(Photo: Peter Gibbons)
India's biggest lender State Bank of India (SBI) has slashed the education loan interest rate for premium b-schools to as low as 10.7%. Further, for students who have two years of work experience and add a parent or the spouse as co-borrower, the interest rate would be even lower at 9.95%.
These interest rates would be applicable to debt taken under the SBI Scholar Loan Scheme for studying at 53 reputed 'List A' management, engineering, medical and law schools including the Indian Institutes of Management, XLRI Jamshedpur, ISB Hyderabad, MDI Gurgaon among others (See complete list here). Loans for an additional 'List B' of 61 colleges including FMS Delhi, IIFT Delhi, SP Jain Mumbai, Nirma Ahmedabad and others would be available at 11.45%. The bank claims these rates to be the lowest in the country for educational loans.
"We lowered the rates to encourage students who want to study at schools under the low-risk category," said a senior SBI official explaining the reason behind the loan rate cuts. Previously, SBI Scholar Loans to top b-schools were disbursed at 12%, 200 basis points above the old base rate of 10%. Last week, the bank slashed the base rate by 0.3 percentage points to 9.70% and lowered the interest rates for 'List A' of 53 topmost schools to 10.70%, 100 basis points above the new base rate.
|List A colleges|
Base rate: 9.70%
Regular rate = 100 basis points above base rate = 9.70+1 = 10.70% per annum
The effective rate of interest with all the three concessions above would not be lower than 9.95% per annum.
|List B colleges|
Regular rate = 11.45% per annum
What kind of savings could one enjoy with the rate cuts? For a loan of Rs 12 lakh for a top b-school, you could save as much as Rs 69,300 over a seven-year repayment period with the new interest rate of 10.7%, against the previous interest rate of 12%. That additional Rs 69,300 could now make way for a more fancy laptop, down payment for a car or a cheap vacation to South East Asia.
Interest rates for SBI's standard education loans for higher educational institutions not included in either List A or List B too have been slashed. The interest rate for a loan upto Rs 4 lakh has become cheaper by 0.3% to 13.2%. For loans above Rs 7.5 lakh, the rate has been lowered by 0.55% to 11.45%. Loans between Rs 4 lakh and Rs 7.5 lakh would however attract an increased interest rate of 13.45%, which previously used to be 13.25%.