Student loan savings help students who are stressed about their student loan payments. This means that you can save money on your student loans, given you follow certain strategies and different approaches for the same. Whether a student loan is private or public, different ways to increase your student loan savings can be applied.
If you are someone who has a student loan and is looking for ways to save and refinance for an increase in your student loan savings, then you have come to the right place. With this blog, we dive right into that. Read below to learn more about student loan savings.
Choose an Applicable Fixed Interest Rate Student Loan
Remember, even an iota of an increase in interest rates can result in you paying a lakh of extra money. So, it’s better to make sure what you are getting yourself into before you decide on your student loan sanctioning. Let’s understand what this means with an example.
Simply put,
Suppose you took an INR 30 lakh student loan amount with a tenure of 10 years on which there is a rate of interest of 8%, then what would the total amount payable be?
= INR 43,67,793.
But, when with the same principal amount and loan tenure, there is a rate of interest of 9%, then how much will you have to pay?
= INR 45,60,328
Take the aforementioned scenarios into consideration and you will find that you are paying an extra INR 2 lakh on the same student loan amount. Therefore, it is always better to consult services like Fly. Finance, which can carefully review your profile and help attain the best fixed rate of interest which applies to you and can help you increase your student loan savings.
Also Read: EDUCATION LOAN SANCTIONED? HERE ARE THE ISSUES YOU CAN EXPECT AFTER THE SANCTION!
Go for Student Loans with Subsidy on Interest
Students can also go for student loans with an available subsidy on interest depending on their eligibility. The government of India provides several of these subsidised student loans for students. For example, the main one is the Central Sector Interest Subsidy Scheme and Credit Guarantee Fund Scheme for Education Loan (CGFSEL). In the former, students can avail of a full interest waiver during the moratorium period. This applies to students who belong to economically weaker sections and whose parent’s annual income is less than INR 4 lakh.
Also Read: UNSUBSIDIZED LOANS: WHAT YOU NEED TO KNOW!
Choose a Domestic Lender
It is always better to choose a local/ domestic student loan lender than an international one, simply because the value of INR is less than that of USD. Also, the value of INR wrt to USD keeps on depreciating, giving the latter more money power. If you choose an international student loan with a lower interest rate than an Indian education loan with a higher interest rate, still the change of value in USD over the years will naturally witness the student face a loss.
Therefore, go for a student loan that helps you increase your student loan savings. For that, you must research thoroughly and go with the lender with the most optimum interest rate and repayment plans.
Be Careful with the Processing Fee
Other costs besides the main one such as processing fees are just as important in determining the ideal student loan that promises a better increase in student loan savings. Some banks such as Bank of Baroda include a processing fee amount which can also be refundable such as INR 11,800.
But in the case of other lenders such as NBFCs, a 2% processing fee of the loan amount can be in tens of thousands of rupees more, which is not favourable for the students in any way. Therefore, to increase your student loan savings or save money on your student loans, plan to cut out all hidden costs such as this.
Also Read: EDUCATION LOAN EMI CALCULATOR WITH OR WITHOUT MORATORIUM PERIOD
Claim Student Loan Tax Deduction
Another interesting factor that helps students increase their student loan savings is shifting their attention towards income tax rebates on education loans, as per Section 80E of the Income Tax Act. Claiming student loan tax deduction helps students not pay any tax on the interest payments. You can claim a student loan tax deduction up to 8 years after the loan repayment period commences.
If you are a student citizen of India who has taken a student loan from a recognised and approved financial institution and plans to repay it then you are eligible to claim this tax deduction. You’ll also need a bank-issued statement on the interest paid. Throughout loan repayment, the tax claims can ultimately amount to an increase in your student loan savings.
Read All About STUDENT LOAN TAX DEDUCTION: CALCULATOR, INCOME LIMIT, SECTION 80E
FAQs
You can save on student loan payments by considering various factors such as rate of interest and tax benefit, before availing of your loan sanction. You can also pay a little extra month to save on the interest you ultimately pay.
Yes, you can pay off student loans early.
Whether to take an education loan or use savings has its pros and cons therefore it completely depends on the students and their circumstances to decide on one.
Yes, having a student loan will affect your credit score. Timely payments will improve your credit score while lagging will affect your credit history.
Students can take 5-20 years to pay off their student loans depending on the amount of monthly instalments and the total loan amount
That was all about how to increase student loan savings! To know more about education loans, the loan application process, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.
