Education loans in India have a moratorium period — you don’t repay while studying (and usually for a year after). Interest accrues during this period and gets added to the principal, which is why your repayment amount is higher than what you borrowed. This calculator shows you the real numbers: how much is outstanding when repayment starts, what your EMI will be, and what Section 80E saves you.
Current education loan interest rates (April 2026)
| Lender | India studies | Abroad studies | Notes |
|---|---|---|---|
| SBI Scholar Loan | 8.15–8.65% | 10.15–11.15% | Lowest rates, long moratorium, subsidy for students from EWS |
| Canara Bank | 8.50–9.50% | 10.50–11.50% | Vidya Turant scheme for top institutes |
| Union Bank | 8.50–9.00% | 10.50–11.00% | |
| HDFC Credila | 10.50–12.50% | 11.50–13.50% | Faster approval, covers living expenses |
| Avanse | 10.50–13.50% | 11.50–14.00% | Good for tier-2 colleges |
| InCred | 11.00–14.00% | 12.00–15.00% | No collateral option available |
PSU banks (SBI, Canara, Union) offer the lowest rates but process slowly. NBFCs (HDFC Credila, Avanse) are faster and cover a wider range of colleges.
How the moratorium and interest capitalisation works
Most education loans have two phases:
Phase 1 — Moratorium: Course duration + 1 year (some banks allow 6 months after getting a job, whichever is earlier). You pay nothing, but interest accrues.
Phase 2 — Repayment: The accrued interest is added to the principal (capitalised), and you start paying EMI on this higher amount.
Example: ₹10 lakh loan at 9.5%, 4-year course:
- Interest accrued during 5-year moratorium = ₹6.1 lakh
- Outstanding at start of repayment = ₹16.1 lakh
- EMI for 10 years on ₹16.1 lakh = ~₹20,900/month
Some banks offer a “simple interest during moratorium” option — you pay only the interest each month while studying. This prevents capitalisation and significantly reduces total repayment cost.
Section 80E: The hidden tax benefit
Interest paid on education loans is fully deductible under Section 80E — with no upper limit. This applies from the year repayment starts, for 8 consecutive years.
| Loan interest paid | Tax bracket | Tax saved per year |
|---|---|---|
| ₹1,00,000 | 5% | ₹5,000 |
| ₹1,50,000 | 20% | ₹30,000 |
| ₹2,00,000 | 30% | ₹60,000 + cess |
The deduction is available only on interest, not principal. It’s available to the individual taking the loan (student) or the parent/guardian who took it. Not available under the new tax regime unless the employer offers it separately.
Collateral requirements (India, FY 2025-26)
| Loan amount | Collateral required |
|---|---|
| Up to ₹4 lakh | No collateral, no guarantor |
| ₹4 lakh – ₹7.5 lakh | Third-party guarantor (typically parent) |
| Above ₹7.5 lakh | Collateral required (property, FD, NSC) |
SBI’s Vidya Lakshmi portal lists all bank schemes in one place and is the official Government of India platform for education loan applications.
IBA Model Education Loan Scheme
The Indian Banks’ Association model scheme covers:
- Fee payable to college (tuition + hostel + exam fees)
- Books, equipment, study tours
- Reasonable living expenses
- Travel expenses for study abroad
It does not cover coaching fees, PG accommodation (non-hostel), or course-related deposits.
Frequently asked questions
What is the maximum education loan I can get?
- PSU banks: Up to ₹10 lakh (India), ₹20 lakh (abroad) — unsecured. No formal upper limit with collateral.
- Private banks/NBFCs: Up to ₹75 lakh or more with sufficient collateral.
- PM-Vidyalakshmi scheme: Interest subvention for EWS/LIG students.
Can I get an education loan without collateral for abroad studies?
Yes, up to ₹7.5 lakh (with guarantor only). Above ₹7.5 lakh requires collateral. Some NBFCs offer up to ₹40–50 lakh collateral-free for top foreign universities (IVY League, Oxbridge, NUS) — at higher rates (12–15%).
What happens if I can’t get a job after the moratorium ends?
Banks can extend the moratorium by 6–12 months if you’re genuinely unable to repay. However, interest continues to accrue. Contact your branch before the moratorium ends — don’t wait for the loan to become NPA (non-performing asset), which damages your CIBIL score.
Is the moratorium period the same at all banks?
No. Standard is course + 1 year. SBI Scholar Loan offers course + 12 months or 6 months after getting a job, whichever is earlier. Some banks offer course + 6 months only. Confirm with your bank — the difference affects total interest capitalised significantly.
Sources
- RBI: Model Education Loan Scheme guidelines
- IBA (Indian Banks’ Association): Education loan framework (2024 revision)
- Income Tax Act 1961: Section 80E deduction on education loan interest
- PM Vidyalakshmi portal: vidyalakshmi.co.in
- SBI, HDFC Credila, Avanse official rate cards (April 2026)