The way to get a bigger education loan for study abroad is to show the bank the full, documented cost of the course, not just the tuition figure on the offer letter. Under the IBA Model Education Loan Scheme that most banks follow, the amount is need-based, so every genuine expense you can support with papers (tuition, living costs, travel, insurance, a laptop, deposits) can go into the calculation. Then, at banks with terms like Canara Bank’s, expect to put in 15% yourself on loans above ₹4 lakh, and to offer collateral once the loan crosses ₹7.5 lakh.
Families often under-ask because they only add up the fees, and then scramble for money in the second semester. Others over-ask and end up with an EMI the graduate’s first salary cannot carry. A careful cost sheet, a buffer for the rupee and a clear plan for the margin money avoid both mistakes.
Start with the admission letter, not the brochure
Your offer or admission letter, along with the university’s published cost of attendance, is the base document the bank will read. It usually states the tuition for the year or the full course and often gives an estimate of living costs for that city. Keep it handy along with fee schedules, the visa requirement for proof of funds and any accommodation offer.
Under the IBA scheme, as set out in Canara Bank’s terms, the expenses a bank can finance include:
- Fees payable to the college and hostel.
- Examination, library and laboratory fees.
- Travel or passage money for studies abroad.
- Insurance premium for the student borrower, if applicable.
- Caution deposit, building fund or refundable deposit, backed by receipts.
- Books, equipment, instruments and uniforms.
- A computer at reasonable cost, if the course needs one.
- Other expenses needed to complete the course, subject to a ceiling the bank sets.
The phrase that matters is “backed by receipts” or by the institution’s own documents. A bank can finance what it can verify. A vague line saying “miscellaneous: ₹5 lakh” is likely to be cut.
Build a full cost sheet for your education loan for study abroad
Put every cost on one page, year by year. The numbers below are purely illustrative, for a two-year master’s course abroad, converted to rupees. Your own figures will come from your letter and the university’s website.
| Item (illustrative) | Year 1 | Year 2 | Total |
|---|---|---|---|
| Tuition fees | ₹14 lakh | ₹14 lakh | ₹28 lakh |
| Living costs (rent, food, local travel) | ₹7 lakh | ₹7 lakh | ₹14 lakh |
| Air travel | ₹1 lakh | ₹0.5 lakh | ₹1.5 lakh |
| Health insurance | ₹0.5 lakh | ₹0.5 lakh | ₹1 lakh |
| Laptop | ₹1 lakh | nil | ₹1 lakh |
| Refundable deposits (housing, university) | ₹2 lakh | nil | ₹2 lakh |
| Books, exam and lab fees | ₹0.25 lakh | ₹0.25 lakh | ₹0.5 lakh |
| Total cost of course | ₹25.75 lakh | ₹22.25 lakh | ₹48 lakh |
Laying it out by year does two things. It shows the bank you have thought about the whole course, and it shows you when each rupee is needed, which matters for disbursement and for the rupee risk discussed below.
What to leave out
Things the course does not need (a new phone, holiday travel, an expensive flat when shared housing is available) inflate the loan and the EMI. Borrow only what the course genuinely needs. Every extra lakh you borrow is repaid with interest for years.
Your margin: why 15% applies abroad
The margin is the share of the cost your family pays from its own money. Under Canara Bank’s IBA scheme terms, there is no margin up to ₹4 lakh. Above ₹4 lakh, it is 5% for studies in India and 15% for studies abroad. Banks vary, so confirm with yours.
On the illustrative cost sheet of ₹48 lakh, a 15% margin comes to ₹7.2 lakh. The loan would then be about ₹40.8 lakh. That is a large sum to arrange in cash, so plan where it will come from early: savings, a scholarship from the university, or help from family. Scholarships and university awards can reduce the cost the bank sees, so apply for them before finalising the loan.
The collateral line at ₹7.5 lakh
Up to ₹7.5 lakh, banks can lend without collateral and without a third-party guarantee, because these loans can be covered by the Credit Guarantee Fund Scheme for Education Loans (CGFSEL). The guarantee covers up to 75% of the amount in default and protects the bank; the borrower still owes the full loan.
Most foreign degrees cost well over ₹7.5 lakh. Above that, Canara Bank’s terms call for tangible collateral worth at least 100% of the loan, plus assignment of the student’s future income. On our example of about ₹40.8 lakh, that means an asset, usually property or fixed deposits, that the bank values at ₹40.8 lakh or more. If the asset is valued lower, the bank may offer a smaller loan.
The loan is granted jointly with a parent or guardian as co-borrower. For a married student, it can be the spouse, or the parents or parents-in-law. The co-borrower’s income, existing EMIs and credit history all count, especially for a large foreign loan.
Start gathering the collateral papers as soon as the admission looks likely. Title deeds, tax receipts and, for jointly owned property, the consent of every owner can take weeks to sort out. Visa appointments and fee deadlines do not wait for a missing document, so the earlier the bank has a complete file, the better.
Plan a buffer for the rupee
Your cost sheet converts foreign fees into rupees at today’s exchange rate. But you will pay the second year’s fees a year or more from now. If the rupee weakens in that time, the same foreign fee costs more rupees.
As an illustration only: if the rupee falls 10% against the currency of your study country between now and the second year, the second year’s ₹22.25 lakh becomes roughly ₹24.5 lakh. That is about ₹2.2 lakh you did not plan for. The currency could also move the other way; nobody can predict it.
How to handle it
- Ask your bank whether it will include a reasonable allowance for exchange-rate changes in the sanction, or how it handles a revised fee letter later.
- Keep a family buffer, say 5% to 10% of the foreign costs, in a separate savings account or deposit. Do not fold this into the margin money.
- Pay fees when they fall due rather than all at once, unless the university offers a clear discount for early payment.
TCS: loan-funded and self-funded money are treated differently
Tax collected at source (TCS) applies to some money you send abroad under the Liberalised Remittance Scheme. For education, the rule since 1 April 2025 is simple:
- Paid out of an education loan from a financial institution: no TCS on the remittance.
- Self-funded education remittances above ₹10 lakh a year: these attract TCS. The rate is set by the Finance Act, so check the current rate with your bank.
TCS is not a final tax. It can be adjusted against your income tax when you file your return. Still, it ties up cash for months. In our example, if the family sends the ₹7.2 lakh margin plus a living-cost top-up from its own funds and that crosses ₹10 lakh in a financial year, TCS may apply. Plan the timing of self-funded transfers with your bank so you know the effect in advance.
Banks or NBFCs for foreign study
Banks, both public and private, give education loans for study abroad. So do NBFCs and some fintech-led lenders, which are often active in this segment. Their rates are often higher, and their loans may not qualify for some government schemes.
A few points to compare between any two offers:
- The interest rate and whether it is fixed or floating.
- Processing fees and other charges.
- What collateral is needed, and how it is valued.
- Whether interest during the course can be paid monthly, and whether it is added to the balance if unpaid.
- Pre-payment terms. Under RBI’s 2025 directions, regulated lenders (banks, NBFCs and others) cannot charge pre-payment charges on floating-rate loans to individuals for non-business purposes sanctioned or renewed on or after 1 January 2026.
- Whether the lender counts as a bank or a notified financial institution for the tax deduction on interest.
On that last point, the deduction on education loan interest (Section 129 of the Income-tax Act, 2025, which replaced Section 80E from 1 April 2026) applies to loans from a financial institution or an approved charitable institution. It covers interest only, for up to eight years, and only under the old tax regime. Check the lender’s status before you sign if this deduction matters to your family.
Interest subsidy schemes are mainly for Indian institutions
Families sometimes assume the government schemes they read about will help with a foreign degree. Mostly, they will not.
PM-Vidyalaxmi offers collateral-free, guarantor-free loans and, for families earning up to ₹8 lakh a year, 3% interest subvention during the moratorium on loans up to ₹10 lakh. But it applies to students admitted to quality higher education institutions (QHEIs), which are Indian institutions picked from the NIRF rankings and central government institutions. The Central Sector Interest Subsidy scheme, which gives full interest subvention during the moratorium for families earning up to ₹4.5 lakh a year, applies to technical and professional courses at approved institutions. Check with your bank whether your course qualifies, but do not build your foreign study budget around these schemes.
What still applies abroad is the standard IBA structure: moratorium of course period plus one year, then EMIs over up to 15 years. Paying interest during the course is optional for the student, but it stops the balance from growing.
After sanction: staged release and repayment
Money arrives semester by semester
Banks typically do not hand over the full sanctioned amount on day one. Money is usually released in stages, as each fee or cost falls due, often straight to the university for tuition. For a semester-based course, that can mean a release before each term on the basis of the fee demand.
Ask your bank how it handles interest on the sanctioned amount versus the amount released so far. Staged release also means you need the paperwork for each release ready in time. Keep fee invoices, enrolment confirmation and receipts for deposits, and tell the bank early if the fee changes.
Check the EMI before you accept
A bigger education loan for study abroad is only useful if it can be repaid. Assume 10% a year for illustration: a loan of ₹40.8 lakh repaid over 15 years works out to roughly ₹43,800 a month, and more if interest from the course and moratorium years has been added to the balance. For comparison, if a scholarship or a cheaper hostel cut the loan to ₹35.8 lakh, the illustrative EMI would drop to about ₹38,500, roughly ₹5,400 less every month for 15 years. Try different amounts and terms in the EMI calculator.
Then compare that EMI with a realistic starting salary for your course, in India or abroad, after tax and living costs. If the EMI would take most of the take-home pay, look at a cheaper university, a shorter course, more scholarships or a larger family contribution.
Checklist before you apply
- Admission letter, fee schedule and the university’s cost of attendance in one folder.
- A year-by-year cost sheet covering tuition, living, travel, insurance, laptop, deposits and books.
- Margin money planned: 15% above ₹4 lakh at banks following Canara Bank’s terms.
- Collateral documents ready if the loan is above ₹7.5 lakh.
- A separate rupee buffer, and a plan for when self-funded remittances may attract TCS.
- At least two lender offers compared on rate, charges, collateral and pre-payment terms.
- EMI checked against a realistic salary.
This is general information, not personal financial advice. Terms vary by lender and change over time, so confirm the details with the bank or institution before you commit.
