Law School Applications: Taking an educational loan

With the annual fees at a National Law University (NLU) hovering near the lakh and a half mark (Rs. 1,64,539/- per year to precise), an NLU education is a fairly expensive endeavor. With the addition of living expenses, the total cost of a five-year law course can easily touch Rs. 9 lakh. Thus it is not unusual for prospective law students to opt for financial aid in the form of bank loans..Keeping this in mind, Bar & Bench brings to you a short report that, we hope, will help in clearing some of the doubts prospective law students face. We have also included details on the fees charged by each school, as well as a handy table that readers can print and take to the various banks..Please note that the following content is not meant to replicate financial advice available from banks; readers are advised to approach individual banks for detailed information. You can also download the full report here..1. How much money do you need?.The average fees are about Rs. 1.6 lakh. (Refer table below for fees of each CLAT school). So, if you are relying entirely on the loan, you are looking at a loan amount of Rs. 8 lakh minimum. Plus personal expenses, say around Rs.4,000 a month which, at roughly ten months a year, would mean an additional Rs. 2 lakh over the course of five years..CLAT Law Schools & Fee Structure.Ideally though, try to keep the loan amount as small as possible. Larger loans come with their own set of requirements like collateral, higher EMIs etc..Also, do remember that loans have a “margin” ie a fixed percentage of the institution’s fees that you will have to pay. So on a loan of say Rs. 1 lakh, with a margin of 4%, you will have to pay Rs. 4,000..2. Choosing the correct bank..Scout around. You can use sites such as ApnaPaisa to compare loan terms for different banks, but it is best to start with banks where your family members already have accounts..Remember, Bank Managers enjoy some discretion in granting loans, so if your family members already have accounts with a particular bank, getting a loan is easier. Certain banks also have concessions for SC/ST students, while others offer incentives for women students..Also, the more well known the institute is, the easier it will be for a loan to be sanctioned. Try and provide as much information as possible to the bank..3. Documents and collateral.Depending on the loan amount, along with the standard documents (Age proof, ID proof etc), you will also require a collateral along with the loan. This collateral may be in the form of immovable property, Fixed Deposits etc. Generally, loans below Rs.4 lakh do not require this collateral; they only require the co-obligation of your parents..Now security in the form of immovable property can come with its own set of costs, for instance paying the Valuer for valuating the property etc..4. Loan coverage.Usually, the loan amount covers tuition and hostel fees. Some banks also allow you to claim funds for books/laptops and the like. Banks may also require you to submit a copy of your Pass Certificate at the end of each academic year..5. Repaying the loan.The tenure of a loan varies with each bank but generally it is about 7-8 years. This period starts a year or so after graduation since all banks allow for a moratorium or a “loan holiday” where you can get a job, etc before you start repaying..However, try and pay off the interest component while you are still studying. In fact, banks actually encourage this practice and will even reduce the rate of interest if you are regular with your payments during your law course..Keep a lookout for pre-payment charges/penalties; some banks do impose an additional cost for this. Of course, you can also negotiate with the bank to waive this penalty/charge..6. Penalties for non-payment of EMIs.Before taking the loan, ask the banks whether they impose any penalties on missing/irregular payments. If you foresee a situation arising where you are unable to repay the loan, speak to the bank as soon as you can..Also, non-repayment will certainly affect your credit history going forward..7. Other things to keep in mind..Just because you have taken a loan of say Rs. 5 lakh, does not mean you have to avail of all it. Only withdraw as much as you need..Look out for scholarships, paid internships etc. There is a government scheme wherein the government reimburses you for the interest paid during the course period and the moratorium as well..Other than that, plan things out. Make sure you set aside a fixed amount for personal expenses such as food, stationery, Xeroxing class notes etc. These may seem like minor expenses but over the course of five years, they can add up to a substantial figure..Lastly, there is no need to take a decision in haste; some careful planning now will help you for years to come..Bar & Bench would like to thank Mr. S Bose and Mr. A Bhansali for their invaluable help in compiling this report.