An education loan (student loan) has a unique structure — there is a moratorium period covering the course duration plus a grace period (typically 6–12 months after completing the course) during which no EMI is required. However, interest continues to accrue during this period and is added to the principal at repayment start. This calculator accurately models the total cost of your education loan, including the interest accrued during the moratorium.
How Interest Accrues During Moratorium
During the moratorium, interest accrues on the disbursed loan amount at simple interest (in most public sector banks). This accrued interest is capitalised (added to the principal) at the start of the repayment period. For a ₹15 lakh loan at 11% over a 4-year moratorium, approximately ₹6.6 lakh in interest accrues — making the effective repayment principal ₹21.6 lakh. Some banks allow you to pay simple interest during the moratorium, which significantly reduces the final outstanding principal.
Education Loan Interest Subsidy Schemes
Vidyalakshmi Portal: Central Scheme of Interest Subsidy (CSIS) — full interest subsidy on education loans up to ₹7.5 lakh for economically weaker section students (annual family income < ₹4.5 lakh) during moratorium. Dr. Ambedkar Central Scheme: similar subsidy for OBC/EBC students. State government schemes vary widely — check your state's education department. These subsidies can save ₹2–5 lakh in total cost.
Frequently Asked Questions
What is the maximum education loan in India?
For studies in India: up to ₹10 lakh (most banks); up to ₹20–30 lakh for premier institutions (IITs, IIMs, AIIMS) — usually without collateral. For studies abroad: up to ₹1.5 crore (with collateral). Banks like SBI, Bank of Baroda, and Canara Bank have specific higher education loan products.
Is education loan interest tax deductible?
Yes. Under Section 80E, the entire interest paid on education loans is deductible from taxable income for up to 8 consecutive years from the year of repayment start. There is NO upper limit on the deduction amount. This makes education loans one of the most tax-efficient forms of borrowing in India.
What collateral is required for education loans?
Loans up to ₹7.5 lakh: no collateral required (for most nationalised banks); a guarantor may be needed. Loans above ₹7.5 lakh: collateral required — typically residential/commercial property, NSC, FDs, or LIC policies worth at least 100% of the loan amount.