How to Apply for Education Loan in India — Banks, Interest Rates & Repayment

An education loan can bridge the gap between your academic aspirations and finances. Whether you're pursuing engineering in India or an MBA abroad, Indian banks offer structured education loan products governed by Indian Banks' Association (IBA) guidelines. This guide walks you through the entire process — from eligibility to repayment and tax savings.

Types of Education Loans

Domestic Education Loans

These cover courses at recognised institutions within India — engineering, medicine, management, law, and other professional or technical programmes approved by UGC, AICTE, or equivalent bodies.

What's covered: Tuition fees, hostel charges, examination fees, books, equipment, and a reasonable amount for living expenses.

Overseas Education Loans

For studies at foreign universities, banks offer higher loan limits. Courses at institutions listed in recognised global rankings or those with tie-ups with Indian banks are generally eligible.

What's covered: Tuition, travel, living expenses, health insurance, and caution deposit — essentially the full cost of attendance.

Other Variants

• Skill development loans: For short-term vocational and certification courses (typically up to ₹1.5 lakh).
• Top-up loans: Additional funding if your original loan falls short mid-course.

Major Banks and Their Education Loan Schemes

Note: Interest rates are indicative and change periodically. Always confirm current rates with the bank before applying.

SBI Scholar Loan

State Bank of India's flagship education loan product is one of the most popular choices:

• Loan amount: Up to ₹1.5 crore for studies abroad; up to ₹50 lakh for domestic courses (varies by scheme)
• Interest rate: Approximately 8.50%–11.15% p.a. (linked to SBI's EBLR/MCLR)
• Collateral: Required for loans above ₹7.5 lakh
• Processing fee: Nil for most education loan variants
• Special feature: Concession of 0.50% for female students under certain schemes

Bank of Baroda — Baroda Scholar

• Loan amount: Up to ₹1 crore for premier institutions; standard limits for others
• Interest rate: Approximately 8.40%–10.90% p.a.
• Collateral: Required above ₹7.5 lakh
• Special feature: Reduced rates for students admitted to IITs, IIMs, NITs, and other top-ranked institutions

PNB Saraswati

Punjab National Bank's education loan scheme:

• Loan amount: Up to ₹10 lakh without collateral (for premier institutions); higher with security
• Interest rate: Approximately 8.45%–10.65% p.a.
• Collateral: Required above ₹7.5 lakh as per IBA norms
• Special feature: Interest concession for girl students

Quick Comparison

Other banks like Canara Bank, Union Bank, IDBI Bank, and private lenders (HDFC Credila, Avanse, Prodigy Finance for abroad) also offer competitive education loans.

Eligibility Criteria

As per IBA model education loan guidelines:

• Nationality: Indian citizen
• Age: No strict upper limit in most banks (some cap at 30–35 years)
• Admission: Confirmed admission (or at least a conditional offer) to a recognised institution
• Academic record: Satisfactory academic track record (typically 50%+ in qualifying exam)
• Co-borrower: Parent or guardian must be a co-applicant
• Course: Must be a recognised degree, diploma, or professional certification

A good credit history helps — especially for larger loans. If you're unsure about your credit standing, check and improve your CIBIL score before applying.

Collateral Requirements

Per IBA guidelines followed by most banks:

Exceptions: Some banks waive collateral for students admitted to premier institutions (IITs, IIMs, AIIMS, NITs, top law schools) even for loans exceeding ₹7.5 lakh.

How to Apply via Vidya Lakshmi Portal

The Vidya Lakshmi Portal (vidyalakshmi.co.in) is a government initiative that lets you apply to multiple banks for education loans through a single application.

Step-by-Step Process

1. Register on the portal using your Aadhaar number, PAN, and email
2. Fill the Common Education Loan Application Form (CELAF) — one form covers all banks
3. Search and select up to 3 bank schemes that suit your needs
4. Upload documents: Admission letter, fee structure, mark sheets, ID proof, income proof of co-borrower, and collateral documents (if applicable)
5. Submit application — it gets forwarded to your chosen banks simultaneously
6. Track status on the portal dashboard
7. Banks respond with loan offers or queries — you can accept, negotiate, or apply elsewhere

Documents Typically Required

• Admission/offer letter from the institution
• Fee structure from the institution
• Mark sheets of last qualifying examination (Class 10, 12, graduation)
• KYC documents (Aadhaar, PAN, passport for abroad)
• Income proof of co-borrower (ITR, salary slips)
• Collateral documents (property papers, FD receipts) if applicable
• Bank statements of co-borrower (last 6 months)
• Passport-size photographs

Pro tip: Filing your income tax return on time strengthens the co-borrower's financial profile and speeds up loan approval.

Interest Rates — What to Expect

Education loan interest rates in India are typically floating rates linked to the bank's MCLR or external benchmark (repo rate). As of early 2026:

• Public sector banks: Approximately 8.40%–11.50% p.a.
• Private banks: Approximately 9.50%–13.50% p.a.
• NBFCs (Credila, Avanse, etc.): Approximately 10.00%–14.00% p.a.

Factors That Affect Your Rate

• Institution tier: Premier institutions attract lower rates
• Loan amount: Higher amounts may qualify for better rates (with collateral)
• Co-borrower profile: Strong income and credit history help
• Gender: Many banks offer 0.50% concession for women borrowers
• Collateral: Secured loans get lower rates than unsecured ones

Interest rates are revised periodically. Visit the bank's website or Vidya Lakshmi portal for the latest rates.

Moratorium Period and Repayment

What Is the Moratorium Period?

The moratorium is the grace period during which you don't need to make EMI payments. Under IBA guidelines:

Moratorium = Course duration + 1 year (or 6 months after getting a job, whichever is earlier)

During the moratorium, simple interest accrues on the disbursed amount. You can choose to:

• Service the interest during the moratorium — this significantly reduces your total repayment burden (highly recommended)
• Let it capitalise — the accrued interest gets added to the principal, increasing your EMIs later

Repayment Schedule

• Repayment period: Typically 5–7 years after the moratorium ends (some banks allow up to 15 years)
• EMI calculation: Based on the outstanding principal (including capitalised interest, if any)
• Prepayment: No penalty on prepayment or foreclosure for floating-rate education loans (as per RBI directive)

Example Repayment Scenario

Tax Benefit Under Section 80E

One of the most valuable benefits of education loans:

• Deduction: The entire interest paid on the education loan is deductible from taxable income — no upper limit
• Duration: Available for up to 8 years from the year you start repaying, or until the interest is fully repaid — whichever is earlier
• Who can claim: The person who repays the loan (student or parent)
• Applicable for: Loans from banks or approved financial institutions for higher education (India or abroad)

This deduction can save you significant tax — especially in the early years when interest forms a larger component of your EMI.

Government Schemes for Education Loans

Padho Pardesh (For Minority Students Studying Abroad)

• What: Interest subsidy on education loans for students from minority communities pursuing higher education overseas
• Eligibility: Family income up to ₹6 lakh per annum; must belong to a notified minority community
• Benefit: Government pays the interest during the moratorium period
• Apply through: The lending bank; subsidy is routed directly

Central Sector Interest Subsidy Scheme

• What: Full interest subsidy during the moratorium period for economically weaker students
• Eligibility: Family income up to ₹4.5 lakh per annum; student must be in a recognised technical/professional programme
• Benefit: Zero interest cost during the study period + 1 year
• Apply through: The bank at the time of loan application

National Scholarship Portal

Don't overlook scholarships that can reduce your loan requirement. Apply for pre-matric and post-matric scholarships and explore other options on the National Scholarship Portal.

Frequently Asked Questions

Can I get an education loan without collateral?

Yes. Under IBA guidelines, loans up to ₹7.5 lakh do not require collateral — only a co-borrower. Some banks waive collateral for higher amounts if you're admitted to premier institutions like IITs, IIMs, or NITs.

What happens if I can't find a job after completing my course?

Banks typically offer a moratorium of course duration plus 1 year. If you face genuine difficulty, you can approach the bank for restructuring. Under IBA norms, banks are expected to consider extension requests sympathetically. However, the interest continues to accrue.

Is the education loan interest rate fixed or floating?

Most education loans in India carry a floating interest rate linked to the bank's MCLR or an external benchmark like the repo rate. This means your EMI can change when benchmark rates are revised.

Can I apply to multiple banks simultaneously?

Yes. The Vidya Lakshmi portal allows you to apply to up to 3 bank schemes with a single form. You can compare offers and choose the best one.

Is there a tax benefit on education loan repayment?

Yes. Under Section 80E of the Income Tax Act, the entire interest paid on an education loan is deductible from taxable income for up to 8 years. There is no cap on the deduction amount. Note that the principal repayment is not deductible under this section.

Can parents take an education loan on behalf of their child?

Yes. In fact, a parent or guardian is required as a co-borrower for education loans. The parent can also claim the Section 80E deduction if they are the one making the repayments.

How long does loan disbursement take?

Once all documents are in order and the loan is sanctioned, disbursement typically happens within 7–15 working days. Funds are usually released directly to the institution. For abroad studies, disbursement is done in stages aligned with semester fee schedules.

Key Takeaways

• Use the Vidya Lakshmi portal to compare and apply to multiple banks in one go
• Loans up to ₹7.5 lakh are available without collateral
• Service the interest during the moratorium to significantly reduce your total repayment
• Claim Section 80E deduction on the entire interest paid — no upper limit
• Check eligibility for Padho Pardesh and Central Sector Interest Subsidy before borrowing
• Reduce your loan burden by also applying for scholarships
• Maintain a strong CIBIL score for better loan terms