Education Loan at 9.65% vs 11.25%: What the Gap Costs Over 10 Years

Education Loan at 9.65% vs 11.25%: What the Gap Costs Over 10 Years

A difference of 1.60 percentage points looks small on a rate card. Spread over a decade of monthly instalments it turns into lakhs of rupees, which is why the education loan interest rate deserves more attention than almost any other line in a sanction letter. The two figures used here come from published rate cards in October this year: 9.65% for a State Bank of India (SBI) Student Loan backed by collateral, and 11.25% as the starting rate for an unsecured loan at Credila.

Rates have moved a good deal in recent years, so the arithmetic here is built from rates published this month. The working is shown in full so that a family can repeat it with its own offer.

What is the education loan interest rate range this year?

SBI's education loan rate card, effective 15 October 2026, links its rates to an external benchmark of 8.15%, which is the Reserve Bank of India (RBI) repo rate of 5.50% plus a spread of 2.65 points. The education loan interest rate on its Student Loan is 10.15% without collateral up to ₹7.50 lakh and 9.65% with collateral above that. Its Scholar Loan for select premier institutions runs from 7.15% to 7.90%.

Other lenders publish starting rates rather than fixed ones. The table gathers the figures lenders list on their own sites.

Two points stand out about the education loan interest rate on offer. First, the cheapest rates carry conditions: collateral, a premier institution or a government scheme. Second, the highest published rate here, 11.25%, is a starting rate for unsecured loans, so a given borrower may be offered more.

Axis Bank's page describes its rate as the repo rate plus a spread that starts at 3.5 points. At today's repo rate of 5.50% that would work out to 9.00%, though the rate table on the same page uses an older repo figure of 6.50% and should not be relied on. Ask the bank for a written quote.

How much does a 9.65% versus 11.25% education loan interest rate cost over ten years?

The figures here are an illustration, not a quote. Take a ₹20 lakh loan repaid in 120 equated monthly instalments (EMIs), with the rate fixed for the whole period and the repayment holiday ignored. The 10.25% and 11% rows use the starting rates published by ICICI Bank for unsecured study abroad loans and by Avanse for unsecured loans.

Moving from 9.65% to 11.25% adds about ₹1,790 to every instalment and about ₹2.15 lakh to the interest paid over ten years. Put another way, every extra 0.1 point of the education loan interest rate costs a family roughly ₹13,000 on this loan.

What does the repayment term do to the gap?

The longer the loan runs, the more an education loan interest rate difference is worth. Using the same ₹20 lakh and the same two rates, here is how the term changes the result.

A 15-year term cuts the monthly burden but more than doubles the extra interest compared with 7 years. A family choosing a long term to keep the EMI low should see the total cost beside it.

How can the same comparison be scaled to another loan size?

A family with a different loan can scale the table without a calculator. Over 10 years, each ₹1 lakh borrowed costs about ₹1,302 a month at 9.65% and about ₹1,392 a month at 11.25%. A ₹12 lakh loan therefore costs about ₹15,624 a month at the lower education loan interest rate and about ₹16,704 at the higher one, a gap of about ₹1,080 a month.

The same shortcut works for interest. Each ₹1 lakh pays about ₹56,000 of interest at 9.65% and about ₹67,000 at 11.25% over those ten years. These are rounded figures for a quick check, and a lender's own schedule will be more exact.

How does the repayment holiday change the comparison?

Education loans usually give a repayment holiday called a moratorium, covering the course and a period after it. SBI's Student Loan page says repayment starts a year after the course ends and that the interest accrued in the meantime is added to the loan before the EMI is fixed.

Suppose the whole ₹20 lakh were paid out on the first day and the course plus holiday ran for 2.5 years, with simple interest charged on the original amount. At 9.65% about ₹4.83 lakh of interest would be added, giving a starting balance of about ₹24.83 lakh and an EMI of about ₹32,327. At 11.25% about ₹5.63 lakh would be added, with an EMI of about ₹35,662. The total interest over the life of the loan would then be about ₹18.79 lakh against about ₹22.79 lakh, a gap of about ₹4.00 lakh. Loans are paid out in stages in practice, so the real figure would be lower, but the gap widens in the same direction.

Paying the interest during the course keeps the balance steady. On ₹20 lakh, the monthly interest is about ₹16,083 at 9.65% and about ₹18,750 at 11.25%.

Is a lower education loan interest rate always better?

Not automatically. A lower education loan interest rate usually has a price: collateral that the family must pledge, a longer approval process, or limits on the institutions covered. Collateral is an asset, such as a property, that the bank can claim if the loan is not repaid. If the property cannot be offered, the realistic comparison is between unsecured loans, whose published starting rates in the table run from 10.15% to 11.25%.

Fees add to the picture. Credila lists an origination fee of up to 1.25% of the loan plus Goods and Services Tax (GST), which would be up to ₹25,000 on ₹20 lakh. SBI's Student Loan page shows a processing fee of ₹5,000 plus GST for loans above ₹10 lakh and up to ₹20 lakh, and 0.50% above that, capped at ₹25,000 plus GST. Avanse's rate page lists a fee of up to 1% while its schedule of charges lists up to 2%, so the sanction letter should settle it.

How should a family read a rate quote?

Ask five questions before comparing any two offers. Is the education loan interest rate floating or fixed? What is the spread over the benchmark, and how often does the rate reset? Is there a processing or origination fee, and is it charged on the sanctioned amount or the amount paid out? What happens to interest during the course? Is there any prepayment or foreclosure charge?

The RBI's pre-payment directions refer to a Key Facts Statement that lenders provide for loans, setting out the charges in one place. Ask for it, and compare the total cost across lenders, not just the headline education loan interest rate.

What if the rate changes during the loan?

Most of the rates above are floating, meaning the education loan interest rate moves with a benchmark. On 7 October 2026 the RBI's Monetary Policy Committee raised the repo rate by 25 basis points to 5.50% and changed its stance to calibrated tightening. Another rise would flow through to the floating education loan interest rate.

As a rough guide, a rise of 0.25 points on the ₹20 lakh loan at 9.65% over 10 years would raise the EMI from about ₹26,044 to about ₹26,320 and add about ₹33,000 of interest if it applied to the whole period. Credila prices its fixed rate 1 to 1.5 percentage points above its floating rate, so a fixed offer is not a free insurance policy.

How can a family lower the education loan interest rate?

Several routes to a lower rate exist, and they can be combined. A co-applicant with a strong credit record can improve the offer. SBI lists a 0.50% concession for girl students under several of its schemes. Its PM-Vidyalaxmi rates are 7.15%, 7.45% and 8.65% for eligible students at designated institutions. Premier institution schemes such as the Scholar Loan price lower, and a concession of 7.00% applies to students at the Indian Institutes of Management, the Indian School of Business and a few other institutes until 31 December this year.

Prepayment is another lever. The RBI's pre-payment directions bar charges on floating rate loans to individuals for non-business purposes, for loans sanctioned or renewed from 1 January this year, so extra payments can reduce the interest without a penalty.

Finally, the interest paid on an education loan is deductible for up to eight consecutive years under Section 129 of the Income-tax Act, 2025, which replaced Section 80E. Credila's website says the deduction is available only under the old tax regime, so check how it applies to your own regime.

Frequently asked questions

Is a public sector bank always cheaper than a private lender?

No. SBI's collateral-backed rate of 9.65% is lower than the unsecured starting rates of private lenders, but SBI's own unsecured Student Loan is 10.15%, which is above Avanse's domestic starting rate of 10%. Collateral, institution and scheme matter more than the type of lender.

Does the education loan interest rate shown on a website apply to every borrower?

No. Lenders say that published rates are starting or indicative figures, and the final rate depends on the borrower's profile.

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

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