An education loan is the most common way a Bihar family funds a degree abroad. It is also the part of the journey with the most jargon. This guide translates it, with figures as of November 2026 and a link to each lender’s own page.
How an education loan works
You borrow for tuition, living costs, travel and insurance. During the course and for a grace period after it, usually six to twelve months, you pay nothing or only the interest. This is the moratorium. Interest still accrues, so a loan of ₹20 lakh at 9.65 per cent builds up roughly ₹1.9 lakh of interest in a one-year course before repayment even starts. Repayment then runs for up to 15 years at most public-sector banks.
Your parent or guardian is a co-applicant on every education loan. Above a certain amount the lender also wants collateral: property, a fixed deposit, an insurance policy. Banks lend a percentage of the cost and expect you to fund the rest, the margin, often 10 to 15 per cent for study abroad.
The two government portals
Vidya Lakshmi is the central government’s loan portal. You fill one common form and send it to several banks at once, then track each application online. Use it, because a bank branch cannot quietly lose an application the portal has logged.
PM-Vidyalaxmi is a scheme, not a lender. Approved by Cabinet on 6 November 2024, it covers students admitted to “quality higher education institutions” in India selected from the NIRF rankings: 860 institutions at launch, 1,425 by July 2026. Loans are collateral-free with no third-party surety; the government covers 75 per cent of the lender’s loss on loans up to ₹7.5 lakh; and families earning up to ₹8 lakh a year get a 3 per cent interest subvention on loans up to ₹10 lakh during the moratorium, for up to one lakh students a year. By 21 July 2026, 1,12,817 loans worth ₹15,634.78 crore had been sanctioned.
The honest line: PM-Vidyalaxmi does not cover foreign universities. It is for Indian institutions. If your plan is a bachelor’s in India followed by a master’s abroad, it can fund the first half cheaply.
Public-sector banks versus NBFCs
| Public-sector banks (example: SBI Global Ed-Vantage) | NBFCs (examples: Credila, Avanse) | |
|---|---|---|
| Interest rate (November 2026) | SBI: 9.65% with collateral; 9.15% with collateral for select institutions; 9.65% without collateral up to ₹50 lakh at select institutions; 0.50% off for girl students under the general scheme. Rates effective 15 October 2026, floating | Credila: from 9.95% for secured loans, floating. Avanse: base rate 14.55% (from 1 December 2024) plus a spread set per applicant |
| Loan size | SBI: ₹7.5 lakh to ₹3 crore | Credila: no fixed maximum; unsecured amount “based on eligibility” |
| Collateral | Usually required above ₹7.5 lakh unless the institution is on the bank’s premier list | More flexible on unsecured loans, priced accordingly |
| Processing fee | SBI: 0.50% of the loan, minimum ₹10,000, maximum ₹50,000, plus GST | Credila: 1.25% of the sanctioned amount plus taxes |
| Speed | Weeks; branch-dependent | Days to two weeks |
| Course lists | Conservative: ranked universities, approved countries | Wider |
| Tax | Interest qualifies for deduction under Section 80E if you file under the old regime | Same, for registered financial institutions |
A rule that holds across lenders: a lower rate with collateral beats a higher rate without it, over 15 years, by lakhs. Pledge a fixed deposit or property if your family can do so safely. Borrow unsecured when you cannot.
Collateral versus non-collateral
Under the banks’ model education loan scheme, loans up to ₹7.5 lakh need no collateral and no third-party surety; the government’s CGFSEL cover, run through NCGTC, protects the bank for 75 per cent of any loss, which is why banks can agree. Above ₹7.5 lakh, expect a request for security unless your university is on the lender’s list of premier institutions, where SBI, for example, goes up to ₹50 lakh unsecured.
Collateral that lenders accept readily: residential or commercial property with clear title, bank fixed deposits, LIC policies at surrender value, and government bonds. Agricultural land is often refused. Property in a parent’s name is fine; property with a pending partition dispute is not.
What lenders ask for
- Admission or offer letter and the fee schedule from the university.
- Marksheets from Class 10 onwards, entrance test and English test scores.
- Passport, Aadhaar and PAN for you and the co-applicant.
- Six months of bank statements and two years of income proof for the co-applicant: salary slips and Form 16, or ITRs for business and farming income.
- Collateral papers: sale deed, mutation, latest tax receipt, and a valuation the bank arranges.
- A cost sheet showing tuition, living, travel and insurance for the whole course.
Prepare these before you have the offer. The offer letter is the only item you cannot get early.
Interest subsidy schemes: what still exists
- PM-USP CSIS (Central Sector Interest Subsidy): full interest during the moratorium for families earning up to ₹4.5 lakh a year, on loans up to ₹10 lakh, for technical and professional courses at accredited institutions in India. Not for study abroad.
- Padho Pardesh (interest subsidy for minority students studying abroad) was discontinued from 2022-23. The ministry told Parliament in 2023 and again in 2025 that there is no proposal to revive it.
- Dr Ambedkar Central Sector Scheme (interest subsidy on overseas loans for OBC and EBC students): the nodal bank’s notice says fresh applications were put on hold from 2023-24 until further orders. Ask Canara Bank for the current position before counting on it.
- Bihar Student Credit Card: up to ₹4 lakh, interest-free since September 2025, for recognised institutions in India. See our separate guide on whether it can help with foreign study.
If someone sells you a subsidy, ask for the government notification and the date.
The loan and the visa
Visa officers accept a sanctioned loan as proof of funds, within limits. The UK accepts a loan letter from a regulated lender as evidence of money for tuition and living, as of November 2026. Canada lists a student loan from a bank among acceptable proofs. In both cases the letter must be a sanction, not an application acknowledgement, and the amounts must match the visa’s own formula. Get the sanction letter at least a month before you intend to apply.
A realistic timeline
| When | What |
|---|---|
| Six months before the course | Shortlist lenders; check which of your universities each one approves; gather co-applicant documents |
| Four months before | Apply through Vidya Lakshmi to two or three banks and one NBFC in parallel |
| Three months before | Offer letter in hand; valuation of collateral; sanction letter issued |
| Two months before | Disbursement of the tuition deposit to the university; visa application with the sanction letter |
| On arrival | Living-cost tranche released to your account as per the sanction |
Apply to more than one lender. A sanction from a second bank is the only reliable cure for a first bank that goes quiet.
What to do next
If you would like help building a cost sheet lenders accept, or checking which banks approve the course you want, Start your application. Bihar Scholars’ guidance is free for students.