What is the Education Loan?
An education loan funds tuition and living costs, with a moratorium (course duration plus 6–12 months) during which no EMI is due. Interest still accrues in that window and is added to your principal, so the loan you start repaying is larger than the loan you took.
Rates in India run about 8.5–11% for domestic study and 9.5–13% for overseas, often with a collateral requirement above ₹7.5 lakh. Interest paid is fully deductible under Section 80E for up to 8 years — but only if you file under the old tax regime; 80E is not available in the new regime.
Formula & worked example
Two stages — compounding during study, then a normal EMI:
EMI = Balance × i × (1 + i)N / ((1 + i)N − 1)
Worked example: ₹20,00,000 at 10.5% with a 4-year moratorium grows to about ₹30.4 lakh before the first EMI — ₹10.4 lakh of interest added before you have earned a rupee. Repaying that over 10 years gives an EMI near ₹41,000 and total interest of roughly ₹29.8 lakh.
How to use this education loan calculator
- Enter the full sanctioned amount including living expenses, not just tuition.
- Set the moratorium as course length plus the grace period your bank allows.
- Choose a realistic repayment tenure — most banks allow up to 15 years.
- Compare the "interest during study" figure with what simple interest servicing would cost.
Smart tips
- Pay just the interest during the moratorium if you can. On a ₹20L loan it prevents about ₹10 lakh being added to your principal.
- Claim Section 80E — the entire interest is deductible with no upper limit, for up to 8 years.
- Government interest subsidy schemes (like CSIS) can cover moratorium interest for families under the income threshold.
- Loans up to ₹7.5 lakh usually need no collateral; going slightly under that limit can simplify approval considerably.
- Start repaying before the moratorium ends if you get a job early — banks allow it and it cuts years of interest.
Frequently asked questions
Do I pay anything during the course?
EMIs do not start, but interest accrues and compounds into the principal. Paying just the monthly interest during study — often a few thousand rupees — saves lakhs later.
Is education loan interest tax deductible?
Yes, under Section 80E the full interest amount is deductible from taxable income for up to 8 years, with no cap. The principal is not deductible.
What is the maximum education loan without collateral?
Usually ₹7.5 lakh under the Model Education Loan Scheme, though several banks now go to ₹10–15 lakh unsecured for premier institutions.
Can I prepay an education loan?
Yes, and education loans typically carry no prepayment penalty. Prepaying early is very effective because interest is front-loaded.
What if I do not get a job after the moratorium?
Most banks will extend the moratorium by 6–12 months on request. Talk to them before missing an EMI — a default is far harder to recover from.
Want the theory behind the numbers? Read our education loan guides on the Money Blog.
Written by Gurjeet Singh, Sharpen Solutions. Last reviewed 30 Sep 2026. How we check these numbers.