Education Loan
What is an Education Loan?
An education loan is a type of financial assistance provided by banks, non-banking financial companies (NBFCs), or government institutions to help students cover the costs of higher education. These loans are designed to support tuition fees, accommodation, books, travel (for studying abroad), and other related expenses.
Additionally, tax benefits Section 80E allows deduction on interest paid, with no upper limit, for up to 8 years. The application process, available through online and offline channels, requires essential documentation such as admission letters and academic records. Best Education Loan in India - Know Interest Rate, Covers.
Types of Education Loans in India (2025 Guide)
Education loans in India are tailored to meet diverse academic needs, whether for domestic or international studies. Based on location, course type, collateral requirements, and lender policies, here’s a detailed breakdown of the major categories:
Types of Education Loan
Domestic Education Loans
- Education Requirement: For students pursuing education within India at recognized institutions (UGC/AICTE-approved or premier institutes like IITs/IIMs).
- Loan Amount: Up to ₹20–50 lakhs (varies by bank)
- Coverage: Tuition, hostel fees, books, laptops, and other course-related expenses.
- Interest Rates: Start from 7.15% p.a.(public banks) to 14% p.a.(private banks).
Overseas Education Loans
- Education requirement: For Studies abroad at accredited universities.
- Loan Amount: Up to ₹1.5 crore (e.g., SBI offers up to ₹1.5 crore for top global universities).
- Coverage: Tuition, travel, accommodation, insurance, and living expenses.
- Interest Rates: 8.55%–16% p.a. (higher than domestic loans due to forex risks)Â
Based on Collateral
- Secured Education Loans – Require collateral (property, FDs, bonds, etc.) for higher loan amounts.
- Loan Amount: Above ₹7.5 lakhs (up to ₹3 crore for premier institutes).Â
- Benefits: Lower interest rates (e.g., SBI offers 8.55% p.a. for secured loans).Â
Based on Location
- Unsecured Education Loans – No collateral needed for smaller amounts.
- Loan Amount: Up to ₹7.5 lakhs (public banks) or ₹40 lakhs (private banks for premier institutes like IITs/IIMs).
- Interest Rates: Slightly higher (e.g., HDFC charges 12.5% p.a. for abroad studies).
Based on Course Type
Undergraduate Loans
- Qualification: For bachelor’s degrees (e.g., BTech, MBBS, BBA).
- Tenure: Up to 10–12 years.
- Eligibility: Minimum 50% in 12th grade.
Postgraduate Loans
- Qualification: For master’s/PhD programs (e.g., MBA, MS, PhD).Â
- Tenure: Up to 12–15 years .Â
- Special Schemes: Some banks offer lower rates for top-tier colleges (e.g., SBI’s “Scholar Loan” for IIMs).
Career-Oriented Loans
- Qualification: For diplomas, vocational training, or certification courses (e.g., pilot training, CA, CFA).Â
- Loan Amount: Up to ₹10–20 lakhs.
Loan Amount | Collateral  Requirement | Interest Rate (Appr.) |
Upto – ₹ 4Lacs | Not Required | 8.5% to 12% |
₹ 4 Lacs to ₹ 7.5 Lacs | Third Party Guarantor | 9% to 13% |
Above ₹ 7 Lacs | Collateral Required (Property / FD) | 7.5% to 11% |
Features & Benefits of Study Loans:
- Loan financing up to Rs.1 crore is available.
- Loan repayment tenure is up to 15 years.
- Get education loans for studies in India and abroad.
- For abroad studies some lenders offer loan disbursals before applying for a Visa.
- Door-step service to collect required documents.
- Children of the bank’s employees enjoy preferential rates at several banks.
- Certain banks offer concessional interest rates to female students.
- Enjoy a moratorium period of up to 1 year after course completion. During this period, you do not have to make payments on the loan.
- Enjoy tax benefits for up to eight years on the interest paid.
List of expenses typically covered under education loans:
- Tuition Fees –
- Primary component of education loans, covering course fees charged by institutions.
- Disbursed directly to the university/college.
- Living Expenses
- Accommodation: Hostel fees or rent for off-campus housing.
- Food & Utilities: Groceries, electricity, and other daily necessitie
- Local Transportation: Commuting costs within the study destination.
- Travel Costs
- Air Tickets: One-way or return flight tickets (may require explicit request).
- Visa Fees: Covered by some private banks/NBFCs.
- Study-Related Expenses –
- Books & Supplies: Textbooks, lab equipment, and software.
- Laptops/Devices: Essential for coursework (often capped at 20% of loan amount)
- Exam/Project Fees: University-mandated charges for tests or field trips.
- Health Insurance –
- Mandatory for many abroad universities; covered by select lenders
- Miscellaneous –
- Pre-Admission Costs: Entrance exam fees (e.g., GRE, GMAT).
- Foreign Exchange: Currency conversion for overseas transactions.
Eligibility Criteria for Education Loans:
In order to avail the education loan, an individual must need to fulfil the below given criteria:
- Loans are provided for sanctioned undergraduate programs, postgraduate programs, PhDs, diploma courses with a duration of six months or more, job-oriented courses, and technical/professional courses
- Applicants must be enrolled or secure admissions in recognised institutions, government institutions, professional institutions, and international colleges and universities
- For undergraduate courses, applicants should have completed 10+2 (12th standard), and for postgraduate courses, a degree is required
Education Loan Eligibility Criteria in India (2025):
To qualify for an education loan in India, applicants must meet specific requirements set by banks and financial institutions. Here’s a detailed breakdown of the eligibility criteria:
- Nationality – Must be an Indian citizen (some banks offer loans to NRI students with an Indian co-applicant).
- Age – 18–35 years (varies by lender; some extend to 40 years for PG/PhD courses).
- Academic Record – Minimum 50% marks in last qualifying exam (10+2/graduation). For top-tier institutions (IIT/IIM), relaxation may apply.
- Admission Status – Must have secured admission to a recognized institution (UGC/AICTE-approved or globally accredited universities).
- Course Type – Full-time degree/diploma courses (UG/PG/PhD), vocational training, or professional certifications (CA, CFA, etc.).
- Co-Applicant – Mandatory for most loans (parent/guardian/spouse with stable income).
List of Documents Required for Education Loans:
- Admission letter from the educational institution
- Marksheets (previous education – school/college)
- Age proof
- ID proof
- Address proof
- Signature proof
- Salary slips
- Recent bank account statements
- ITR with the income computation
- Audited balance sheet
- Recent bank statements
- Proof of turnover (service tax return/sales receipt)
- Completed application form with signature
- Latest passport-size photographs
- Appropriate Visa for studies abroad.
Courses Covered Under Education Loans:
- Undergraduate degrees
- Postgraduate degrees
- Undergraduate diplomas
- Postgraduate diplomas
- Vocational training courses
- Skill development courses
- Doctoral programs
Frequently Asked Questions:
1. What is the maximum loan amount for studying abroad?
Up to ₹1.5 crore, depending on the university and collateral 714.
2. Can I get an education loan without collateral?
Yes, for loans up to ₹7.5 lakh (public banks) or ₹40 lakh (private banks for premier institutes) 14.
3. What is the moratorium period?
It is the course duration + 6–12 months before repayment starts 14.
4. Are there processing fees for education loans?
Yes, typically 0.5%–2% of the loan amount.
5. Can I prepay the loan without penalties?
Most banks do not charge prepayment penalties for floating-rate loans 7.
6. What if my loan application is rejected?
You can reapply after improving eligibility (e.g., better co-applicant income) 3.
7. Can I get a loan for part-time/distance learning courses?
Usually, only full-time, recognized courses are eligible 11.
8. How is the loan disbursed?
Directly to the institute for tuition fees and to the student for other expenses
9. Do I need a co-signer if I’m employed?
For most student loans, a co-signer is mandatory unless you’re taking a career loan 8.
10. Can I claim tax benefits on education loans?
Yes, under Section 80E, the interest paid is deductible.
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