How to use the education loan EMI calculator
- Enter the loan amount and the rate your bank offers. The default rate is only an example.
- Set the course duration and the grace period after it; together they make the moratorium.
- Choose whether the loan is paid out at once or year by year, as fees fall due.
- Choose whether you will pay the interest while studying or let it be added to the loan.
- Set the repayment tenure and your tax slab to see the EMI and the tax saving.
How the moratorium changes your EMI
| ₹10 lakh at 10%, 12 months' grace | Moratorium interest | EMI over 10 years | Total repaid |
|---|---|---|---|
| 1-year course, interest added | ₹2,00,000 | ₹15,858 | ₹19,02,971 |
| 1-year course, interest paid | ₹2,00,000 | ₹13,215 | ₹17,85,809 |
| 2-year course, interest added | ₹3,00,000 | ₹17,180 | ₹20,61,551 |
| 2-year course, interest paid | ₹3,00,000 | ₹13,215 | ₹18,85,809 |
| 4-year course, interest added | ₹5,00,000 | ₹19,823 | ₹23,78,713 |
| 4-year course, interest paid | ₹5,00,000 | ₹13,215 | ₹20,85,809 |
The whole loan is assumed to be paid out at the start. Paying out year by year, as fees fall due, means less interest builds up.
The formula
Moratorium interest = P × r × M ÷ 12
EMI = P′ × i × (1 + i)n ÷ ((1 + i)n − 1)
M is the moratorium in months and r the yearly rate. P′ is the loan when EMIs start: the amount borrowed plus any unpaid moratorium interest. i is the monthly rate and n the number of EMIs. Some lenders compound during the moratorium; check your sanction letter.
Ways to cut the cost
- Pay the interest during the course, even part of it; unpaid interest is added to the loan.
- Draw the loan in instalments as fees fall due instead of all at once.
- Prepay once you start earning. Floating-rate education loans to individuals carry no prepayment charge; see the loan prepayment calculator.
- Claim the section 129 deduction if the person repaying files under the old regime; compare regimes with the income tax calculator.
Frequently asked questions
What is the moratorium on an education loan?
It is the period when you do not have to pay EMIs: usually the course duration plus 6 to 12 months, or until you get a job if that is sooner. Under the Indian Banks' Association model scheme it is the course period plus one year, and repayment can then run for up to 15 years.
Is interest charged during the moratorium?
Yes. Most banks charge simple interest on the amount disbursed during the moratorium. If you don't pay it, it is added to the loan when EMIs start. On ₹10 lakh at 10% with a 2-year course and 12 months' grace, that adds ₹3,00,000, raising the EMI over 10 years from ₹13,215 to ₹17,180.
Should I pay interest during the course?
If you or your family can, yes. Paying the simple interest as it falls due stops it being added to the loan, so you never pay interest on interest. In the example above it saves ₹1,75,743 in total. Some banks also offer a small rate concession for servicing interest during the course.
What is the tax benefit on an education loan?
Section 129 of the Income-tax Act, 2025 (which replaced section 80E from tax year 2026-27) lets an individual deduct all the interest paid on a loan for higher education of self, spouse, children or a student they are the legal guardian of. There is no upper limit, it runs for the tax year in which you start paying interest and the next seven, and only interest counts, not principal. It is available only in the old tax regime and only on loans from a bank, financial institution or approved charitable institution.
Are there government interest subsidies?
Yes, for lower-income families. Under the Central Sector Interest Subsidy scheme, students with family income up to ₹4.5 lakh a year in approved technical or professional courses get full interest subvention during the moratorium on loans up to ₹10 lakh. PM-Vidyalaxmi gives 3% interest subvention during the moratorium on loans up to ₹10 lakh for family income up to ₹8 lakh, for students admitted to eligible top institutions. Apply through the Vidyalaxmi portal.
Is collateral needed for an education loan?
Many banks lend up to ₹7.5 lakh without collateral, backed by a government credit guarantee, usually with a parent as co-borrower. Larger loans, especially for study abroad, often need property or deposits as security. Rates vary widely, so compare the reducing rate and fees.