In India, education loans generally offer flexible repayment options. Here’s a clear illustration regarding interest payments:
When Does Interest Start Accruing?
Interest on the education loan starts accruing from the date of disbursement, not after course completion.
Repayment Options
- Full Moratorium (Standard Option for Most Students)
- Interest accrues from the time of
- No payment required during the course period + grace period (usually 6-12 months).
- Accrued interest is added to the loan (capitalized).
- Suitable if financial pressure during studies is a concern
2. Partial Payment of Interest During Study Period (Preferred Option)
- Pay only the interest during the study and grace
- Prevents the loan amount from
- Some banks offer a 0.5% lower interest rate if
3. Full EMI from Day One (Rare)
- Pay both interest and principal from the
- Best if student has income or strong family
Best Practice
If affordable, pay at least the interest during the study period to reduce your debt burden after graduation.
Summary of the Article:
Option | During Study Period | Total Cost Impact |
Full Moratorium | No payments | Higher (interest is added) |
Pay Interest Only | Pay simple interest | Medium (saves on interest) |
Full EMI | Pay interest + principal | Lowest total cost. |
Added Advantages of Education Loans
- Interest “Paid” on Educational Loan can be deducted from Taxable Income during ITR Filling (80E)
- No Tax collected at Sour ce( TCS) if payment is from Education Loan.