How Education Loans Work in India 2025 – Full Guide for Students

About Education Loans in India

Education loans are the answer to the skyrocketing and ever-inflating costs of education in India. They are the financial support for students to help them navigate through their educational aspirations, whether in India or overseas. Different banks and NBFCs offer these loans at competitive rates to help students afford a good education.

Here are two key features of Education Loans:

• You can get full tax benefits on the interest you pay under Section 80E.
• For certain courses and schools, you can get a loan without needing collateral up to a certain amount.

Read on to know the complete details about education loans, their types, features, benefits, eligibility, how they work and how to secure one.

The education loan tax benefit under Section 80E lets you claim deductions on interest paid, easing the repayment burden, and is a key feature to note when exploring education loans in India for higher studies.

How Education Loan Works in India

Understanding what an education loan is and getting these loans is easy. Here is how an education loan works:

1. Students can borrow from Rs 1 lakh to Rs 1 crore in India. It often depends on what and where they are learning and can be even more depending on the course and location.
2. Most lenders cover 100% of the expenses in education loans.
3. The loan amount can also be used for expenses like buying a laptop or covering travel costs.
4. The interest rate on the loan varies across lenders.
5. The loan amount is paid directly to the institution.
6. It's not necessary to start paying the loan immediately. Most lenders offer a moratorium period, i.e. a repayment holiday.
7. After the moratorium too, you get flexible options for repaying the loan. Students can take up to 15 years after finishing their course to repay it.
8. Usually students don't have a job and are studying, hence, they might need someone else to sign the loan agreement too. This person can be someone who agrees to pay back the loan if the student can't. These are called co-signers and can be parents or close relatives.

Different Types of Interest Rates in Education Loans

The bank decides what kind of interest rate students need to pay back. Some Indian banks may offer loans with fixed interest rates, meaning the rate stays the same throughout the loan term.

Others have interest rates linked to the Lending Rate. This is defined by the Marginal Cost of Funds based Lending Rate (MCLR) for a year. If this rate changes, your student loan's interest rate might also change.

The lowest interest rate on education loan can help reduce your overall repayment burden and is often offered to meritorious students or under government schemes, making it important to compare the different types of interest rates in education loans — fixed and floating — before applying.

Compare Top Education Loan Information 2025-26

Let's have a glance at some of the most prominent education loan providers, their interest rates and processing charges (rates as of 2025-26; illustrative and subject to change — verify with the lender before applying):

The above figures are as of 2025-26, are illustrative, and are subject to change. For the latest information, please check directly with the respective bank or lender.

You can also get your loan from new-age NBFCs like Propelld that provide hassle-free education loans with minimal documentation and no collateral requirement.

Get your Loan 10X Faster than Banks. Disbursal in Just 7 Days. Apply Now.

Factors That Decide Your Education Loan EMI

Several things determine how much you'll pay each month for your education loan. These include:

• The interest rate on the loan
• How much you borrowed
• How long you have to repay the loan

Types of Education Loans in India

There are numerous education loans for different kinds of courses. Whether you are pursuing a skill-based course or studying abroad, there's a loan for it. They are categorised based on several distinguishing factors:

Based on Location of Institute

• Domestic Education Loan: For courses within the country. To get this loan, you need to meet certain requirements and have a confirmed seat in an approved institute.
• Overseas Education Loan: For courses outside the country. Similar to domestic loans, you need to have a secured seat in a recognised college or university.

Based on the Course

• Undergraduate Education Loans: For undergraduate degree programs. Undergraduate degrees are usually 3-4 years. After completing these programs, students have plenty of job opportunities.
• Postgraduate Student Loans: For postgraduate degrees within India. Postgraduate degrees are usually 2 years. Students need to have completed their undergraduate program to qualify.
• Professional Courses Loans: For career-oriented education programs. Many people, after spending some time in corporate, decide to take up skill development courses to improve their employment prospects.

Based on Collateral Provided

• Loan Against Deposits: Students can get a loan against fixed deposits, recurring deposits or gold deposits.
• Loan Against Property: Financial institutions offer loans against properties like your house.
• Loan Against Securities: Students can also get loans against bonds, debentures or equity shares.

The Process to Apply for an Education Loan in India

Step 1: Choose a Lender Based on Your Preferences and Requirements

Do proper research and choose a lender based on your preferences like interest rate, processing fees, repayment tenure, moratorium availability etc.

Step 2: Fill the Student Loan Application Form Online or Offline

You will need to fill out a form with your personal details and provide the required documents.

Step 3: Bank Initiates the Process

The bank initiates the process of the loan, verifies your documents and evaluates your application. You'll have a discussion with a bank employee about your academic performance, chosen course, and possibly your institute along with collateral requirements, if any.

Step 4: Provide Supporting Documents

Before the bank approves your loan, you need to submit documents showing your admission to the institute. If your loan is for a larger amount, you might need collateral like property papers.

Step 5: Loan Approval or Denial

Students often require a guarantor for their loans — usually parents or guardians. The bank will check their credit history. After checking everything, the bank will decide whether to approve or deny your loan.

Step 6: Get your Loan

Once everything's sorted, the bank will give you the loan. They'll directly pay your college fees to your institute.

For easy processing with minimal documents, students can visit Propelld's website. Propelld is a preferred choice for many students and parents in India.

Understanding the process to apply for an education loan is crucial, especially the steps involved in documentation, verification, and sanctioning.

Minimal Documentation. No Collateral Required. 7 days Disbursement. Apply Now

Features of Education Loan in India

The most important features of an education loan in India are:

1. Loan Amount: The maximum loan amount in education loans can be as much as Rs 1 crore. Most lenders provide 100% financing for college fees including tuition fees, hostel, laptop, student exchange programs and other expenses.
2. Flexible Repayment: Numerous education loans let students pay back the money after they finish studying. They can choose a schedule that works for them, making finances more manageable.
3. Moratorium Period: Some banks give students a break from paying right after they graduate, allowing them time to settle into their new job without worrying about loan payments.
4. Tax Benefits: Education loan interest payments may help students save money on taxes under Section 80E, lightening their financial load.
5. Online Application and Management: Students can easily apply for loans and track their accounts online, saving time and energy.

Benefits of Education Loans Explained

The major benefits of education loans are as follows:

1. Access to Higher Education: Students from different financial backgrounds can fulfil their dreams of higher education without worrying about how to pay for it.
2. Financial Flexibility: Students can focus on their studies without stressing about finances, fully concentrating on learning and achieving their goals.
3. Building Credit History: Repaying education loans on time helps students build a good credit history, making it easier to borrow money later on if needed.
4. Global Opportunities: Education loans can enable students to explore educational opportunities abroad, broadening their horizons and exposing them to different cultures and academic environments.
5. Interest Subsidies and Tax Benefits: Some education loans come with interest subsidies or tax benefits, reducing the overall cost of borrowing. For instance, the PM Vidyalaxmi scheme (active, 2025-26) offers a 3% interest subvention for eligible students; the Central Sector Interest Subsidy (CSIS) scheme supports EWS students. Note: the Padho Pardesh scheme has been discontinued. These incentives can significantly lower the financial burden on students and their families.
6. Investment in Future Earnings: Education loans are often considered investments in future earning potential. By obtaining a degree or certification through higher education, individuals can enhance their skills and qualifications, leading to better job prospects and potentially higher salaries over time.

Click here for Higher Chances of Approval than Banks - Propelld Education Loan

List of Expenses Covered in Education Loan

Here's what the loan amount will cover:

1. Tuition fees
2. Hostel fees
3. Travel expenses / passage money for students studying abroad
4. Insurance premium
5. Cost of books / equipment / instruments / uniform
6. Examination / laboratory / library fees
7. Cost of a computer / laptop required for course completion
8. Caution deposit, building fund / refundable deposit supported by institution bills / receipts
9. Any other expenses required to complete the course such as study tours / thesis / project work

Tax Benefits on Education Loan

The interest you pay on your student loan can be deducted under Section 80E of the Income Tax Act of 1961. This advantage is only available to individual borrowers and is offered only for higher education. The deduction is available for all fields of study, both domestic and international, including vocational and academic courses.

It's important to remember that the tax deduction applies only to the interest portion of the EMI, not the principal. There is no limit on how many times you can claim this benefit. You'll need a certificate from your bank or financial institution that separates the principal and interest components of your EMIs to qualify.

This benefit is accessible for eight years from the day you start repaying your loan or until the interest component is paid off, whichever comes first.

Courses Covered Under an Educational Loan

1. Undergraduate degrees
2. Postgraduate degrees
3. Undergraduate diplomas
4. Postgraduate diplomas
5. Vocational training courses
6. Skill development courses
7. Doctoral programmes

Education Loans Eligibility

1. Indian Residence / Citizenship
2. Age Requirement: The student should be at least 18 years old to apply for a loan. Alternatively, parents can apply on their behalf.
3. Admission to a Course: Students must have confirmed admission to a college or university recognised by the UGC, government, AICTE, or the relevant authority.
4. Academic Undertaking: Students must have achieved at least 60% in their previous qualifying exams.

List of Documents Required for Education Loan

Here is an indicative list of documents that most lenders ask for:

1. Admission letter from the educational institution
2. Marksheets (previous education — school / college)
3. Age proof
4. ID proof
5. Address proof
6. Signature proof
7. Salary slips
8. Recent bank account statements
9. ITR with income computation
10. Audited balance sheet
11. Proof of turnover (service tax return / sales receipt)
12. Completed application form with signature
13. Latest passport-size photographs
14. Appropriate Visa for studies abroad

Tired of too much Documentation? Turn to Propelld for Minimal Documentation, Superfast Processes and Hassle Free Loans. Apply Now!

What is an Education Loan EMI Calculator

The Education Loan EMI calculator is an online tool designed to help borrowers calculate the monthly repayment amount for their educational loans. It generates an amortisation schedule illustrating the EMI breakdown, including monthly interest payments and the portion of the principal repaid.

The tool also outlines the total amount repaid to date and the outstanding balance, offering a comprehensive understanding of the overall cost of the educational loan — including the total interest payable throughout the loan tenure.

For individuals considering or already applying for an educational loan, understanding the monthly EMI commitment is crucial. The EMI calculator aids in assessing the monthly financial obligation, allowing borrowers to explore various interest rates and select preferred banks. This information enables effective budget planning.

How to Use the Educational Loan EMI Calculator

The tool is user-friendly and free of charge. Input the following details:

• Amount: The desired educational loan amount.
• Tenure: The preferred duration for repaying the loan (the EMI period).
• Rate of Interest: The applicable interest rate offered by the lending institution.

By entering these details, you can obtain the monthly EMI amount, with the flexibility to adjust parameters for a customised monthly budget.

How to Calculate Educational Loan EMI

The following formula is used to calculate the educational loan EMI:

EMI = [P × R × (1 + R)^n] / [(1 + R)^n – 1]

Where:

• P = Principal amount
• R = Rate of interest (monthly)
• n = Tenure (in months)

As the cost of university fees keeps rising, more students find it tough to manage their expenses. In such a scenario, education loans can be really helpful. But it's important to understand how student loans work in India before choosing a lender.

Students can visit Propelld for obtaining education loans in India. With a vast customer base of over 2 lakh individuals, Propelld has partnered with more than 2,500 institutes and disbursed over Rs 2,000 crores in loans.

Propelld collaborates with various institutions across different sectors. Their primary features include:

1. No Collateral Loans: Propelld offers education loans without requiring collateral.
2. Moratorium Option: Propelld provides a moratorium period, allowing borrowers to defer loan payments if needed.
3. Faster Process: Propelld boasts a significantly quicker loan processing time compared to traditional banks — typically disbursing within seven days. For skill-up courses, disbursement can be even quicker.
4. Minimal Documentation: Propelld requires fewer documents, simplifying the application process.
5. Fully Online Process: The entire loan application and verification process is conducted online, eliminating the need for physical verification.