Education Loan: Best Student Loan In India For 2024 (2024)

State Bank of India: Best customized education loan with low interest rates.

Punjab National Bank: Best for students in the OCI category, or born abroad but studying in India.

ICICI Bank: Best for studies in reputed colleges and universities in Canada.

Bank of Baroda: Best in loans for child’s studies pursuing schooling from nursery to class XII.

Bank of India: Best in loans with nil processing fees and lower interest rates.

Bank of Maharashtra: Best in loans to get concessions on rate of interest for meritorious students.

Central Bank of India: Best education loan for executives pursuing MBA from reputed management institutes.

We scored 18 public and private sector banks of India across 43 education loans products, and 15 data points in the categories of interest rates, processing fee, loan terms, security, repayment option over and above basic eligibility criteria and ease of access to information. We chose the seven best lenders based on those earning four stars or higher.

The following is the weighting assigned to each category:

– Interest rates: 30%

– Application process: 20%

– Loan terms: 20%

– Security: 10%

– Repayment: 10%

– Fees: 5%

– Ease of access to information: 5%

Specific parameters taken into consideration within each category included concession to meritorious student and women borrowers, takeover option of loans, repayment based on income, time to defer payment as well as loans for schooling besides colleges and universities.

Lenders who offered interest rates below 10% scored the highest, as did those who offered flexible repayment options, nil charges on prepayment, availing loans to other categories besides Indian residents, and who charged minimal fees.

Interest rate in an education loan, like in any other personal loans provided by public and private sector banks, is key to determine the total amount you have to repay when the equated monthly installment (EMI) begins.

Lending institutions provide education loans and charge interest rates depending upon the students’ choice of further studies, either at domestic colleges or abroad.

Interest rates on education loans also vary upon lending institutions, loan amount, repayment tenure, borrower’s credit profile, collateral kept as security as well as aspirants’ select-course and the type of education institution offering the course, to name a few.

The policy repo rate hike by the Reserve Bank of India (RBI) in Dec. 2022 to 6.25% has led many banks to increase their interest rate on loans. A consumer can still get a reasonable rate of interest on an educational loan.

Here are the interest rate on education loan provided by major public and private sector banks of India:

Bank of Baroda

Bank of India

Bank of Maharashtra

Canara Bank

Central Bank of India

Punjab & Sind Bank

Punjab National Bank

State Bank of India

Axis Bank

City Union Bank

Federal Bank

ICICI Bank

IDBI Bank

IDFC First Bank

Karur Vysya Bank

Kotak Mahindra Bank

South Indian Bank

Tamilnad Mercantile Bank

The above interest rates and details on education loans are updated as on Feb. 13, 2023. While we update this information regularly, the rate of interest and loan details may have changed since the page was last updated.

Related: Tips To Successfully Pay Off An Education Loan

An interest rate fixed by the bank on an education loan plays a crucial role in one’s ability to pay the borrowed amount. Although banks do not ask you to pay the sum during the moratorium period or while you are studying, it is best to consider paying at least the interest amount during the period. Doing this will not only ease the burden of the EMI, but may as well help you get a certain concession on the principal loan amount later as per the bank’s policy.

Most public and private sector banks in India offer “floating interest rate” while lending an education loan. In this type of rate of interest (ROI), the interest rate on your easy EMI is calculated as per the “base lending rate” plus the standard premium rate, or credit spread, markup, etc.

Banks refer to base rate, with floating components like repo-linked loan rate (RLLR) or marginal cost of fund-based lending rate (MCLR), among others, while determining their actual interest rate on education loans.

Notably, the base rate for every bank changes as per the RBI’s change in repo rate (the rate at which the public and private banks borrow money from the apex bank), which is reviewed on a bi-monthly basis. Therefore, the interest rate in your floating EMI is revised as per the change in the RBI’s repo rate.

This change is, however, reflected after the “reset period” when the interest rate on your EMI is subjected to revisions. The reset period in the RLLR type of floating component is three months while it usually takes six to 12 months for the reset to take place in the MCLR concept of fixing the interest rate on your EMI.

In a nutshell: Final Interest Rate = Base Rate (MCLR/RLLR/Repo Rate) + Standard Premium/Spread per annum.

It would be best to consider this aspect of calculating floating interest rate before you choose an education loan for your further studies. Nonetheless, banks usually provide the breakdown of interest rates on your EMI against the outstanding amount in your education loan sanction letter.

Education loan eligibility determines the maximum amount a bank can borrow to an applicant, depending on the amount that you or your ward needs to cover the expenses. Here are some factors to consider:

Margin: Just like other retail loans, education loans require applicants to pay a portion of the total education cost for loans above INR 4 lakh, which can be around 5% for studies within India and 15% for abroad studies.

Collateral: Depending on banks, you may be required to pledge a certain percentage of the property’s value as collateral to secure loans above INR 7.5 lakh at lower rates.

Moratorium period: Repayment for the loan or the equated monthly installments (EMIs) will begin after the education course is complete. It is advised to pay at least the interest amount during the course of study to reduce the repayment burden. Some banks also offer lower rates if the interest part of the loan is paid during the course period.

Tax deduction: The student or their cosigner can claim the interest portion of the loan for tax deductions under Section 80E of the Income Tax Act for up to eight years.

Rate of interest: The RoI is an important factor that determines how much you will pay when the EMI begins. The RoI offered by major banks of India are detailed in the above section.

Remember, most banks offer concessions on the RoI (normally 0.25 to 0.50 bps) to meritorious students, female, scheduled caste, scheduled tribe, minority, and physically challenged students.

Processing fee on education loan: This charge is levied by the bank to process your application. While some banks do not charge any processing fee for studies within India, or women borrowers, the processing charge is in the range between 0.50% to 2%.

Read the fine print. Education loans come with a set of terms and conditions. Make sure you avoid needless penalties and charges, it is advisable to go through the fine print before you sign any paperwork.

Related: What Is An Education Loan And How To Get One?

– Proof of income (parents/sibling/guarantor)

– Proof of identification

– Proof of address

– Bank statement of last six months

– Copy of admission letter of the institute along with fees schedule

– Demand letter from college or university

– Loan agreement/sanction letter/disbursem*nt request form signed by applicant, co-applicants

– Documents for collateral security (if any)

– Form A2 signed by applicant or co-applicants for studies in overseas institute

– Mark sheets, or pass certificate

• Central Government schemes like CGFSEL, Dr Ambedkar central scheme on education loans, Padho Pardesh Scheme offer subsidies on interest rate charged on the loan amount.
• Borrowers can avail of tax exemption under Section 80E.
• A few banks also offer concessions on the interest to their existing customers with a good credit score.
• Some banks offer up to 1% concession in ROI if the interest amount is paid in full during the study period.
• A few banks may charge additional interest as risk premium (up to 0.05%) if the lender has not obtained credit life insurance, which ensures that debts are settled after insurers’ demise.

Registration of loans can be done directly via the government’s Vidya Lakshmi portal (VLP). Or, borrowers can get a quote on an education loan by filling up a self-explanatory form available on the lender’s website. After submission, bank’s agents get back to you over the phone or email. Details required to be filled on VLP, or lenders’ web portal, are as follows:

• Mobile number
• Course details: Country of study, course type, nature of course, course duration.
• Course Fee: Admission fee, tuition fee, hostel fee/living expense, examination lab/library fee, purchase of books, caution fee, purchase of computer, misc expenses, fellowship/scholarship.
• Applicants details like qualification, gender, work experience, state of residence.
• Co-applicant details.
• Email id
• Read and accept the terms and conditions.