Indian students looking to transfer their education loans to Public Sector Banks (PSBs)

Many students in India are looking for transferring their education loans to Public Sector Banks (PSBs) as they can save a decent amount of money through a balance transfer. Arjun Krishna, co-founder of an online loan and scholarship consultant said, “On average, the student borrower saves around 4% when they do a balance transfer."

He also said that public sector banks offer loans around 9.3%, and students who have existing loans from private non-banking financial companies (NBFCs) are paying around 13-14%. That is a significant gap and can definitely reduce the interest rates on education loans of students.

It can be even more beneficial for students of premier Indian institutions such as IIT (Indian Institute of Technology) and IIM (Indian Institute of Management) as the government charges lower rates for them.

Benefits of transferring education loans to PSBs

There are various benefits that students can get if they transfer their education loans to PSBs. Some of them are given here:

Many PSBs waive off processing fees when they take over the education loan and offer higher repayment tenures.
Public Sector Banks (PSBs) provide lower interest rates but have a list of institutes for which they lend.
It’s also possible to get a moratorium from PSBs during the course tenure. In the case of private lenders, they charge a portion of interest soon after disbursement.
Government banks take over the loans once the full repayment starts. The student borrower doesn’t get any moratorium on loan transfer. The primary reason for shifting the loan is the interest rate gap”.

Why private lenders are better?

If the student needs to take a new loan, private lenders are more flexible as they offer higher loan amounts for a variety of courses.

Some important data regarding the interest rates are given below and can be useful for the student looking for an education loan from PSBs:

PSBs in India with their respective interest rates for education loans (March 2021)

Public Sector Banks	Interest rates (Education loans)	Tenure
State Bank of India (SBI)	6.90%-9.30%	15 years
Punjab National Bank (PNB)	6.90%-9.55%	15 years
Bank of Baroda	6.85%-9.95%	15 years
Canara Bank	7.40%-9.40%	15 years
Central Bank of India	6.85%-9.00%	15 years
Bank of Maharashtra	7.05%-8.90%	15 years
Bank of India	9.05%-9.85%	15 years
UCO Bank	7.30%-9.70%	15 years
Indian Overseas Bank	7.25%-10.05%	15 years
United Bank of India	6.90%-9.55%	15 years

How to apply for education loans?

Students who wish to apply for education loans from PSBs can create their account at Vidya Lakshmi Online Portal and then fill in their details and submit the form by choosing the desired bank from which they would like to borrow funds. The bank will check the documents and the details they enter in the portal and give the approval only upon successful verification.

The eligibility for education loans varies from one government bank to another. If the interested student has collateral with the existing lender, it will be transferred to the government bank. If there is no collateral, the student borrower will need to provide fresh collateral that covers 100% of the loan amount.

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