Did you know?
The education loan market in India has seen significant growth over the past decade. As of 2024, the market is valued at approximately INR 1.2 lakh crore (USD 16 billion). The Compound Annual Growth Rate (CAGR) for education loans in India has been around 12% over the last five years.
Interesting, right? But, why?
In India, education isn’t just a pathway to personal growth—it’s a ticket to success and a better future. With prestigious institutions and competitive programs, the demand for quality education is sky-high. However, this excellence comes at a price. Higher education costs have been steadily rising at 10% or more, making it challenging for many families to afford without financial assistance. That’s where student loans come into play, bridging the gap between your dreams and reality.
This blog aims to guide you in selecting the best student loan options available in India. Whether you’re aiming for an engineering degree, a medical seat, or an international MBA, This page will provide you with insights and tips to ensure you make an informed choice. Let’s dive in and find the perfect loan to fuel your educational journey!
What is a student loan?
A student loan is financial aid specifically for education expenses. It covers tuition, books, and living costs. In India, banks and financial institutions offer these loans. The interest rates for student loans in India range from 8% to 15%. As of 2023, over 3.5 lakh students avail student loans annually.
The loan amount depends on the course and institution. For studies in India, the maximum loan amount is ₹10-15 lakhs. For international studies, it can go up to ₹80 lakhs or more.
Repayment usually starts after the course completion. There is a moratorium period, typically 6 months to a year. During this period, repayment is not required. Student loans can be secured or unsecured. Secured loans need collateral, while unsecured loans do not.
Student loans are a crucial tool to make higher education accessible. They ensure that financial constraints don’t hinder your educational goals.
Types of student loans available in India
Secured vs. Unsecured Loans
Secured loans require collateral, such as property or fixed deposits. They usually offer lower interest rates and higher loan amounts. Unsecured loans don’t need collateral but may have higher interest rates and lower loan limits. Both types have their advantages, and the choice depends on your financial situation and risk tolerance.
| Feature | Secured Loans | Unsecured Loans |
| Collateral | Required | Not required |
| Interest Rates | Lower (6%-12%) | Higher (10%-15%) |
| Eligibility Criteria | Stricter due to collateral requirement | More lenient |
| Approval Time | Longer due to collateral verification | Quicker |
Government vs. Private Loans
Government loans are offered by public sector banks and come with subsidized interest rates. They often have favorable terms, especially for economically weaker sections. Private loans are provided by private banks and financial institutions. They offer more flexibility but may have higher interest rates. The choice between the two depends on your eligibility and specific needs.
| Feature | Government Loans | Private Loans |
| Provider | Public sector banks and government schemes | Private banks and financial institutions |
| Interest Rates | Lower and subsidized | Higher, varies by lender |
| Flexibility | Less flexible, strict criteria | More flexible, varied criteria |
| Subsidies/Benefits | Often available for economically weaker sections | Sometimes offered |
| Processing Time | Generally, longer | Usually faster |
Key student loan features
Loan Amount and Coverage
Student loans in India can range from ₹1 lakh to ₹1 Cr or above, depending on the course and institution. Coverage may include tuition fees, accommodation, living expenses, books, travel cost, and supplies.
- Tuition Fees: The primary component of student loans is tuition fees, which can be up to 100% of the total course cost. This ensures you can focus on your studies without financial worry.
- Accommodation and Living Expenses: Loans also cover accommodation costs, whether on-campus or off-campus. Living expenses like food, travel, and daily necessities are included, often up to ₹1-2 lakhs per year.
- Books and Supplies: Books, study materials, and essential supplies are covered under student loans. This can amount to ₹50,000 to ₹1 lakh per year, depending on the course requirements. .
Interest rates
Interest rates for student loans in India range from 8% to 15%. The rate depends on the lender, loan type, and borrower’s credit profile
Fixed vs. Variable Rates
Fixed rates remain constant throughout the loan tenure, providing predictability in repayments. Variable rates fluctuate with market conditions, which can be beneficial or risky depending on economic factors.
| Feature | Fixed Interest Rate | Variable Interest Rate |
|---|---|---|
| Interest Rate Stability | Interest rate remains constant throughout the loan term | Interest rate fluctuates based on an underlying benchmark or index |
| Loan Payments | Predictable and consistent | Vary based on interest rate changes |
| Flexibility | Less flexible if borrower wants to change terms or exit the loan early | More flexible, but with greater risk of rate changes |
| Initial Rate | Generally higher than variable rates | Often lower than fixed rates, especially for introductory periods |
| Risk | Lower risk due to predictable payments | Higher risk due to potential rate changes |
| Loan Terms | Available for various terms, from 6 months to 10 years | Typically available for shorter terms, such as 5/1 or 7/1 ARMs |
| Forecasting | Easier to forecast cash flow due to predictable payments | More challenging to forecast cash flow due to changing rates |
| Attractive Features | Predictable payments, flexibility in loan terms | Attractive introductory rates, lower initial rates |
| Disadvantages | Historically more expensive over the life of the loan | Greater risk of rate changes, potentially higher total cost |
Subsidized vs. Unsubsidized Interest
Subsidized loans have the government paying the interest during the study period. Unsubsidized loans require the borrower to pay all the interest, even during the study period.
| Feature | Subsidized Loans | Unsubsidized Loans |
|---|---|---|
| Interest Payment | Government pays interest while borrower is in school, during the 6-month grace period, and during deferment periods | Borrower is responsible for paying interest from the time the loan is disbursed |
| Eligibility | Available to undergraduate students who demonstrate financial need | Available to both undergraduate and graduate students, regardless of financial need |
| Interest Rate | Fixed rate of 4.99% for undergraduate students, disbursed between July 1, 2022 and June 30, 2023 | Fixed rate of 4.99% for undergraduate students, disbursed between July 1, 2022 and June 30, 2023; 6.54% for graduate students |
| Risk | Lower risk due to government-paid interest | Higher risk due to borrower responsibility for interest payments |
| Forecasting | Easier to forecast cash flow due to predictable interest payments | More challenging to forecast cash flow due to changing interest rates |
| Flexibility | Less flexible if borrower wants to change terms or exit the loan early | More flexible, but with greater risk of rate changes |
Repayment Terms and Options
Repayment typically starts after the course completion, with a moratorium period of 6-12 months. Options include standard EMIs, step-up EMIs, or flexible repayment schedules based on the borrower’s income.
Grace Period
Grace period
The grace period is a post-study duration during which repayment is not required, usually 6-12 months. This allows graduates time to secure a job before starting repayments.
Loan Tenure
Loan tenure can vary from 5 to 15 years, depending on the loan amount and repayment capacity. Longer tenures reduce EMI amounts but increase total interest paid.
EMI (Equated Monthly Installment) Options
EMI options include standard fixed EMIs, where the amount remains constant. Some lenders offer step-up EMIs, which start low and increase over time, matching the borrower’s growing income.
Eligibility criteria for student loans in India
Eligibility criteria for student loans in India typically include factors such as admission to recognized courses, Indian citizenship, and specific age limits. Financial institutions assess applicants based on academic performance, course accreditation, and co-applicant guarantees.
Basic eligibility requirements for students
Students must be Indian citizens to qualify for student loans in India. Additionally, they should have a strong academic record and a clear career plan.
Age Limits:
Most lenders require students to be between 18 and 35 years old. This range ensures the borrower is mature enough to manage the loan and its repayment.
Academic Qualifications:
Applicants must have completed their higher secondary education (12th grade). They should also have a consistent academic record with no gaps in their education.
Admission to Recognized Institutions:
Students must have secured admission to recognized institutions in India or abroad. This includes universities, colleges, and professional courses approved by the relevant authorities.
Co-applicant Requirements:
A co-applicant, usually a parent or guardian, is mandatory for most student loans. The co-applicant shares responsibility for loan repayment, adding an additional layer of security for the lender.
Role of Parents/Guardians:
Parents or guardians often act as co-applicants, providing financial backing. Their involvement is crucial, especially for securing higher loan amounts or better terms.
Financial Stability and Credit History of Co-applicant:
The co-applicant’s financial stability and credit history significantly impact loan approval. A good credit score (typically 700 or above) and stable income increase the chances of loan approval and better interest rates.
Comparing the best banks for student loans in India
Here’s a comparison of student loans offered by some of the top banks in India.
| Bank/Institution | Interest Rate* | Loan Amount | Repayment Tenure | Processing Fee | Collateral Requirement | Moratorium Period |
| State Bank of India (SBI) | 7.50% – 10.75% | Up to ₹1.5 crore | Up to 15 years | Up to ₹10,000 | Required for loans above ₹7.5 lakh | Course duration + 1 year |
| HDFC Bank | 9.55% – 13.25% | Up to ₹40 lakh (can be higher for premier institutes) | Up to 15 years | Up to 1% of loan amount | Required for loans above ₹7.5 lakh | Course duration + 1 year |
| ICICI Bank | 10.25% – 11.75% | Up to ₹1 crore | Up to 10 years | Up to 1% of loan amount | Required for loans above ₹7.5 lakh | Course duration + 6 months |
| Axis Bank | 10.50% – 13.00% | Up to ₹75 lakh | Up to 15 years | Up to 1.5% of loan amount | Required for loans above ₹4 lakh | Course duration + 1 year |
| Punjab National Bank (PNB) | 8.75% – 10.50% | Up to ₹1 crore | Up to 15 years | Up to 1% of loan amount | Required for loans above ₹7.5 lakh | Course duration + 1 year |
| Bank of Baroda | 7.85% – 10.25% | Up to ₹1 crore | Up to 15 years | Nil for loans up to ₹4 lakh, otherwise up to 1% | Required for loans above ₹7.5 lakh | Course duration + 1 year |
| Canara Bank | 8.75% – 10.50% | Up to ₹40 lakh (can be higher for premier institutes) | Up to 15 years | Up to 1% of loan amount | Required for loans above ₹7.5 lakh | Course duration + 1 year |
| Avanse Financial Services | 11.75% – 16.00% | Up to ₹1 crore | Up to 12 years | Up to 1% of loan amount | Required based on loan amount and institute | Course duration + 6 months |
| Credila (HDFC Credila Financial Services) | 11.85% – 13.75% | Up to ₹1 crore | Up to 10 years | Up to 1.5% of loan amount | Required based on loan amount and institute | Course duration + 1 year |
| InCred Education Loan | 11.75% – 14.00% | Up to ₹1 crore | Up to 15 years | Up to 1% of loan amount | Required based on loan amount and institute | Course duration + 6 months |
*The interest rates are subject to change and may vary based on the profile of the borrower, co-applicant, and the institution/course of study.
How to apply for an education loan in India
Here are simple steps you can use to apply for a student loan –
- Research and Compare Loan Options: Evaluate various banks and loan schemes for the best interest rates and terms.
- Documents Required for Student Loan: Gather necessary documents like admission proof, income proof, identity, and address verification.
- Fill Out the Loan Application Form: Complete the application form accurately with all required details.
- Submit the Application and Documents to the Bank/ loan provider: Provide the filled form and documents to the chosen bank.
- Loan Processing and Approval: The bank reviews the application and verifies the documents.
- Disbursement of the Loan Amount: Upon approval, the bank disburses the loan amount directly to the institution or as per agreed terms.
How to apply for an education loan in India
Choosing the right student loan can greatly impact your financial well-being. Here are some tips to help you make an informed decision:
- Compare Interest Rates and Total Cost: Look beyond just the interest rate; consider the total cost of the loan over its tenure.
- Check for Hidden Charges and Fees: Be aware of any processing fees, prepayment penalties, or other hidden charges that may affect the overall cost.
- Understand Repayment Terms and Flexibility: Ensure you understand the repayment schedule, EMI amount, and any flexibility in repayment options.
- Consider the Reputation and Customer Service of the Lender: Choose a lender with a good reputation for customer service and transparent policies.
- Evaluate Additional Benefits: Look for loans that offer additional benefits like interest subsidies for certain categories of students or moratorium periods post-course completion for job search or further studies. These benefits can significantly reduce your financial burden in the long run.
Benefits of choosing EduFund for your student loan
Although we’ve talked about how you can choose the best student loan in India, let us give you a shortcut to that – EduFund!
Here’s what we can offer you!
| Loan Features | What EduFund Offers |
| Competitive Interest Rates | EduFund offers competitive interest rates starting from 5.5%. |
| No Processing Fees | No processing fees, ensuring you save on upfront costs. |
| Flexible Repayment Options | Customizable repayment plans based on your financial situation. |
| Quick and Easy Application Process | Streamlined application process for faster loan approval. |
| Pre-Approved Loan Offers | Pre-approved loan offers based on your eligibility. |
| Expert Loan Advisors | Access to expert loan advisors for guidance and support. |
| Online Account Management | Convenient online account management for loan tracking. |
| Additional Benefits | Additional benefits like interest subsidies and tax benefits. |
Choosing the right student loan is pivotal for a successful academic journey. With careful research, comparison, and consideration of factors like interest rates, repayment terms, and lender benefits, you can make an informed decision.
