Education Loan Disbursement Process in Indian Banks 2024

For a student flying abroad for their higher studies, an education loan is an essential aid. Taking an education loan is a long process. But what gives happiness after that lengthy process is the last step - LOAN DISBURSEMENT. In India, the loan disbursement process of different lenders is carried out in different ways. This article aims to educate you about the loan disbursement process of the two major types of education loan lenders in India in a detailed manner.

• The disbursement of loans is the last step in the process of getting an education loan. In this stage, the loan amount is sent directly to the university to cover tuition fees, and any remaining money is deposited into the student’s account to help with other expenses like housing, transportation, and basic living costs.
• This process begins after the lender has checked and approved all the required documents and confirmed that the student has met all the conditions. The disbursement can be made either as a lump sum or in parts, depending on the agreement with the bank.

1. The disbursement of student loans has two stages: The two are the pre-disbursement and the post-disbursement. 
2. The loan application form has to be filled by the applicants and the documents have to be attached along with the loan sanction letter before the actual loan amount can be disbursed. 
3. They decide how much should be disbursed initially for the drawdown which includes tuition fees for the semester, additional fees for the semester, personal allowance for the semester, and how the money should be disbursed whether directly to the university, to the individual’s account or through forex for the international students. 
4. At certain times, international universities, especially those in the USA, prefer the payment of tuition fees via third-party payment services like Flywire, Globalpay, etc.
5. Similarly, many students who require an early disbursement of loans to study in countries like Germany and Canada also prefer paying their living expenses through third-party payment services because of factors like GIC and blocked accounts.
6. The lender then drafts the loan agreement which needs to be signed by the applicant, the co-applicants, and the guarantors/ financial co-applicants  (if any)
7. For disbursement, the students fill out a formal document indicating the amount to be disbursed and the beneficiary as per the fee structure of the university. 
8. The lender then confirms enrollment and accreditation, and then disburses the funds usually within 24-48 hours; tuition fees directly to the university, and living expenses directly to the student’s account, or to forex transfer to the country of study. 
9. Most of the disbursement happens in phases based on a semester or academic year-specific fee structure, and timetable provided by the lender or the school. 
10. Repayment is usually in equal instalments (EMI) and is usually starting from the time the funds are released based on the agreed period of repayment.

1. The disbursement process of an education loan starts after the approval of the education loan through submitting a formal Disbursement request form or letter mentioning the amount, the beneficiary, the date of disbursement, and the mode of disbursement. 
2. This letter is prepared and sent after entering into the loan agreement to request the funds release and to state the willingness to receive the amount of the loan. 
3. The disbursement letter is also used for banking and legal procedures and may be requested by your university as proof of your sponsorship. 
4. It is advisable not to change anything in your university once the disbursement letter is out, this is because it shows seriousness towards the agreed terms. 
5. In this case, the Disbursement letter can be sent through Email or the Post depending on the preference of the lender.

To,

Date: 

Place: 

The Manager 

Bank Ltd. 

Dear Sir/ Ma'am,

Sub: A request for my Education loan to be disbursed to the  a/c number XXXXXXXX

I/We have been approved for an education loan by your bank to pursue the education course. I/We kindly request you to disburse the amount according to the details provided below.

Details of the Education Loan

Sanctioned Education Loan Amount: Rs._______________________

Name of the Course: _______________________

Name of the College & University: _______________________

I/We kindly request the disbursement of Rs. _______________________. Please issue a Demand Draft or transfer the funds in favour of _______________________ (payable in _______________________ currency).

I/We also request that the EMI/Pre-EMI (as applicable) be deducted on the 5th of each month.

Yours faithfully, 

(Applicant/Co-applicant) _______________________

Government banks follow certain processes in the disbursement of education loans. This section will aim at explaining the process that is followed when dealing with some of the institutions such as the State Bank of India (SBI), Union Bank of India, and the Bank of Baroda. Starting from loan approval at the Retail Assets Central Processing Cell (RACPC) to disbursal by a FOREX card or direct credit to university accounts, Keep reading this section to know more:

Education Loan Disbursement Process by State Bank of India

1. First, the student will have to go to the Retail Assets Central Processing Cell (RACPC) to obtain the loan approval and the terms and conditions of the loan agreement.
2. The bank then provides the student with a Memorandum of Deposit (MOD) format, which the student has to take to the sub registrar’s office and submit back to RACPC.
3. After this, the student completes a Disbursement Request Form (DRF) to provide information such as the amount required, purpose, and account number.
4. The student can e-mail a specific address or have his/her co-applicant physically go to RACPC to request additional disbursement.

Education Loan disbursement by Union Bank of India and Bank of Baroda

1. After executing the loan agreement and getting the sanction letter, students must provide a disbursement letter to the government banks. 
2. This letter should state how they would wish the payments to be made. To ensure that the loan is disbursed on time, the students must state their preferred mode of payment in the letter.  
3. Most of the Government banks on receiving the disbursement letter will directly deposit the funds to the university account or third-party payment as mentioned in the disbursement letter. 
4. Government banks do not transfer tuition fees for the entire course in one go. The money is released as and when students submit a request to the bank which is either yearly or semester-wise, whichever is the interval preferred by universities for tuition fee payment.
5. Most government banks transfer the funds to a FOREX card which can be used to withdraw the money easily when in the host country. 
6. The FOREX card which is issued by banks such as SBI and Bank of Baroda has a validity of three months. While in this period, the student is required to deposit in a local bank of the host country, a savings account. The rest of the money shall be paid into this savings account as specified in the disbursement letter. 
7. In some countries such as New Zealand, Germany, and Canada banks might have to pay out living allowances in advance into certain accounts such as FTS, Blocked, or GIC accounts respectively.
   

The process of getting an education loan can differ from one bank to another. While dealing with Karur Vysya Bank (KVB) or other private banks like ICICI, AXIS, or IDFC is important to know the various steps for a smooth process. This section provides a look into various processes used by these banks such as signing of documents, account opening, and time taken to receive funds. This section is going to provide you with what you should know to have a smooth disbursement through private banks.

Education Loan Disbursement Process in Karur Vyasya Bank (KVB)

1. To request a loan disbursement from Karur Vysya Bank (KVB), the student must visit the bank and sign the loan agreement.
2. After this, the bank will handle the rest of the process.
3. The student can then request the required amount directly from the bank.
4. If the student's loan was sanctioned through WMS, they can also contact the WMS team for assistance.
5. The same procedure applies for the second disbursement, where the student can either contact the bank directly or seek help from the WMS team if applicable.

Education Loan Disbursement Process in ICICI Bank, AXIS Bank, and IDFC Banks:

1. In case of loan disbursement through ICICI, Axis, or IDFC Banks, the student has to get the documents signed or they can send the signed documents through courier.
2. The bank will open an account for the student and will also verify the documents which have been provided by the student.
3. If all conditions have been fulfilled and there is nothing left that is pending, it will take not more than three days to make a disbursement.
4. For the subsequent disbursements, students should get in touch with the salesperson who was assigned to their case for further directions on the same.

NBFCs are Non-Banking Financial Companies that students go for to get an educational loan because of their faster processing time, full amount disbursement, and non-collateral loans. 
Notable NBFCs in India are Avanse, Auxilo, HDFC Credila and Incred. Compared to public banks, the disbursement process for NBFCs is simpler because:

• NBFCs do not require a disbursement letter.
• The disbursement time of NBFCs is faster.
• Since there is no involvement of collateral, the education loan disbursement time taken by NBFCs is shorter.  
• NBFCs disburse the education loan amount according to the candidates’ convenience.

Education Loan Disbursement Process in HDFC Credila

1. To request a disbursement from HDFC Credila, a student has to write an email requesting documents related to the manual agreement including the policy, consent form, and loan agreement.
2. If the student is abroad, the family members in India need to forward these documents to the student for his/her signature and then they send the same to India to the loan sanctioning office.
3. Once the documents are validated, the student is provided with an HSBC account; an E-agreement and an E-mandate are signed after validation by the Operations Team.
4. The student then logs into the NSDL portal to do the verification using the Aadhaar Card number and consent is first sought before disbursement.
5. After validation, the funds for the loan are credited to the student’s account and this usually takes not more than three days.
6. For the subsequent disbursement, the students can fill up the online disbursement form available on the website with the details of the previous disbursement and if any document is required by the operation team, the same will be uploaded by the students.
   

Education Loan Disbursement Process in Avanse:

1. For a student to get their loan disbursed from Avanse, they have to send an email asking for documents for a manual agreement including the policy, consent form, and loan agreement.
2. If the student is abroad a relative or an attested agent in India has to forward these documents to the student who can sign these documents and return them to be forwarded to the loan sanctioning office in India.
3. Once all the documents are confirmed and all the necessary conditions are fulfilled, an HSBC account is created for the student. Subsequently, an E-agreement is sent and an E-mandate is created, following confirmation from the Operations Team.
4. The student then has to verify on the NSDL portal using the Aadhaar Card that belongs to him/her. After all the verifications, the loan amount is credited into the student's account, this usually takes not more than three days. 
   

Education Loan Disbursement Process in INCRED

1. To avail of a loan disbursement from InCred, a student has to first send an email to request the disbursement and complete a Disbursement Request Form (DRF) where the student provides information about the required amount, the purpose for the amount required and the amount required for daily expenses.
2. Once the form is completed the loan agreement is generated, and any further necessary documents are sought from the student to be signed and returned.
3. At times, InCred pays the amount directly to a partnered Forex company, which then fulfils the payment to the university on behalf of the student.
4. The disbursement is done after all the documents submitted and has been verified, and it takes 2-3 days. In case of further disbursement, the student has to talk to his or her assigned salesperson for further instructions. 

Education Loan Disbursement Process in Auxilo:

1. To initiate a loan disbursement with Auxilo, students can either visit the bank in person or courier the required documents.
2. After the documents are submitted, an HSBC account is opened for the student, and an e-mandate is set up.
3. The student then needs to submit the loan documents and agreement.
4. Once these are verified and all requirements are met, the loan amount is disbursed.
5. For subsequent disbursements, the student must contact their assigned sales executive, who will guide the next steps.

• One of the biggest flaws of the education loan disbursement process of government banks is the fact that many officials are unaware of the financial obligations that students have to fulfil before getting their student visas in time.  For example, countries like Canada, Germany, New Zealand, and Australia require international students to make payments for their living expenses before applying for a student visa. This clause is one of the major parameters of qualifying for a student visa to study in the countries listed above. 
• In the education loan disbursement process, when borrowers submit an education loan disbursement letter to the bank requesting early disbursement of a loan to fulfil this requirement, there have been a lot of incidents where bank officials have refused to fulfil such requests without seeing valid proof that mentions the need of an early education loan disbursement.
• At other times, the local branch officials of certain prominent government banks also turn down requests for payment of their tuition fees to third-party services. Although many banks have issued multiple circulars that state that students are allowed to avail of a pre-visa disbursement to fulfil their financial obligations, a lot of branch officials are still unaware of its provisions. 

Despite the modifications made in education loan policies concerning the loan disbursement process, many bank officials still refuse many students to approve the payment of tuition fees through third-party payment services. If you happen to be one of those students, please do not hesitate to request a callback.

• Tip 1 - Stay Organized: It is recommended that you sort out all the documents concerning your loan and university enrollment. 
• Tip 2 - Communicate Effectively: Always communicate with your loan provider and respond to any inquiries or concerns promptly. 
• Tip 3 - Seek Professional Help: If the process of getting the loan makes you stressed, it is wise to consider seeking the services of an expert. 
• Tip 4 - Know the Timelines: Know when you’re going to disburse the money and arrange your expenses depending on the time taken. 
• Tip 5 - Check Your Paperwork: Make sure that the information in all documents is correct before filing the papers. 
• Tip 6 - Keep Communication Open: Stay in touch with your lender and use the resources below to clarify any questions you may have. 
• Tip 7 - Align Payment Deadlines: Compare the payment schedule of the university with the lenders and try to make both the disbursement schedules similar. 
• Tip 8 - Review Your Loan Agreement: Make sure that you read through the loan agreement very carefully and contact your lender in case of any clarification. 
• Tip 9 -  Plan Currency Needs: Read up on currency expectations beforehand and find out how to go about using the FOREX cards.

It is not very easy to cancel your education loan after the disbursement, but not impossible too. It would be a loss to the bank to cancel the loan after disbursement because they will have to suffer interest losses. And you will lose on processing, legal, and valuation charges.

There are a few conditions in which the bank may accept you canceling your education loan post disbursement. The conditions are: 

• If you drop your course, the bank might accept to cancel your loan.
• If the institute you are studying at ceases its operations before your course is completed due to unfortunate events like wars.
• If the loan is canceled after disbursement, banks offer you a cooling period during which you can return the money you took. After the cooling period, you will have to repay the borrowed amount with interest.

The education loan disbursement process is not exactly complicated. However, there are a lot of myths going around regarding the exact procedure. Through this article, we aim to dismiss these myths and give you a clear picture of the whole process. Keep reading our blog to get answers to some of the most complicated questions related to the abroad education loan process.