Education Loan Sanction Letter and Process: A Comprehensive Guide

The education loan process is lengthy and complex with multiple steps. It starts with you researching the eligibility for a loan. After reading the lengthy novel-like terms and conditions, you understand maybe one or two things. The next is filling up the application form. Do you know all the documents that you have to submit? Probably not. So you run from pillar to pillar, gathering the documents you need to submit just the next day. After this marathon, you finally submit your loan application. Now you have to wait for some letter. And the wait, still, continues. 

What is an Education Loan Sanction Letter?

A sanction letter is an official document provided by the lender that indicates the basic information about the education loan, such as the loan amount, student’s (borrower) name, interest rate, loan tenure, and other terms and conditions. It is proof that the student has successfully applied for and been granted the loan.

When and How Do You Get This Education Loan Sanction Letter?

The sanction letter is either sent by post or handed a hard copy to the student against acknowledgment. It is given once the loan is approved and sanctioned after the student submits the loan application form and the required documents.

A loan sanction letter can be submitted as proof of funds for your admission and visa purposes.Some foreign universities require students to submit proof of their ability to pay for their education before granting admission. Students must show proof of funds while applying for a student visa for countries like the USA, UK, Australia, and Germany.

For example, to get6 an I-20, you must submit proof of financial support, for which the minimum fund requirement is 10,000 USD. In this case, a loan sanction letter makes you eligible for an I–20.

Pre-approved Education Loan Sanction Letter?

Generally, education loans are sanctioned once students submit proof of securing admission abroad. However, students often need a sanction letter before getting admission to a university. In this situation, a pre-approved sanction letter helps them.

A pre-approved sanction letter is a provisional sanction letter given to the borrower before they secure admission to a university. This letter can prove financial support during the admission process and, for select countries, during the visa process.

Students can apply for a pre-approved education loan after receiving their standardized test scores. Remember, this facility is available with select lenders. If the lender finds any discrepancy with your application or submitted documents later, the pre-approved loan can get canceled. 

Format of Education Loan Sanction Letter

The format of an education loan sanction letter varies for different lenders. While some lenders issue a 2 - 3 page long sanction letter, some others make it concise to fit within one page.

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  A sanction letter is addressed to the borrower and co-borrower
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  It will contain comprehensive information on the loan that the student can use the letter for future reference
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  The sanction letter is dated, and the validity is mentioned 

Education Loan Sanction Letter Sample

Based on the format mentioned above, here is a sample for an education loan sanction letter. Since the template for each lender varies significantly, we have adopted a format followed by a prominent public sector bank in India for study abroad education loans.

Documents Required For Sanction Letter 

The documents required to get a sanction letter vary depending on the type of lender. They are submitted with the initial loan application. A generalized list of documents is as follows:

Documents Required From Applicant:

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  The loan application form was filled out completely and correctly
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  Identity proof - PAN Card, Passport, Voter ID card, etc.
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  Address proof - a recent copy of the telephone bill, electricity bill, or water bill 
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  Copy of the passport 
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  Past academic record - 10th, 12th, undergraduate
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  Scores of entrance tests like GRE, TOEFL, IELTS, etc. 
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  Proof of admission - students can submit a conditional offer of admission if they get it 
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  Statement of expenses for the entire cost of education. 
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  Passport-size photographs 
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  Loan account statement of one year, if there are any previous loans taken from any lender

Documents Required From Co-Applicant:

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  Identity proof 
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  Proof of address
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  Proof of income - the documents for the same will differ depending on the type of employment, such as self-employed or salaried.

Self-employed co-applicants:

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  Business address proof 
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  Last 2 year’s IT returns 
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  TDS Certificate 
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  Certificate of Qualification 
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  Bank account statement for the last 6 months 

Salaried co-applicants:

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  Salary slips for the last 3 months 
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  Copy of Form 16 for the last 2 years or copy of IT Returns for the last 2 years.
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  Bank account statement for the last 6 months.

The applicant will have to submit collateral documents along with the above-mentioned documents in case the student has applied for a secured education loan.

Education Loan Sanction Letter Process

The process of getting an education loan sanction letter is long stretched and requires multiple actions. You must choose your lender, prepare the documents, pay the processing fee, and wait for approval. The process is slightly different for various lenders, as you can see in the sections below.

Public Sector Banks:

The education loan sanction process in public sector banks is slightly lengthy and can take up to one month.The process to receive the sanction letter is in three steps.

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  The process in banks, like State Bank of India, Union Bank of India, and Bank of Baroda, starts with filling up the application form
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  The applicant will have to submit the documents that are mentioned above and some additional documents that may be case-specific
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  The applicant has to pay the loan processing fee
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  Once the application is processed and accepted by the bank, the sanction letter is sent to the applicant

Private Sector Banks:

The education loan sanction letter for private banks, like Axis Bank, ICICI Bank, and IDFC First Bank, is as follows:

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  Fill up the loan application form online or offline
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  Upload the documents online or submit them to a nearby branch
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  The bank will verify the documents and send the application for further process
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  Pay the processing fee charged by the lender. Generally, the processing fee is 0.5% - 1% of the loan amount plus GST
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  The education loan sanction letter is sent via email or post

For a secured loan, the bank will evaluate the property and complete the documentation, while, for an unsecured education loan, the bank will evaluate and verify the credit history of the applicant and the co-applicant.

Non-Banking Financial Companies:

The process for an education loan sanction letter for Non-Banking Financial Companies (NBFCs) starts with filling up the loan application, submitting the required documents, and receiving the sanction letter. Here are the details of the process for different NBFCs:

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  HDFC Credila education loan sanction letter is issued a day after the applicant successfully pays the processing fees. On request, HDFC Credila can also issue the letter before the student secures admission to a university.

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  Avanse education loan sanction letter is issued after the documents and other financial details have been verified. Moreover, Avanse offers