Education Loan Guide — How to Fund Your Studies

📋Education Loan Basics

Education loans cover: tuition fees, hostel charges, exam fees, books, laptop/equipment, travel expenses (for foreign education), and caution deposit. The loan amount depends on the course and institution — ₹4-10 lakh for domestic courses, ₹20 lakh-1.5 crore for foreign education.

Collateral rules: Up to ₹4 lakh — no collateral, no guarantor. ₹4-7.5 lakh — third-party guarantee required (a co-signer). Above ₹7.5 lakh — collateral (property, FD, gold) required. Some banks like SBI have raised the collateral-free limit to ₹7.5 lakh for domestic courses.

Repayment structure: Moratorium period = course duration + 1 year (or 6 months after getting a job, whichever is earlier). During moratorium, you pay nothing (interest accrues and is added to principal — 'simple interest' during moratorium at most banks). After moratorium, EMI repayment starts for 5-15 years.

Interest rates (2026): Public banks (SBI, BOB, PNB): 7.5-9.5%. Private banks (HDFC Credila, Avanse): 9-12%. NBFCs (Auxilo, MPOWER): 10-13%. Government subsidy available for economically weaker students under Central Sector Interest Subsidy Scheme — 0% interest during moratorium for families with income below ₹4.5 lakh.

🏦Best Banks for Education Loan

💰Section 80E — Tax Benefit

Section 80E allows deduction of ENTIRE interest paid on education loan — there's no upper limit. Unlike 80C (capped at ₹1.5 lakh), 80E has NO cap. If you pay ₹3 lakh interest in a year, the full ₹3 lakh is deductible.

The deduction is available for 8 years or until the interest is fully repaid (whichever is earlier). It's available to the person who takes the loan (parent or student). Available under both Old and New Tax Regimes.

Example: ₹20 lakh loan at 9% for 10 years — total interest paid is approximately ₹10 lakh. Over 8 years of claiming 80E, this saves ₹2-3 lakh in taxes (at 30% bracket). Effectively, the government is subsidizing your education loan through tax relief.