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List of Things to Check before Applying for Education Loan


The growing expenses of educational courses have led many students to opt for a student loan as the cost of education has surged sharply over the last few years. The ongoing coronavirus crisis has worsened the situation for fresh graduates and students who have opted for a student loan in the recent past. The slow-down of the global economy and the downward trend in the job market is adding further woes to the existing scenario.


The student loan borrowers must check with the lender and request them for restructuring their existing loan to ease the burden.

List of Things to Check before Applying for Education Loan

The following are the List of Things to Check before Applying for a Education Loan.

Repayment of Interest during the Moratorium Period

Most of the banks in India will provide a grace period for student loans called a moratorium period. The moratorium period is given to the students as a breathing space. So, the borrower can start repaying the loan post completion of the course or once they secure a job.

There is no mandate for the borrower to repay the equated monthly installment (EMI) during the moratorium period. One can still start repaying the loan amount during this tenure to bring down the cost of the total repayment value.


Note: Lender will charge interest on the loan amount during the moratorium period.

Chalk Out Repayment Strategy

The student loan will have a repayment tenure ranging between 8 - 10 years or even more. The longer the period of the loan the lesser will be the equated monthly installments (EMIs). But the total repayment cost will be more. So, it is better to go for short-term tenure so that the borrower can repay the total outstanding loan amount quickly, thus saving the interest cost on the loan.

Note: There is no penalty on the prepayment of student/education loans. So shorter the tenure, the lesser will be the total outstanding repayment amount.

Income Tax Benefits

The interest amount paid towards the student loan is eligible for deduction under Section 80(E) of the Income Tax Act of 1961. The applicant who has applied for an education loan can claim a deduction for payment of interest amount during a financial year. The tax benefit can only be claimed by the individual who has applied for the loan (even if the borrower is not the actual beneficiary of a student loan).

Grant for Students in Top Universities

Some of the Top Universities in India like - the Indian Institute of Management (IIM), Indian Institute of Technology (IIT), and others to provide grants or charge fees at concessional rates for female students. Some of the banks in India offer lower inter rates for female students.

Note: Eligibility differs from one lender to another.

Subsidy Schemes

Most of the state governments and central government provide subsidy schemes for students to make student loans affordable. To secure it, the student should meet the eligibility criteria. As per the rule, the gross annual income of the family should not exceed Rs 4,50,000.

Apart from this, the government also provides concessions through subsidies for students who belong to the economically weaker section or EWS category.

Read more about: education loan loan
Story first published: Thursday, November 5, 2020, 18:51 [IST]
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