How to Get out of Education Loan Debt Trap

Education loan is one of the most common choices of people who are unable to afford the cost of education. But the rising non-performing assets (NPAs) of the banks signify that many are struggling to repay their education loan. Gross NPAs of banks in education loan segment have risen sharply from 2.4% in March 2011 to 4.1% in March 2014. Unemployment or low salaries are some of the reasons behind education loan default. But if you default on an education loan, it will impact your credit score negatively and reduce your prospects of getting a loan in future.
Consider the following options if you are finding it difficult to pay off your debt.
1) Repayment tenure extension
Education loans have a higher tenure as loan repayment starts only after the completion of the course. Many banks offer repayment tenure of up to 15 years depending on the loan amount. If you are unable to find a job during the moratorium period, you can apply to the bank for extension of the loan tenure. Moratorium period is the time when you are not required to make any payment. It generally ranges between 6 months and 1 year. You can ask your bank to extend the moratorium period. If you have a good relationship with your bank and can explain the reasons behind delay in repayment, it might consider extending the loan tenure.
2) Loan restructuring
Restructuring of loan means to reduce or renegotiate the delinquent debt. Banks may relax the norms if you explain the situation to them. If the bank is convinced then it may allow you to pay based on simple interest rate till you get a job. You can request the bank to replace the guarantor with somebody who can afford to pay the loan till you get a job. The bank may also give you an option to pre-close the loan by liquidating an investment.
3) Apply for a part-time job
If you are finding it hard to get the right job and have an education loan to repay, you can opt for a part-time job. This way you will be able to pay your EMIs and reduce your loan burden. In the meantime, stay on the lookout for the right full-time job.
One of the ways you can avoid getting into all this hassle is by choosing the right course (of your liking and with job prospects) and a good institution. Before enrolling with an institution, check their placement record and faculty credits. A comprehensive research about the course and the institution is a must. Once you have decided that, go online and compare lenders offering education loan.