Plan Your Education Loan EMI

A moratorium is the period during which you don't have to make full EMI payments — typically your course duration plus 6-12 months (to give you time to find a job). Interest still accrues during this time, either capitalized into your principal or payable as a smaller amount.

Paying the (small) interest during your course keeps your final principal lower, resulting in a smaller EMI and less total interest over the loan tenure. If you can't afford it while studying, letting it capitalize is the standard default — just know it increases your total cost.

EMI = P × r × (1+r)ⁿ / ((1+r)ⁿ − 1), where P is the principal, r is the monthly interest rate (annual rate ÷ 12 ÷ 100), and n is the number of monthly instalments.

Section 80E of the Income Tax Act allows a full deduction (no upper limit) on the interest portion of an education loan EMI, for yourself, spouse or children, for up to 8 consecutive years starting from the year you begin repayment. This can meaningfully lower your effective tax outgo while repaying.

Public sector banks typically offer 8.5-11% p.a. depending on the loan amount and collateral, while NBFCs and study-abroad-focused lenders (for foreign universities) may charge 10-13% p.a. Rates are usually lower with collateral and for top-ranked institutes.