Education loans open doors to opportunities — but if you can’t repay them after your studies, that door can quickly turn into a financial trap. Whether you’re struggling to find a job or facing unexpected circumstances, banks have clear rules about who’s responsible for paying the EMIs and what happens if payments stop.
1. The Grace Period: When You Don’t Have to Pay Yet
· Moratorium Period: Most banks provide a grace or moratorium period of 6 to 12 months after completing studies (or until you find a job).
· No Immediate EMI: During this period, you don’t have to start paying the EMI — but interest keeps accumulating.
· Tip: If possible, pay at least the interest during this time to reduce your future repayment burden.
2. Who’s Responsible If You Can’t Pay
· Primary Borrower: The student is always the main borrower and is legally responsible for repaying the loan.
· Co-borrower or Guarantor: Usually, a parent or guardian signs as a co-borrower. If the student defaults, the bank can demand payment from the co-borrower.
· No Escape: Both the student and the co-borrower are equally liable — the bank can pursue either or both for repayment.
3. What Happens If You Default on EMIs
· Penalty Interest: Banks may add penalty charges for each missed EMI.
· Credit Score Impact: Defaulting can severely damage your CIBIL score, making it hard to get future loans or credit cards.
· Legal Action: In prolonged cases, the bank can initiate recovery proceedings or involve loan recovery agencies.
· Seizure of Collateral: For secured education loans, the pledged property or asset can be seized if repayment isn’t made.
4. What You Can Do If You’re Unable to Pay
· Request an Extension: You can approach the bank to extend your repayment period or temporarily reduce EMI amounts.
· Loan Restructuring: Banks may allow loan restructuring for genuine financial hardship.
· Government Schemes: Schemes like the Credit Guarantee Fund Scheme for education Loans (CGFSEL) can offer partial relief.
5. Prevention Is Better Than Recovery
· Borrow Wisely: Take only as much loan as needed.
· Start Saving Early: Begin saving or earning part-time during your studies.
· Stay in Touch with the Bank: Open communication with your bank can prevent harsh actions later.
Takeaway
If you default on your education loan, it doesn’t just affect you — it impacts your parents’ credit, your financial credibility, and your future opportunities. The bank won’t simply write off the loan; either you or your co-borrower will be held accountable.
So, even in tough times, stay proactive — talk to your bank, restructure if needed, and keep your financial future intact.
Disclaimer:
The views and opinions expressed in this article are those of the author and do not necessarily reflect the official policy or position of any agency, organization, employer, or company. All information provided is for general informational purposes only. While every effort has been made to ensure accuracy, we make no representations or warranties of any kind, express or implied, about the completeness, reliability, or suitability of the information contained herein. Readers are advised to verify facts and seek professional advice where necessary. Any reliance placed on such information is strictly at the reader’s own risk.
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