Difference Between Education Loan and Education Plan

Types of Instrument

  1. Child Education - Turns into an asset in the future
  2. Student Education Loan - Always stays a liability until repaid

Goal of Plan

  1. Child Education -Building a corpus to fund the child's education before the course begins
  2. Student Education Loan - To fund the child's education after the course begins

Eligibility criteria

  1. Child Education - Must stay invested for a compulsory term. Premium paid depends on your health condition
  2. Student Education Loan - Collateral is required for Loans above 4 Lacs. Co-applicant might be required too.

Process

  1. Child Education - Amount is invested in the chosen funds at regular frequencies. Profit is earned on the maturity of the plan.
  2. Student Education Loan - An interest is charged on the Loan amount. Repayment usually begins post Educational course completion

Provision for Insurance

  1. Child Education Plan - An insurance component is mandatorily included
  2. Student Education Loan - Insurance is mandatory only for Unsecured Loans

In event of Account Holder's Demise

  1. Child Education Plan - Depending on the policy's terms and conditions, beneficiaries get the policy sum assured or the fund value plus death benefit.
  2. Student Education Loan - The Loan will be repaid either by the co-applicant or the third-party guarantor.

Tax Benefits

  1. Child Education Plan - Premiums and Maturity value are exempt from tax under Section 80C & Section 10(10D) of the Indian Income Tax Act, 1961 respectively.
  2. Student Education Loan - Tax benefits are provided under section 80E of the Indian Income-Tax Act on the interest amount.

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