Education Loans in India: Eligibility, Interest and Repayment Explained
An education loan can make a course possible, but you may be repaying it for many years. It's worth taking time to understand how much it will really cost, and what happens if your first job pays less than you hoped.
Education Loans in India: Eligibility, Interest and Repayment Explained
How an education loan works
What it usually covers
Depending on the lender, a loan may cover tuition, hostel fees, exam fees, books and equipment. Some lenders pay the college directly, often one semester at a time. Ask for a written list of what's included, because costs such as travel or a laptop aren't always covered.
The moratorium period
A moratorium is the time when you don't have to make full repayments. It's commonly the length of the course plus about a year, although the period can vary. After that, you begin paying EMIs, and repayment terms can run for up to around 15 years.
A moratorium isn't the same as an interest-free period. On many loans, interest keeps building up while you study and is added to what you owe. If you or your family can pay that interest during the course, your later EMIs may be smaller. Ask your lender to show you both versions.
What PM-Vidyalaxmi offers
PM-Vidyalaxmi is a central government scheme for students admitted on merit to listed Quality Higher Education Institutions. Banks describe these key features:
- No collateral or guarantor: eligible students can get a loan without either.
- Interest support: a 3% interest subvention during the moratorium on loans up to ₹10 lakh, for students with annual family income up to ₹8 lakh.
- Credit guarantee: a 75% government guarantee to lenders on loans up to ₹7.5 lakh, which can make banks more willing to lend.
Separate interest support may apply to families on lower incomes. Benefits, income limits and the institution list can change, so check the current rules on the PM-Vidyalaxmi portal or the Ministry of Education website before you apply.
How to compare lenders
Look beyond the headline rate
Public sector banks, private banks and non-banking lenders can offer very different terms. Ask each one for the same details so you can compare them properly:
- The interest rate, and whether it's fixed or floating
- The processing fee and any other charges
- Whether interest builds up during the moratorium
- Any charge for repaying early
- Whether a co-applicant or collateral is needed
- How payments are released to your college
Check the EMI against a realistic salary
Before you borrow, look up typical starting pay for your course and city from several sources, not just a college brochure. Then use a loan calculator to estimate your EMI. If the EMI would take up a large share of that salary, consider borrowing less or choosing a less expensive option. A loan that looks manageable on a high placement figure may be difficult on an ordinary one.
Applying without surprises
Documents to prepare
Lenders commonly ask for your admission letter, fee schedule, academic records, identity and address proof, and income documents for any co-applicant. Keep clear scanned copies in one folder, so you can respond quickly when asked.
Protect yourself from loan fraud
Be careful with agents or apps that promise guaranteed approval. Never pay an upfront fee to someone who has contacted you out of the blue, and never share an OTP or banking password. Check that the lender is genuine through its official website. If you're unsure, our guide to spotting scams covers the warning signs, and they apply to loan offers too.
After you start repaying
If you're struggling
Speak to your lender before you miss a payment. Missed payments can harm your credit record and may make future borrowing harder. Ask what options are available, and get any change in writing.
If you have a complaint
Start with your lender's complaints process and keep a record of what you sent. If your complaint against a regulated lender isn't resolved, you may be able to use the Reserve Bank of India's complaints portal.
Tax on loan interest
A deduction on education loan interest has been available under the old tax regime, subject to conditions. It generally doesn't apply under the new regime. Check the current rules on the Income Tax Department website or ask a tax professional before relying on it.
Last checked November 2026. This guide is general information, not financial, tax or legal advice. Rules and rates change, so confirm the details with the official source or your provider before you decide.