Loan for Education

Education Loan Repayment in India: Rules & How to Pay

By Tata Capital
07 January 2026
9 mins read
1656

As the burden of repayment looms, smart planning becomes paramount, starting from choosing the right bank to navigating through their policies. In this article, we will delve into the intricacies of education loan repayment rules in India, shedding light on the significance of understanding these rules for effective planning.

Moratorium Period

Understanding the moratorium period is fundamental to crafting a successful education loan repayment strategy. The moratorium period acts as a crucial phase where students are granted a repayment holiday, delaying the start of Equated Monthly Installments (EMIs). Typically, this period spans the course duration plus an additional 6 months to a year.

For instance, if your academic program extends over 2 years, the moratorium period could extend up to 3 years. However, variations exist among banks. In Government banks, students may opt to start EMIs during the moratorium, while in Private banks and NBFCs, this is usually not the case.

During the moratorium period, Government banks often offer a no-payment option, relieving students from any financial obligation. In contrast, Private banks and NBFCs might require students to pay either full or partial interest during this period.

Education Loan Repayment Rules During Moratorium

Navigating through the moratorium period involves understanding whether repayments are mandatory during this financial respite. Ideally, the moratorium period is designed to offer students a financial breather after completing their studies. During this phase, students are not obliged to make any payments.

However, the scenario varies across banks. Some offer a zero-payment moratorium, allowing students to complete financial relief during this period. In contrast, others may calculate and expect partial or full interest payments. This distinction in policies between banks underscores the importance of knowing your lender’s terms.

Differences Between Repayment in Government Banks and NBFCs

Comparing the education loan repayment processes between Government banks and Non-Banking Financial Corporations (NBFCs) is vital for students making informed decisions. Government banks often stand out due to their student-friendly repayment policies, offering a broader repayment tenure of 12 to 15 years after the moratorium period concludes. This extended tenure provides students with a significant repayment holiday, allowing them to settle into their careers before beginning EMIs.

In contrast, NBFCs present a different approach. While they do offer a moratorium period akin to Government banks, students might be required to pay interest during this phase. Additionally, the total loan tenure in NBFCs is often capped at 10 years, including the moratorium period.

Choosing between Government banks and NBFCs involves careful consideration. Opting for a Government bank with collateral can yield better offers, as the loan tenure includes the moratorium period. This choice is crucial, as it can impact the overall duration of your loan and, subsequently, your financial burden.

When to Start Repaying an Education Loan in India

Choosing the right time to initiate education loan repayments is a pivotal decision that significantly impacts your financial trajectory. Most students find the optimal window for repayment between 5 to 7 years post-education.

While the moratorium period offers a payment-free window, it’s crucial to recognize that it’s not interest-free. Simple interest accrues during this period, especially considering the relatively high-interest rates in Private banks and NBFCs.

Starting repayments early is advised to prevent the accumulation of substantial interest and alleviate the overall cost of the loan. Delaying repayment can inadvertently amplify the financial burden. As the moratorium is a grace period for EMIs but not interest, planning becomes imperative.

Education Loan EMI: Calculation and Repayment Modes

Education loan EMIs are Equated Monthly Instalments you pay each month to clear your student loan repayment over the chosen tenure.

The EMI is calculated using the standard formula:
EMI = [P × R × (1+R)ⁿ] / [(1+R)ⁿ–1],

where P is the principal loan amount, R is the monthly interest rate and n is the total number of monthly payments. This helps you plan how much you need to repay every month.

In India, education loan repayment normally starts after the moratorium period which includes your course duration plus 6–12 months after completion or 6 months after getting a job, whichever comes earlier. The full repayment period can extend up to several years, depending on the lender’s policies.

Popular repayment modes include auto-debit via NACH/ECS, UPI and online banking, which make paying your EMIs convenient. Timely repayment improves your credit score and avoids penalties.

Popular Methods to Pay Education Loan in India (NACH, ECS, Cheques)

Here are popular methods for education loan repayment in India using different repayment modes:

NACH (National Automated Clearing House): Under the NACH mandate, your education loan EMI is automatically debited from your bank account on the due date. This method is widely preferred for education loan repayment as it ensures timely payments, avoids missed EMIs, and helps maintain a good credit score.
ECS (Electronic Clearance Service): ECS works in a similar way by enabling automatic student loan repayment from your account every month. It suits borrowers who want a structured and hassle-free way to repay their education loan, provided sufficient balance is maintained.
Cheques: Some lenders still allow repayment through cheques, especially for borrowers who prefer offline methods. While reliable, this option requires manual tracking and timely submission to avoid delays or penalties.
RTGS/NEFT: These netbanking modes are suitable for student loan repayment, wherein funds are transferred instantly from your bank account to the lender. They are suitable for lump-sum payments, part-prepayments, or closing the loan, but are usually available only during bank working hours.

How to Calculate Your Student Loan Repayment Using Calculators

To calculate your student loan repayment using an online EMI calculator, follow these simple steps:

Enter the loan amount: Type in the total education loan repayment amount you plan to borrow.
Input the interest rate: Add the annual interest rate charged by the bank; the calculator converts this to a monthly rate for accurate results.
Select loan tenure: Choose how long you want to take to repay the loan (in years or months).
Click “Calculate”: The tool instantly shows your monthly EMI, the total interest payable, and the full repayment amount over the tenure.

Using these calculators makes it easy to plan how to pay your education loan and understand your obligations in an instant.

How to Repay Your Education Loan: Step-by-Step Process

Here’s a step-by-step guide if you’re wondering how to pay education loan in India:

Know your repayment start date: Repayment typically begins after your moratorium period (course duration plus about 6–12 months) or after securing a job, whichever comes earlier.
Review your loan agreement: Check details like interest rates, EMI amount, tenure, and education loan repayment rules so you know when to repay education loan and what’s expected.
Plan your budget: Use a student loan repayment calculator to estimate your monthly EMIs and budget your post-graduation income accordingly.
Choose a repayment mode: Set up auto-debit (NACH/ECS), NEFT/RTGS, or cheques for regular EMIs.
Start EMIs on time: Make your monthly education loan repayment through the chosen mode to avoid penalties and protect your credit score.

Managing Repayment During Financial Emergencies & Deferment

Here’s how you can manage your student loan repayment during financial emergencies and unforeseen circumstances:

Communicate with your lender early: If you face financial difficulties, reach out to your lender as soon as possible. Lenders may offer options such as loan restructuring or temporary relief to avoid defaults and legal consequences.
Request repayment flexibility: Some lenders allow you to restructure the repayment schedule so you pay a smaller amount during hard times or adjust EMIs temporarily. This can help manage education loan repayment without hitting defaults.
Deferment or moratorium extension: Beyond the standard moratorium (course duration + 6–12 months), you may be able to negotiate extensions or defer additional payments if employment or income is delayed, easing pressure on how to repay education loan.
Make partial payments: During challenging periods, making smaller payments toward interest or principal can reduce the total burden and help maintain your student loan repayment schedule.

Staying proactive and informed helps you manage repayment more smoothly and protects your credit health during emergencies.

Education Loan Repayment Strategies and Tips

Navigating the complex terrain of education loan repayment requires a strategic approach. Here are key tips to optimize your repayment journey:

How to Use Education Loan Features and Benefits

1. Capitalize on bank features such as interest rate discounts for female candidates, loan insurance benefits, and schemes like Rinn Raksha.

2. Explore subsidy schemes tailored for differently-abled individuals or those from economically weaker sections.

2. Opt for Fixed Rates: –

1. Consider opting for fixed interest rates over floating rates for stability.

2. Understand the impact of interest rate fluctuations, especially for those with floating interest rates.

3. Take Loan Amount Whenever Required:

1. Utilize your loan amount judiciously; interest is calculated on the amount utilized, not the sanctioned amount.

2. Seek clarification from TATA Capital if you face challenges understanding this concept.

How to Budget for Your Student Loan Repayment

1. Repayment demands meticulous planning and budgeting.

2. Prioritize repaying the loan, cutting down on unnecessary expenses.

3. Create a detailed budget considering monthly EMIs and interest.

5. Utilize Tax Benefits: –

1. Indian bank borrowers can benefit from Section 80E for tax deductions on education loan interest payments.

2. Understand that the deduction is applicable only for the interest component of the EMI, with a maximum tax benefit period of 8 years.

Conclusion

Navigating the landscape of education loan repayment in India demands meticulous planning and a nuanced understanding of policies. From comprehending the intricacies of the moratorium period to making informed choices between Government banks and NBFCs, each decision significantly impacts your financial journey.

Starting repayments at the right time and implementing strategic tips, such as optimizing available features and utilizing tax benefits, can pave the way for a smoother repayment process.

As you embark on your education loan repayment journey, remember that TATA Capital is here to guide you. For tailored advice and expert assistance, connect with our team to ensure a secure and financially sound future. TATA Capital is committed to making it happen. Apply now for education loan with TATA Capital today!

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FAQs

What is the education loan repayment period in India?

The repayment period usually starts after the moratorium period (course duration plus a typical 6-12 month grace period). Tata Capital offers repayment tenures extending up to 13 years

When does my student loan repayment start after graduation?

Your student loan repayment generally begins once your moratorium ends, i.e. after you complete your course and the additional grace period (often 6–12 months) is over.

How can I pay my education loan EMI if I am abroad?

If you are abroad, you can usually pay your education loan EMIs using online banking (NEFT/RTGS), international bank transfers, or auto-debit arrangements through NACH/standing instructions set up before departure. Most lenders support digital payment options to manage student loan repayment from overseas.

Is it beneficial to pay interest during the moratorium period?

Yes. Paying interest during the moratorium, even if only simple interest, prevents interest from being added to the principal later, which can reduce the total repayment burden.

Can I change my education loan repayment schedule or defer payments?

Many lenders allow you to request changes to your repayment schedule or defer payments in cases of financial hardship, subject to their terms and approval. This helps manage repayment during tough times without defaulting.

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