An education loan lets you pay for higher studies now and repay after you start earning. Understanding a few terms helps you compare offers and avoid surprises.
What an education loan usually covers
- Tuition and exam fees
- Hostel and mess charges
- Books, equipment and a laptop where the course needs one
- Travel and living costs for study abroad
Key terms
- Co-applicant: usually a parent or guardian who shares responsibility for repayment.
- Moratorium: the course period plus a grace period during which EMIs are not due. Interest usually keeps adding up.
- Collateral: security such as property or deposits. Whether it is needed depends on the loan amount, the bank and the institution.
- Margin money: the part of the cost you pay yourself.
How to reduce the total cost
- Pay interest during the moratorium if you can. It stops interest being added to the loan.
- Compare the effective interest rate, processing fee and any insurance the bank bundles in.
- Check government schemes such as the PM-Vidyalaxmi portal and interest subsidy schemes for eligible students.
- Prepay when you can — most education loans allow it without heavy charges, but confirm with your bank.
Tax benefit
Interest paid on an education loan for higher studies can be claimed as a deduction under Section 80E of the Income-tax Act, subject to its conditions. There is no upper limit on the interest amount, and the deduction can be claimed for a limited number of years. Confirm the current rules with a tax adviser.
Use our Education Loan EMI Calculator to see your EMI with and without paying interest during the moratorium.
