Why Do Many Indians Commit Costly Errors with Education Loan Applications?
Indian families often treat education loans as a simple bridge to fund studies, but the process is far more complex. Small mistakes at the application stage can create years of financial burden for students and parents alike.
About the Education Loan Landscape in India
Key Mistakes Students and Families Make
✅ Ignoring Co-Borrower Responsibilities: Parents or guardians often don’t realise they are fully liable if the student defaults.
✅ Over-Borrowing Without Planning: Taking higher loan amounts than necessary increases EMI pressure after graduation.
✅ Missing Moratorium Fine Print: Many assume no interest applies during study years — but most banks compound interest monthly.
✅ Ignoring Currency and Job Market Risks: Especially for students going abroad, currency depreciation or uncertain job markets can make repayment much harder.
Families should also check if partial prepayments are allowed without penalty and whether interest subsidies apply for economically weaker sections. Proper documentation and early repayment discipline can make a huge difference in long-term financial health.
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How to Avoid These Common Traps
💡 Read the moratorium clause twice — most banks start compounding even when EMIs are paused.
💡 Keep backup plans for part-time jobs, assistantships, or scholarships that can help reduce borrowing needs.
💡 Maintain communication with your lender to restructure in case of job delays after graduation.
Remember, a well-researched loan application is as critical as choosing the right course or university. Taking time to understand fine print and lender policies prevents future shocks.
Investor Takeaway
Indian-Share-Tips.com Nifty Expert Gulshan Khera, CFP®, who is also a SEBI Regd Investment Adviser, observes that disciplined financial planning during education builds stronger credit profiles later. Applicants who treat education loans as structured investments — not emotional decisions — tend to achieve better long-term wealth stability.
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SEBI Disclaimer: The information provided in this post is for informational purposes only and should not be construed as investment advice. Readers must perform their own due diligence and consult a registered investment advisor before making any investment decisions. The views expressed are general in nature and may not suit individual investment objectives or financial situations.
