How To Plan Your Education Loan Repayment?

The need to repay or not while studying depends on the payment option available to you. Once students know the number of EMIs they have to pay to repay their education loan, the next question that crosses a student's mind is whether he/she has to start repaying the loan while studying. It is prudent for students to know about the different repayment options to plan their loan repayment intelligently. 

Earning a job to repay the loan within the moratorium period is always at the top of a student’s mind. To ensure a well-paid job, the student must start researching jobs at the beginning of the final year. It is better to research in advance and study a course that ensures well-paying job opportunities to reduce loan repayment anxieties.

The chances of an education loan becoming a Non-Performing Asset (NPA) are real. In simple words, an NPA is a loan on which the borrower has failed to make principal and interest payments during their education loan repayment period. Defaulting on an education loan can have several consequences, including the following:

1. If you fail to pay your EMI for 3 consecutive months, the bank will classify the loan as NPA. 
2. The borrower’s collateral will be at risk. The bank may seize your collateral and use it to recover the loan amount. 
3. Once the loan is classified as an NPA, the credit score of both the borrower as well as co-applicant will be affected. This will reduce your and your co-applicant’s ability to borrow money in the future. 

A wise education loan repayment plan begins soon after disbursal, all it requires is a combination of planning and diligence.

An early repayment plan can benefit students in their loan repayment journey. By increasing the amount they pay back to the lender, students can significantly reduce their financial liability. We at GyanDhan, encourage students to be mindful of their expenses while studying and to utilize any potential earnings they can generate during their studies. 

There are several ways in which students can lower their education loan burden while studying:

1. Loan repayment during the study period: If possible, making small loan repayments during the study period, even if it's just the interest, can help reduce the overall burden. This approach can prevent interest from accruing and reduce the principal amount borrowed.
    
2. Part-time employment: Taking up part-time jobs or internships can help students earn income to contribute towards their education expenses. By utilizing their free time effectively, students can reduce their reliance on loans and offset some of the costs. For example, in the USA, the stipend for assistantships is approximately $12 per hour, and students are allowed to work a maximum of 20 hours a week. A student can, thus, easily earn between $900 to $ 1000 a year. This translates to INR 58000 to INR 65000 - the money that can be used to repay a part of the education loan!
    
3. Internship during the summer break: Students are allowed to do an internship during their summer break. It helps them get relevant industry experience and earn between $3000 to $ 5000 to pay a part of the education loan.

Refinancing your education loan is better than opting for a longer repayment tenure. This is because the student can bargain for a lower rate of interest once they get a job and thereby save their hard-earned money. An unsecured loan at 13% can easily reduce to 11.5% once the student gets a job. The lower rate of interest will reduce their EMIs and thus make loan repayment a bit easier. 

Planning your abroad education loan repayment is a critical aspect of your abroad education journey. By understanding your loan terms, creating a budget, exploring repayment options, prioritizing payments, and seeking professional guidance, you can ensure a well-structured and successful repayment strategy. Remember, proactive planning and disciplined financial management will contribute to your long-term financial stability and help you achieve your goals beyond your education loan repayment. 

Additionally, when it comes to education loan assistance, GyanDhan is a trusted partner that can provide invaluable support. With their expert education loan counselors and commitment to securing the best education loans for students, GyanDhan offers a personalized and comprehensive approach to education loan guidance. Our experts can help you compare loan products, find the most competitive interest rates, and navigate the loan application and repayment process. So take the first step towards your abroad education dreams and check your loan eligibility for free.

Paying interest for education loans while studying varies from lender to lender. Public banks do allow zero repayments during the moratorium period. However, private banks and NBFCs require the borrower to repay simple or partial interest while studying.

The partial interest rate in education loans refers to a repayment option where borrowers have the choice to pay only a portion of the simple interest of the loan while still studying.

The repayment of education loans starts after the moratorium period. However, some lenders require borrowers to repay during the study period as well.

Yes, students can start repayment of education loans after getting a job.

Yes, students can repay their loans early. There are no pre-payment charges after 6 months of disbursal of education loans.