What Is an Education Loan? A Beginner's Guide for Indian Students (This Year)

What Is an Education Loan? A Beginner's Guide for Indian Students (This Year)

Admission results arrive, fee deadlines are set, and a family that has never borrowed for education suddenly has to work out where to begin. Which lender should you approach? What papers will they ask for? How long will it take, and what will it cost?

Getting an education loan in India is mostly a matter of preparation, and the steps are the same for most families. This walkthrough follows the practical path, from checking whether you qualify to signing the sanction letter. Every figure comes from a lender or government page read in October this year, and each lender's own terms should be confirmed before you apply.

Who can get an education loan in India?

The basic conditions for an education loan in India are common to nearly every lender. The borrower is an Indian national, admission to a course has been secured, and a parent or guardian agrees to be co-borrower. Lenders then assess the co-borrower's income and repayment record, since they will carry joint responsibility for the loan.

Age rules differ. ICICI Bank states a minimum age of 16 and a maximum of 65 at loan maturity, assessed case by case, and it accepts a wider set of co-applicants than many families expect, including siblings, grandparents and uncles. HDFC Bank lists an age band of 16 to 35 and asks for a co-applicant on full-time courses.

SBI does not publish a minimum credit score for its education loans, but a clean repayment record on the co-borrower's side makes approval smoother with any lender. Credit score here means the number built by credit bureaus from your borrowing history, such as CIBIL (Credit Information Bureau India Limited).

Which courses and expenses are covered?

An education loan in India covers more than tuition alone, though the exact list depends on the lender.

State Bank of India (SBI) spells it out on its Student Loan scheme page. For India, it covers graduation and postgraduation courses, regular technical and professional degrees and diplomas approved by bodies such as the University Grants Commission and the All India Council for Technical Education, and teacher training and nursing courses approved by the Central or a State government. Aviation and shipping courses approved by their regulators also qualify.

Eligible costs include college and hostel fees, examination, library and laboratory charges, books and equipment, a computer capped at 20% of tuition, and refundable deposits capped at 10% of tuition. A course that is not recognised by the right authority will not qualify for an education loan in India, so confirm approval status early.

Where can you get an education loan in India?

Three types of lenders offer an education loan in India. Public sector banks publish detailed rate cards, private banks publish their own terms on their websites, and non-banking financial companies (NBFCs) often focus on overseas courses.

SBI's education loan rate card, effective 15 October 2026, lists the Student Loan at 9.65% with collateral and 10.15% without. Premier institutions such as the IITs and IIMs get a concessional 7.00% until 31 December this year. All SBI education loan rates are floating.

Those are the lowest advertised rates, not guaranteed offers. Your own rate depends on the course, institution, co-borrower and security.

When you compare, look at the rate type as well as the number. A floating rate can rise or fall during the life of the loan, so the first EMI is not necessarily the last.

HDFC Bank's education loan page says the tenure can run up to 15 years and that processing is free up to ₹7.5 lakh and 1% above that. Collateral options include fixed deposits, insurance policies, selected mutual funds, and savings certificates such as NSC (National Savings Certificate) or KVP (Kisan Vikas Patra).

Which documents will the lender ask for?

Gather these before you walk into a bank, because missing papers are a common cause of delay for an education loan in India.

• Application form, filled in fully
• Identity and address proof for the student and co-borrower, with a Permanent Account Number (PAN) card
• Mark sheets from Class 10, Class 12 and graduation where relevant, and entrance exam scores
• Admission letter and a schedule of course fees and expenses
• Income proof for the co-borrower and about six months of bank statements
• Passport and visa details for study abroad
• Property or deposit papers if you are offering collateral

SBI adds a few: an asset and liability statement for loans above ₹7.5 lakh, and a gap certificate if there was a break in studies. For any application involving a government subsidy, Aadhaar needs to be updated.

How do you apply, step by step?

1. Estimate the full cost: tuition, hostel, books, travel and a reasonable living allowance. An education loan in India sized to the real budget is easier to sanction than one padded for comfort.
2. Shortlist two or three lenders and read their scheme pages for security, margin and fees. No single lender is the cheapest for every education loan in India.
3. Run an EMI estimate so that you know the monthly figure before you commit.
4. Submit the application, online or at a branch, with the documents above.
5. Respond quickly to the lender's queries. Many banks verify the admission and ask for clarifications on income.
6. Review the sanction letter for the rate, fees, moratorium, security and prepayment terms before accepting.
7. Sign, and let the lender release funds against the institution's fee schedule. From then on, the education loan in India is a legal commitment for both the student and the co-borrower.

The government's education loan portal, Vidya Lakshmi, lets students apply to several banks. PM-Vidyalaxmi applications are made through a government portal as well.

What does an education loan in India cost?

The cost of an education loan in India has three parts. Interest is the main one, but fees and unpaid-interest build-up matter as well. Under SBI's Student Loan scheme, processing is free up to ₹10 lakh. The bank charges ₹5,000 plus goods and services tax (GST) from ₹10 lakh to ₹20 lakh, and 0.50% above that with a ₹25,000 cap plus GST.

Here is an illustration with an ₹12 lakh loan. At 9.65% over 10 years, the EMI is about ₹15,626 and total interest is about ₹6,75,171. At 10.15%, the EMI is about ₹15,958 and interest about ₹7,14,952. Stretching the term to 12 years at 9.65% lowers the EMI to roughly ₹14,099 but raises the interest to around ₹8,30,308. These are illustrative calculations at a fixed rate, and they ignore any interest added during the moratorium.

So half a percentage point on the rate costs about ₹40,000 over ten years on this loan, while two extra years of tenure cost more than ₹1.5 lakh. Small differences in terms add up, which is why it pays to compare each education loan in India on rate, fees and tenure together.

Is there government help with an education loan in India?

Yes, for eligible students, and it can lower the cost of an education loan in India noticeably. The Press Information Bureau explainer on PM-Vidyalaxmi describes collateral-free and guarantor-free loans for students admitted on merit to 1,425 designated institutions, with a rate capped at the bank's benchmark plus 0.5%. Families with annual income up to ₹8 lakh get a 3% interest subvention on loans up to ₹10 lakh.

A separate support, the Central Sector Interest Subsidy scheme, gives full interest relief during the moratorium for families earning up to ₹4.5 lakh a year on loans up to ₹10 lakh for technical and professional courses.

The 75% government credit guarantee on loans up to ₹7.5 lakh is meant to make banks more willing to lend without collateral.

Is the interest on the loan tax deductible?

The interest portion of an education loan in India can be deducted under Section 129 of the Income-tax Act, 2025, which replaced Section 80E. A lender explainer says only individuals can claim it, only for interest and not principal, with no upper limit, for up to eight consecutive years from when repayment starts. Whether it helps you depends on your tax regime.

How does repayment work after the course?

Repayment of an education loan in India begins after the moratorium, the repayment holiday that covers the course plus some time afterwards. Under the Indian Banks' Association model scheme, the moratorium is the course period plus one year, though individual schemes differ. SBI's Scholar Loan, for example, starts repayment 12 months after the course or six months after getting a job, whichever is earlier, while Global Ed-Vantage starts six months after the course.

Interest keeps accruing during the moratorium. Paying even a part of it while you study, if the family can manage, lowers the amount on which the EMI is later fixed. Ask the lender how unpaid interest is treated before you accept, since this changes the final cost of an education loan in India more than most families expect.

Repayment can stretch up to 15 years under the SBI schemes covered here. A longer period gives a smaller EMI, but it raises the total interest.

What mistakes should you avoid?

• Borrowing for the full wish list instead of the verified cost of the course
• Comparing only the headline rate, not fees, margin and moratorium
• Applying late, so that a fee deadline arrives before the sanction
• Ignoring the co-borrower's credit record until the bank raises it
• Accepting an education loan in India without reading the prepayment and penalty clauses in the sanction letter

Questions students often ask

How long does approval take?

There is no single timeline for an education loan in India. It varies with the lender, the loan size and how complete your papers are. Ask for a realistic timeline in writing and plan around your fee date.

Can I apply before I have an admission letter?

Some lenders issue a pre-admission sanction. ICICI Bank, for instance, lists a pre-admission sanction letter on its page. The final loan still depends on confirmed admission.

Can I repay early?

You can usually prepay an education loan in India. For floating rate loans to individuals for non-business purposes sanctioned or renewed from 1 January this year, RBI's directions bar prepayment charges. Fixed rate loans may carry them, so check.

FundMyCampus is an education loan advisory platform founded by an alumnus of the Indian Institute of Management Bangalore. It is not a bank, it says it does not charge students any fee, and it works with more than 12 banking partners. Its free tools include an EMI calculator, an eligibility checker and a loan comparison tool.

Visit FundMyCampus