Education Loan Interest Rates

Note: Many banks, including SBI and Canara Bank offer a 0.5% concession on interest rates for women borrowers. Always ask your bank about this before applying.

Education Loan Interest Rates by Regional Rural Banks

Regional Rural Banks (RRBs) are scheduled commercial banks in India that are owned by the government. Here is a list of RRBs in India that are offering various education loan schemes at competitive interest rates: 

Note: RRB loans may also be eligible for government interest subsidy schemes like the Central Sector Interest Subsidy (CSIS). For further details, you can check with your bank. 

NBFC Education Loan Interest Rates

Traditional banks often reject applications from first-time borrowers due to issues like insufficient collateral or a co-applicant with a weak credit profile. In such situations, NBFCs such as Bajaj Finance and Tata Capital can work as an alternatively providing faster approvals and more flexible eligibility, but at higher interest rates which are as follows:

When to consider an NBFC? 

• When you need quick loan approval  

• When banks do not approve due to eligibility or documentation gaps  

• When you do not have collateral or a strong financial background 

Note: NBFC loans are generally easier to access, but their borrowing costs are higher as compared to traditional bank education loans.

Types of Interest Rates in Education Loans

Education loans mainly come with two types of interest rates: 

1. Fixed interest rate: This rate remains unchanged throughout your entire loan tenure. Your EMI remains the same, which makes it easier to plan your monthly budget. If you want stability, then this is a good option for you. 
2. Floating interest rate: This rate is linked to your bank’s benchmark (like MCLR) that can change over time. Your EMI or loan tenure may increase or decrease depending on interest rate movements. It can be cheaper in the long run, but there are some uncertainties.

Note: Most public sector banks in India offer floating rates, which are usually lower, but they can change over time. Therefore, it is important to check how often your bank updates the rate. 

How to Get a Lower Interest Rate on Your Education Loan? 

You can get a lower education loan interest rate if you plan smartly and meet certain conditions. Here are some simple ways by which you can reduce your loan cost: 

1. Study at a top-ranked institution: If you get admission to well-known colleges like IITs, NITs, or top foreign universities, then banks may offer lower interest rates. This is because lenders trust that students who have passed from these institutions have better job opportunities. 
2. Provide collateral for higher loans (above Rs.7.5 lakh): If you give security like property or fixed deposits, the loan becomes less risky for the bank. In return, they usually offer a lower interest rate.
3.  Strong co-applicant: A co-applicant with a good income and credit score (like parents) helps in improving your loan terms. Having a strong co-applicant makes the lender feel safer due to which they may reduce the interest rate.
4. Opt for a government scheme: Some government education loan schemes offer subsidies or lower interest rates for eligible students. These can reduce your overall repayment burden. 
5. Negotiate with the bank: Public sector banks sometimes have flexibility in pricing. If you have a good profile or offers from other banks, you can request a better rate. 

How to Calculate Your EMI on Education Loans

The formula that is used to calculate your education loan Equated Monthly Installment (EMI) would be:

EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1]

P = Principal amount

R = Rate of Interest

N = Number of years for repayment (this is calculated in months)

For Example: If you borrow Rs.10 lakh at 9% annual interest for 10 years, then your monthly EMI would be approximately Rs.12,668. 

Don’t want to do math? You can use our online Education Loan EMI Calculator. You just need to enter your loan amount, interest rate, and repayment tenure to instantly see your monthly EMI and total interest payable. 

What to Check Before Choosing an Education Loan? 

Before you get an education loan, it is very important for you to understand a few key factors that can affect your approval, interest rate, and total repayment amount. These are as follows:  

• Eligibility criteria: Every bank has its own rules like marks, course type, and institute. Therefore, it is important to know the eligibility criteria of that particular bank and meeting those criteria is the first step to getting your loan approved.  

• Courses covered: Not all courses are financed equally. Professional courses like engineering, MBA, medicine, and foreign degrees usually get better loan support as compared to normal courses.  

• Collateral: Loans above Rs.7.5 lakh often need security like property or fixed deposits. This also helps you in getting a lower interest rate.  

• Co-applicant requirement: Most banks require a parent or guardian as a co-applicant. Their income and credit scores strongly affect your loan approval and interest rate. 

• Interest rate: This is the extra cost you pay on the loan. Even a small difference in rate can greatly change your total repayment amount. This is also an important thing that you need to check out.  

• Repayment of tenure: This is the time given to repay the loan. A longer tenure means lowering EMI, but higher total interest paid.  

Tax Benefit on Education Loan Interest (Section 80E) 

Under Section 80E of the Income Tax Act, you can get a tax benefit on the interest paid for your education loan. There is no upper limit on the amount of interest you can claim as a deduction. This benefit is available for up to 8 years or until the loan is fully repaid, whichever comes first. It helps in reducing your taxable income and lowers your overall tax burden. 

Eligibility Criteria for Education Loan 

Before applying for an education loan, it is very important to know the basic eligibility criteria set by banks. On the basis of these requirements, lenders decide whether you qualify for the loan and at what interest rate. The eligibility criteria is given as below: 

• You must be an Indian citizen.  

• Age should be up to 35 years (for students) and up to 45 years (for working professionals). 

• Proof of admission into a recognised educational institution. 

• Academic records (usually 50% or above in previous exams)  

• Guarantor/co-applicant income proof and credit history  

• For studying abroad, you will require a passport, visa, and i20 form. 

Note: In case you do not meet every condition, then no need to worry as eligibility rules differ across banks. Therefore, always check with 2–3 lenders before making any decision. 

Documents Required for Education Loan Application

The following are some of the documents that you will require to complete your loan application: 

Student’s Documents 

• Accurately filled application form with passport-size photos  

• Identity proof (Aadhaar / PAN / Passport / Driving License) 

• Address proof (Aadhaar / Passport / utility bill, etc.)  

• Date of birth proof (birth certificate or 10th marksheet) 

• Admission letter from the college/university  

• Academic certificates and marksheets  

• Entrance exam marksheet (if any)  

• Scholarship proof (if any)  

• Statement of Purpose (SOP), if needed (mainly for abroad studies)  

Co-applicant / Guarantor’s Documents 

• Bank statements  

• Income proof (salary slips / ITR / Form 16, etc.)  

• Identity proof  

• Address proof (if asked by bank)  

Note: If you need an education loan for studying abroad, then keep your offer letter, visa, and i20 form (for USA) ready in one file. 

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