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Education Loan Moratorium Period: What It Is & Why It Matters for Students

Q: What are RBI guidelines on education loan moratorium?

RBI guidelines allow a moratorium period in education loan for the course duration plus up to twelve months after completion. During this period, borrowers may pay simple or partial interest. Principal repayment begins only after the moratorium ends, providing students with flexibility in managing their finances during and after studies.

Q: What are the disadvantages of a moratorium period?

During a moratorium period of an education loan , interest continues to accrue, increasing the total repayment. If you do not pay any interest, your EMIs may rise or your loan tenure may extend. This can make the loan costlier in the long term, despite temporary relief from principal repayment.

By Tata Capital
01 December 2025
9 mins read
2486

Education Loan Moratorium Period: What It Is & Why It Matters for Students

The moratorium period refers to the loan repayment holiday when the borrower does not make EMI payments on the loan borrowed.

Education loans offer much-needed assistance to those bright students who wish to pursue higher studies either in India or abroad but do not have the financial resources. With the financial cost of education trending upwards, educational loans provide timely help to deserving students who are financially constrained.

Educational loans have added benefits like enabling the students to conserve their scarce resources for their expenditure, maintain their CIBIL score, and gain tax benefits.

Obtaining an educational loan has become easier, with most banks and financial services companies offering educational loans to students.

What is the Moratorium Period for Education Loans?

This refers to when the borrower (Student) is exempted from repaying the loan. It refers to a repayment holiday.

The RBI, the governing authority for all banks and financial institutions, has made it mandatory for all banks and financial institutions offering loans to offer a mandatory moratorium period.

Like all loans, education loans also start accruing interest from the day the loan is disbursed.

But the student is not obligated to make interest and principal repayments when the moratorium period is in force. It should be noted that interest is only deferred and not waived off.

It is added to the loan’s outstanding balance, and higher EMIs will have to be paid when the student has a job and starts earning.

The difference between moratorium and grace period: The grace period refers to the period interval you are allowed before making EMI payments without any imposition of penalty. In contrast, the moratorium period is when there is a freeze on making EMI payments on a loan to the bank or the financial institutions.

Also, read – How to Get Education Loan After 12th?

Advantages of an Education Loan Moratorium

An education loan moratorium reduces the financial burden on students and parents during the study period.
Maintains the stability of the CIBIL score
As the moratorium is valid for up to one year after the borrowing student starts earning, there are no financial penalties for non-payments of EMIs during the moratorium period.
The student can complete his studies peacefully without fearing paying EMIs or penalties during the moratorium period.
The students enjoy freedom from the liability of repayments during this period and up to one year after completing their studies.

You can apply for a student loan from Tata Capital to cover the cost of your tuition and living expenses abroad.

Education Loan Amount: If you are studying in India, you can take a loan up to Rs. 35 Lakhs and the maximum loan amount available for studies abroad is Rs. 30 Lakhs.

Also, read – Education Loan for BSc

Difference Between Education Loan Moratorium Period and Grace Period

The difference between the moratorium and grace period in education loans is subtle yet significant. A moratorium period allows you to pause repayments while you complete your course and settle into a job, helping you focus on studies without financial pressure. Interest may still accrue, but you are not required to make payments during this time.

In contrast, an education loan grace period begins after the moratorium ends and gives you a short extension before regular EMIs start. This buffer helps you prepare your finances and ease into full repayment. Being aware of both periods enables you to plan effectively and choose terms that suit your repayment capacity with your lender.

Also, read – What is Margin in Education Loan?

Understanding Interest Accrual During Moratorium Period

During the moratorium period of an education loan, principal repayment is temporarily paused, but interest continues to accrue. Lenders may offer different ways to handle this interest during the moratorium, such as:

Simple Interest: The student pays the simple interest moratorium during the study period. This ensures that interest is not added to the principal, and future EMIs include only the principal plus any interest calculated later.

Partial Simple Interest: The student pays a portion of the simple interest, while the remaining interest is added to the principal. As a result, compound interest education loan calculations apply to both the principal and the unpaid interest.

Understanding how education loan interest accrues during the moratorium period helps students make informed decisions about whether to pay simple or compound interest, ultimately reducing the total cost of the loan.

Also, read – Education Loan for Bachelor of Arts

Repayment Options During the Education Loan Moratorium Period

During the education loan moratorium period, borrowers have several repayment options to manage their finances effectively. These include:

Full Moratorium: The student is not required to make any payments during the moratorium. While this provides financial relief, interest continues to accumulate on the principal, increasing the overall loan burden.

Paying Interest During Moratorium (simple interest): Borrowers can choose to pay simple interest during the moratorium. This prevents unpaid interest from being added to the principal, making future EMIs more manageable.

Simple Partial Payments: With education loan partial payments, a portion of the interest is paid, while the remaining interest is added to the principal. This helps manage EMIs efficiently.

EMI Post-Moratorium: All repayments are deferred until the end of the moratorium, with compound interest charged on the principal and accrued interest.

Also, read – A Quick Guide About an Education Loan for a PhD

Moratorium Period for Education Loans Across Different Lenders in India

Different lenders in India, including public sector lenders, private lenders, and NBFCs, offer education loans with moratorium periods to support students during their studies.

Public banks generally provide the longest relief, making public bank education loan moratorium options more flexible. Private banks offer shorter breaks and the final private bank moratorium terms will depend on the borrower’s profile. NBFCs provide varied terms, typically ranging from only the study period to a few months after graduation, making NBFC education loan moratorium policies lender-specific.

Also, read – Courses Eligible for Education Loan in India

Can the Education Loan Moratorium Period Be Extended?

Students can extend the education loan moratorium under specific circumstances, subject to their lender’s policies.

Some lenders allow a moratorium extension after course completion, especially for reasons like employment delays, higher studies, or medical issues, provided the borrower submits a formal request with supporting documents. However, lenders will grant extensions more selectively, evaluating each case individually.

An extension of the moratorium provides students with financial flexibility, enabling careful repayment planning and minimising unnecessary interest accumulation. It is essential to be aware of these options, as they help manage future EMIs confidently while reducing financial stress.

Also, read – Education Loan For MBBS

How to Maximize the Benefits of Your Education Loan Moratorium

To optimize the moratorium period, students should take proactive steps and adopt careful financial planning for their education loans.

The benefits of the moratorium include:

Understand your repayment options: Knowing the choices offered by your lender during the moratorium helps you decide whether to pay interest or defer payments.

Pay interest proactively: Covering the interest during the moratorium can reduce the total education loan interest and prevent it from compounding, making future EMIs more manageable.

Plan your finances: Allocate funds efficiently for essential expenses and upcoming repayments to avoid financial stress later.

Monitor interest accumulation: Regularly reviewing loan statements helps track accrued interest and refine your repayment strategy.

Use the moratorium strategically: With careful planning, this period can be leveraged to manage debt effectively while focusing on your studies.

Also, read – Education Loans for Girl Students in India

Education Loan Eligibility

You should be an Indian citizen between the ages of 16 years to 26 years
You should have a good academic record in your past studies
Your family (including you or your parents should have a stable income source)
It would help if you had good collateral to secure the education loan.
If you have a co-guarantor for the loan, both your guarantor and you should have a good credit history.

Documents Required for Education Loan

Valid photo identity proof

Attested copies of all mark sheets of the student from their 10th grade onwards

Admission letter from the college the student is proposing to join.

All other essential documents from the college/school/ institute, including Prospectus, the complete break-up fees etc.

All other applicable documents, including employment contract, entry permit, admission letter, and an I-20 form from the foreign institution.

The student’s parents’ salary slips for the past three months, along with the copies of their Income Tax returns. If not the parents, then the guarantor’s documents will apply
Bank statements for the preceding six months.

If the student had been hitherto employed, resignation letter, acceptance of resignation letter or sanction letter for study leave.

Documents for providing the collateralised security, including the property title deeds if immovable property is offered as collateral.

Interest Rates on the Educational Loan

Interest rates on educational loan start from 10.99%. Tata Capital also provides all processing fees, delayed EMI payment charges, and foreclosure transparently charges upfront.

Period available to pay back the loan: You can pay back your education loan for up to 6 years.

Also, read – The Role of Co-Applicant in Enhancing Education Loan Eligibility

Moratorium Period for Educational Loans

The moratorium period applicable to your education loan is the entire tenure of your studies.

Plus, you get a moratorium period up to a maximum of one year after you start working before you become liable to pay back the loan. But you can start paying off your student loan after six months, which is a more prudent policy and avoid foreclosure charges. It is better to start planning your repayments early. This will ensure that your EMI amounts are lower.

Education Loan EMI calculator, including moratorium period education:

Tata Capital provides a versatile EMI calculator which will calculate the EMI amounts, i.e., principal and interest amounts payable on the loan. With the help of the personal loan EMI calculator, you can enter the loan amount, interest rate, and loan tenor. The EMI is automatically calculated.

The EMIs will be payable after the moratorium period for the education is completed. However, it would be prudent to start planning the savings for EMIs as early as possible. It would help build up personal savings to start paying the loans and reduce your EMI burden.

If you are an aspirant for higher studies, start planning the financial cost and seek help for Tata Capital’s Personal Loan.

Tata Capital loans come at competitive personal loan interest rates and easy terms.

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FAQs

What happens if I make partial interest payments during the moratorium?

If you pay partial interest during the moratorium period, you reduce the amount of interest that accrues on your loan. While the full principal pause still holds, paying some interest lowers your future burden. Otherwise, the unpaid interest is added to your loan balance, increasing the total repayment.

Does a moratorium affect my CIBIL score?

A formally approved moratorium does not affect your CIBIL score. Lenders report the loan status as deferred rather than missed. As long as the moratorium is officially recorded with the lender, your credit history remains intact, and your repayment behaviour during this period does not harm your credit profile.

What are RBI guidelines on education loan moratorium?

RBI guidelines allow a moratorium period in education loan for the course duration plus up to twelve months after completion. During this period, borrowers may pay simple or partial interest. Principal repayment begins only after the moratorium ends, providing students with flexibility in managing their finances during and after studies.

Which banks or lenders offer different moratorium terms?

Lenders vary in moratorium terms. Public sector lenders often provide a complete payment holiday during the study period. Private lenders and NBFCs usually require partial or full interest payments, depending on their policy. Understanding your lender’s specific moratorium options helps plan finances and avoid surprises after studies.

What happens to my EMI after the moratorium period ends?

Once the moratorium period ends, your EMI resumes. The outstanding balance may include deferred interest, which increases the EMI or extends the repayment period. Lenders recalculate EMIs based on the revised principal and remaining tenure, so planning is essential to comfortably manage monthly repayments.

What are the disadvantages of a moratorium period?

During a moratorium period of an education loan, interest continues to accrue, increasing the total repayment. If you do not pay any interest, your EMIs may rise or your loan tenure may extend. This can make the loan costlier in the long term, despite temporary relief from principal repayment.

How can I calculate my EMI if my loan has a moratorium period?

To calculate your EMI for an education loan after a moratorium period, include the interest accumulated during the pause in your principal. Use the updated principal, the applicable interest rate, and the remaining tenure in an EMI calculator or amortisation formula. This gives the revised EMI for the remaining loan period.

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