment: ₹81.08 lakh
Starting Salary: ₹7.2–10.8 lakh/year
Starting Salary after MBBS (Junior Resident): ₹60,000 to ₹90,000 per month (₹7.2 lakh to ₹10.8 lakh per annum).

Medical education is very expensive. The loan amount is large, and the starting salary may be low. However, after specializing (MD/MS), the salary increases significantly. Here, a loan is necessary, but repaying it will require long-term and thorough planning.

To take a loan or not?

An education loan is neither good nor bad; it's simply a tool. If used wisely, it can elevate your career, but if taken without planning, it can become a burden. So, before making a decision, check these things:

The placement record of the college and the course

The expected salary after graduation

The interest rate and bank terms

Only take out the loan you need

If you take out a loan after thorough research, it can prove to be a life-changing investment.

Disclaimer: This content has been sourced and edited from Dainik Jagran. While we have made modifications for clarity and presentation, the original content belongs to its respective authors and website. We do not claim ownership of the content.