4 Things I Learnt After Taking An Education Loan

It's been a couple of years since I completed my engineering degree and I am about to change employers, moving on to working with one of the largest IT consulting and solutions firm in the world. A 4 year bachelor?s degree has earned me one of the more decently paying jobs, if not the most highly paying one in the country. Life wasn?t always this simple or easy for that matter.
I needed an education loan to get started with my higher studies, something which most students in India might be familiar with. As far as selecting a lender to borrow from, how much loan to opt for and of course after going over the finer details, I decided to go forward and apply for my education loan from a public sector bank my parents had their salary accounts with.
When the loan was sanctioned, I believed that the hard part was over and I was ready to begin my college years with the firm belief that I had everything under control. However, there is a lot I learned over the course of the next few years ? about what it?s like to live and deal with when you are paying off an education loan just after you are out of college.
Make sure you make timely payments
I was quite lucky and got placed on campus. I started my first job after graduating even before I had received my final semester results. But as soon as I did, I lost track of everything else?including the fact that I had to start making my monthly repayments on the education loan. I ended up missing a payment which was overdue for almost 60 days by the time I got around to paying it.
The loan officer warned me that if a payment is overdue for more than 90 days, it will put the loan collateral at risk which in my case would be my parents? house. An education loan of over Rs 7.5 lakhs as in my case comes with the inherent risk. That apart, the delayed payment showed up on my credit report for years and might have been the main reason why my first credit card came with a low credit limit.
Start Repayment while in College
Education loan is provided with a moratorium period during which you are not required to service the loan and you are not required to make payments during the time you are in college. However, what no one told me was that if I had started making loan repayments during the time I was in college, I would have benefited from a discounted interest rate and a lower loan burden.
Take out your borrowings in small amounts
Tuition fees are usually paid out by your lender in tranches. Interest is also levied right from the time of disbursement at the end of each academic cycle, be it a year or a semester. It therefore makes sense to not exercise your option and draw out the entire loan amount in a single go. If you do so, your lender will begin by levying interest on the full loan amount, instead of what has only been disbursed. This will just add to your debt burden, which might make it unmanageable in the future.
Job Situation after You Graduate
Securing decent placement is not an easy thing, given how competitive almost every field has become. The employment market is completely dictated by macroeconomic forces and you need to stay psychologically prepared for the worst case scenario. I was lucky enough to get placed on campus, in case you are not so lucky and have problems securing a job after graduation, get ready to negotiate with your lender about extending the moratorium period.
Loans above Rs 7.5 lakhs can have their tenure extended up to 15 years while for amounts below that it can be extended up to 10 years. Trust me negotiating for a longer tenure is a much better option than not paying your due EMI and being termed as a willful defaulter.