Key takeaways
- Loans of up to ₹3 crore are available; public banks are cheapest but slowest.
- Interest accrues during study — paying simple interest through the moratorium saves lakhs.
- Section 80E allows full interest deduction for up to 8 years.
An education loan is usually the second-largest financial decision of a student's life after the degree itself. A one-percentage-point difference on ₹40 lakh over ten years is roughly ₹2.5 lakh — worth a week of comparison.
Lender types compared
| Lender type | Typical rate | Collateral | Processing time |
|---|---|---|---|
| Public sector banks | 8.5%–11% | Required above ₹7.5 lakh | 3–6 weeks |
| Private banks | 10%–13% | Often required above ₹40 lakh | 1–3 weeks |
| NBFCs | 11%–15% | Frequently collateral-free | 3–10 days |
| International lenders | USD-linked, 9%–14% | No Indian collateral | 1–3 weeks |
The moratorium trap
Most loans allow you to repay nothing during the course plus six to twelve months. Interest still accrues and is capitalised — so a ₹40 lakh loan can become ₹50 lakh before your first EMI. Paying simple interest monthly during study, even partially from family income, is the single highest-return decision in the whole process.
What to compare beyond the headline rate
- Processing fee — 0% to 2% of the sanctioned amount
- Whether the rate is fixed or floating, and the spread over the benchmark
- Prepayment penalties — insist on zero
- Whether living expenses, flights, laptop and insurance are covered
- Forex margin charged on each disbursement to the university
- Whether the moratorium interest is simple or compounded
Tax and documentation
Under Section 80E, the entire interest paid on an education loan is deductible from taxable income for up to eight years, with no upper limit — a benefit worth claiming from the first year of repayment. Keep the sanction letter, disbursement schedule and interest certificates filed from day one.
Need personal guidance?
Talk to a Parayu Orbit counsellor for unbiased advice based on your profile, budget and career goals.