Check Education Loan Benefits, Features, Expenses Covered & How to Apply.

Education loans make higher education possible by covering tuition, books, living expenses, and more. They offer lower interest rates, flexible repayment options, and tax benefits while helping students build credit and secure better career opportunities. Here’s a quick summary of their key advantages:

• Affordable Rates: Interest rates start at 9.65% for women and 10.15% for men, much lower than personal loans.
• Full Coverage: Covers tuition, housing, travel, and study materials.
• Tax Savings: Deduct interest payments under Section 80E for up to 8 years.
• Grace Period: Repayment starts 6–12 months after graduation, with terms up to 15 years.
• No Collateral for Small Loans: Easier access for students with limited assets.

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Education loans not only fund education but also improve career prospects, with college graduates earning significantly more over their lifetime compared to high school graduates. They’re a smart way to invest in your future while protecting family savings and teaching financial discipline.

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Top 10 Education Loan Benefits

Education loans come with a range of benefits that not only ease financial burdens but also open doors to academic opportunities that might otherwise seem out of reach. Here are the major benefits of taking an education loan: 

1. ‍Study at Top Schools

With education loans in India offering amounts as high as INR 1.5 crore, students can confidently aim for top universities without financial constraints. These loans go beyond just covering tuition fees - they also include housing, travel, and study materials. This makes it possible for more students to pursue education at prestigious institutions.

2. ‍Tax Savings

A standout perk of education loans is the tax deduction on interest payments under Section 80E of the Income Tax Act. Borrowers can claim this benefit for up to eight years from the start of repayment, with no cap on the deductible interest amount. This can significantly ease the tax load, especially in the early stages of one’s career.

3. ‍Payment Grace Periods

Education loans provide a repayment grace period of 6–12 months after graduation, giving borrowers time to focus on starting their careers. Additionally, these loans offer repayment terms of up to 15 years, making it easier to manage monthly payments.

4. ‍Full Cost Coverage

Education loans are designed to handle all aspects of studying - tuition fees, textbooks, computers, room and board, transportation, study abroad costs, and even exam fees. This comprehensive coverage ensures students can focus on their education without worrying about hidden expenses.

5. ‍Lower Interest Rates

Compared to personal loans, education loans come with much lower interest rates. Rates start at 9.65% for women and 10.15% for men, offering borrowers a chance to save significantly over the life of the loan. This affordability makes education loans a more appealing option for funding higher studies.

6. ‍Build Credit Score

Taking out an education loan is a practical way to start building your credit history early. By making consistent, on-time payments, you can demonstrate financial reliability to credit bureaus, which can significantly boost your credit score. However, missed payments can have serious repercussions. For instance, a single missed payment on a student loan could drop your credit score by over 150 points.

7. ‍Keep Family Money Safe

Education loans not only help you fund your education but also protect your family’s financial stability. According to data, 65% of graduates in 2019 relied on student loans, highlighting how these loans can preserve family savings and assets.

Some key benefits include:

• Maintaining emergency funds for unexpected situations
• Keeping retirement accounts untouched
• Protecting valuable assets like property or investments

By relying on an education loan, you can focus on your studies without putting undue financial pressure on your loved ones.

8. ‍Learn Money Management

Repaying an education loan is an excellent way to build financial discipline. With the average monthly student loan payment hovering around ₹15,000, borrowers gain hands-on experience in budgeting, understanding loan terms and interest rates, and managing payment schedules. These skills not only help with loan repayment but also lay the groundwork for achieving long-term financial goals.

The education loan market has seen a 20.6% year-over-year growth, reflecting its role in teaching financial responsibility and providing access to higher education.

9. ‍Better Job Options

On average, college graduates with a bachelor’s degree in India earn a significantly higher median annual salary compared to those with only a high school diploma or less education. Bachelor’s degree holders typically earn about ₹4.5 to ₹6 lakh per year, which is roughly 2 to 3 times more than those with only a high school diploma.

Over a lifetime, this wage gap accumulates considerably—degree holders often earn more than twice the income of those without a college degree.

But the advantages of higher education go beyond just the paycheck. Education loans help students:

• Complete their degrees without financial interruptions, allowing them to enter the job market sooner.
• Gain access to internships and workshops that strengthen professional skills and networks.
• Obtain specialized certifications or training that enhance career prospects.
• Explore international education opportunities for a broader perspective.

Apart from the earning potential, education loans also provide flexible options that make higher education more achievable.

10. ‍Small Loans Without Collateral

One of the standout benefits of education loans is the ability to secure funding without collateral. This flexibility is especially helpful for:

• First-generation college students
• Families with limited financial assets
• Students pursuing technical or specialized training

Additionally, about 35-40% of Indian employers—especially in IT, BFSI, and multinational companies—now offer tuition reimbursement or education assistance programs to help employees pursue further education and skill development. For example, companies like Tata Consultancy Services (TCS) and Infosys have initiatives supporting employee education through sponsorships and reimbursements, which can cover certification courses or even degree programs.

Regarding education loans, around 40-45% of Indian graduates manage to repay their education loans within five years, while approximately 60% repay within ten years. These repayment trends demonstrate that education loans in India not only address immediate financial constraints but also enable graduates to invest in their skills and careers, ultimately leading to better income prospects and financial stability.

Together, these factors highlight how employer support and education loans are vital tools for Indian students and professionals striving for long-term career growth and a brighter future.

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Education Loan vs Personal Loan

Education Loan and Personal loan do differ in some of their features as both are meant for different purposes and for different audiences. Lets check out the basic differences: 

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Conclusion

Education loans play a crucial role in turning academic dreams into tangible financial and personal achievements. Over a lifetime, the return on investment in higher education can range from 14% to 36%, highlighting the undeniable value of pursuing advanced learning. These loans not only help cover tuition but also provide the financial flexibility needed to safeguard family savings and assets.

The numbers speak for themselves:

But the benefits go beyond just financial gains. Education loans introduce borrowers to structured repayment plans, fostering a sense of financial responsibility. With income-driven repayment options, graduates can align their loan payments with their career growth, making them manageable as they establish themselves professionally.

For tailored solutions and competitive rates, consider Propelld's education loan plans. When approached thoughtfully, education loans are not a burden - they’re a stepping stone to higher earning potential and career success.

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Frequently Asked Questions

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How can an education loan impact your credit score, and what happens if you miss payments?

An education loan can be a powerful tool for building your credit score, especially when you use it to establish a solid payment history. Since payment history is a major factor in credit scoring, consistently making on-time payments can show lenders that you’re financially responsible. Plus, it can help diversify your credit mix and potentially boost the average age of your credit accounts, both of which contribute to a stronger credit profile.

That said, missing payments can lead to serious problems. Even a single missed payment can hurt your credit score and stay on your credit report for years. If missed payments pile up, your loan could go into default. Defaulting carries heavy consequences, like wage garnishment, seizure of your tax refunds, and additional fees. To steer clear of these pitfalls, it’s crucial to plan your repayments carefully and stay on top of your loan responsibilities.

What expenses can an education loan cover, and are there any restrictions on how it can be used?

An education loan is meant to help students manage the various costs associated with higher education. These loans typically cover:

• Tuition fees
• Room and board (housing and meals)
• Books, supplies, and other study materials
• Essential equipment, like laptops or other necessary devices
• Travel costs related to education, such as commuting or relocation
• Institutional and exam-related fees

That said, there are usually restrictions on how the funds can be used. These loans are strictly for approved educational expenses as outlined by the lender or institution. Personal costs - like vacations, luxury purchases, or entertainment - are not allowed. Additionally, borrowing limits may apply depending on factors like the type of program, the institution, or the student’s academic year. It's always a good idea to carefully review your loan terms to understand what expenses are covered.

What is the tax benefit provided under Section 80E for education loans, and how does it help with financial planning after graduation?

Section 80E of the Income Tax Act: Tax Deduction for Education Loan Interest

Section 80E of the Income Tax Act provides a tax deduction for the interest paid on education loans taken for higher studies, whether pursued in India or abroad. You can claim this deduction for up to 8 consecutive financial years, beginning from the year your loan repayment starts. What makes this particularly appealing is that there’s no cap on the interest amount you can claim, offering a substantial opportunity to lower your taxable income.

This benefit can be especially helpful in managing your finances after graduation. During the early stages of your career, when your income might still be modest, reducing your tax liability can free up funds for other priorities - whether that’s saving, investing, or covering essential expenses. By easing financial pressures, it allows you to focus on career growth without the added worry of high tax payments.

How can an education loan impact your credit score, and what happens if you miss payments?

An education loan helps build your credit score through consistent, on-time payments. It improves your credit mix and payment history. However, missing payments can severely hurt your score and lead to default, affecting your financial credibility and future borrowing ability.

What expenses are covered under an education loan?

Education loans typically cover tuition fees, hostel charges, books, equipment, travel expenses (especially for studying abroad), exam fees, library and lab fees, insurance, and other educational necessities.

Is there a tax benefit on education loan repayments?

Yes, under Section 80E of the Income Tax Act, the interest paid on education loans is fully tax-deductible for up to 8 years from the start of repayment. There’s no upper limit on the deductible amount.

What is the grace period for education loan repayment?

Most education loans offer a grace period of 6 to 12 months after course completion or job placement. This allows students time to secure employment before starting repayments.

Can I get an education loan without collateral?

Yes, many lenders offer unsecured education loans (up to INR 7.5 lakh in India) that don’t require collateral. These are ideal for students without family-owned assets.

What is the interest rate for education loans in 2025?

Interest rates typically range from 9.65% (for women) to 10.15% (for men) in India, much lower than personal loans. Rates vary depending on the lender, loan amount, and credit profile.

How long does it take to get an education loan approved?

With digital platforms like Propelld, you can get loan approval within 7 days. Traditional banks may take 2 to 3 weeks, depending on document verification and processing time.

Can I apply for an education loan for overseas studies?

Yes, education loans can be used for international education. They cover tuition, airfare, visa fees, living expenses, and other study-related costs abroad.

What is the maximum tenure for repaying an education loan?

Education loans generally offer repayment terms up to 15 years, which makes EMIs more manageable compared to shorter-term personal loans.

What documents are required to apply for an education loan?

You typically need identity proof, address proof, academic records, admission letter, course fee structure, income proof of co-applicant (if applicable), and bank statements.

Are there penalties for early repayment of education loans?

Most lenders do not charge prepayment penalties on education loans, allowing borrowers to repay earlier without extra fees. Always confirm with your lender.

Do employers offer support for education loan repayment or higher studies?

Yes, many Indian and global employers now offer education assistance programs or tuition reimbursements, especially in IT, BFSI, and multinational companies.‍