What will my education loan cost after the moratorium?
An education loan does not ask for repayment during the course plus a grace period. Interest still accrues through that time and is added to the principal, so repayment starts against a larger amount than was borrowed. That capitalised interest is the part borrowers are surprised by, so it is shown separately here.
Study duration plus the grace period before EMIs begin, usually 6 to 12 months.
How your lender charges interest before EMIs begin. It is in the loan sanction letter.
EMI once repayment starts
₹28,741
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Nothing is repaid during the moratorium (the course plus the grace period), but interest keeps running on the amount borrowed and is added to the loan. By default it is simple interest (amount × rate × months ÷ 1,200), as SBI and most public-sector banks charge it; choose monthly compounding if your lender adds interest on interest.
Repayment then starts on that larger amount, and the EMI is worked out with the standard formula over the repayment months. Paying the interest during the course keeps the loan at the amount you borrowed.
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Yes, and it is usually the single best thing a student loan borrower can do. Paying only the interest each month during study stops it being added to the principal, which removes interest-on-interest for the whole repayment term. Many banks also offer a small rate concession for doing it.
It depends on the lender. SBI and most public-sector banks charge simple interest during the course and grace period and add it to the loan when EMIs start; many private lenders and NBFCs compound it every month, which costs more. On ₹15 lakh at 10.5% over 4 years, simple interest adds ₹6.3 lakh and monthly compounding about ₹7.8 lakh. Check your sanction letter and choose it above.
The period during which no EMI is due, normally the course duration plus six to twelve months. It is not an interest-free period. Interest accrues throughout and is capitalised at the end unless you service it.
Under Section 80E the interest is fully deductible, with no upper limit, for up to eight years from when repayment starts. The principal is not deductible. The deduction is available to the person repaying the loan.
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