How To Plan Your Education Loan Repayment?

    Updated on: 07 Sep 2023 11 min read

    7 Tips to Repay Your Education Loan Wisely 

    Planning your education loan repayment is a crucial step in managing your financial obligations and ensuring a stress-free journey towards repaying your loan. Whether you have taken an education loan for studying abroad or pursuing higher education in India, understanding the repayment process, options, and effective strategies can help you navigate this financial commitment with confidence. In this comprehensive guide, we will provide you with expert tips and insights on planning your education loan repayment, exploring repayment options, managing the loan effectively, and making informed decisions to ease your repayment journey.

    From understanding the education loan repayment period to analyzing interest rates, subsidies, and tax benefits, we will cover essential aspects to help you create a repayment plan that suits your financial capabilities and goals.

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    Education loan repayment process of different lenders in India

    Students who take an education loan are entitled to a moratorium period. Ideally, during this period, the borrower does not have to make any loan repayment. This is the time between the end of the course and the start of a job, and RBI has asked banks to give a moratorium period of one year after the completion of the course. 


    Moratorium period

    Payment during study period

    Public Banks

    Duration of course + 6 months


    Private Banks

    Duration of course + 6 months

    Simple interest


    Duration of course + 12 months

    Simple/partial interest / immediate EMI

    International lenders

    Duration of course + 12 months

    Simple interest


    After the completion of the moratorium period, applicants are required to pay their EMI. It is essential to stay on top of your loan repayments to avoid any negative impact on your credit score or future loan applications.

    Can you repay education loan while studying abroad?

    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. 

    Lenders in India have different policies for repayment during the moratorium period. They are as follows:

    1. Students Have To Pay Zero Interest During The Moratorium 
    2. Students Have To Pay Partial Interest During The Moratorium
    3. Students Have To Pay Full Interest During The Moratorium
    4. Students Have To Pay EMI During The Moratorium


    To understand the difference between the 4 repayment plans, let us take the following example

    Mr. A is going to Arizona State University For MS in CS, borrows INR 25 lakh from a lender

    Case A

    Case B

    Case C

    Case D

    No interest during moratorium

    Full interest during moratorium

    PI during moratorium (INR 10K pm)

    Full EMI during moratorium

    Available with secured loans of PSUs

    Available with  Axis Bank

    Available with NBFCs

    Available with all the Lenders

    Interest rate 10% loan tenure 10 years

    Interest rate 11% loan tenure 10 years

    Interest rate 12% loan tenure 10 years

    Interest rate 13% loan tenure 10 years


    This means that for Mr A: 


    No Interest During Moratorium

    Full Interest During Moratorium

    PI During Moratorium (INR 10K pm)

    Full EMI During Moratorium


    Case A

    Case B

    Case C

    Case D

    Amount while you study


    INR 22,916

    INR 10,000

    INR 35,868

    EMI (Whenever tt starts)

    INR 36,341

    INR 34,438

    INR 38,450

    INR 35,868

    Total amount repayment in 10 Years

    INR 43,60,974

    INR 41,32, 502

    INR 47,34,030

    INR 43,04,132

    Effective amount after-tax benefits

    INR 38,02,681

    INR 36,42,751

    INR 47,34,030

    INR 43,04,132


    The table clearly shows that your repayment option varies with lenders. The student need not to start repaying in the moratorium period in the case of education loans from public banks.

    Will you earn enough to repay my education loan?

    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.

    GyanDhan’s estimated future earning tool would help the students by comparing their earnings against EMI. Based on their course, college ranking, loan amount, and approximate expected annual salary, this tool will help them know their approximate savings and, consequently, the ease with which they can repay their education loan. 

    To explain further, let’s look at three different cases for Mr. A in the above discussion.

    Situation 1. Mr. A is working in the US & earning $80,000 per year.

    His typical disposable income is around 35%, and he is expected to save about $ 2,300 per month. It means that he can save INR 1,45,000 a year.

    Based on the above numbers, he can easily pay EMIs. He can even pre-pay to save interest. 

    Situation 2. Mr. A is going for a Ph.D. and will earn $25,000 to $ 30,000 per year. 

    His EMI will start after 6 months. To repay the loan, he will have to cut expenses and serve the EMI from the stipend. Mr. A didn’t get a job in the US and is working in India now. He will earn INR 1 to 1.5 Lakhs per month.

    In this case, life will be a bit hard, as one-third to half of his earnings will go into EMI for the education loan.

    Estimating the future earnings against the repayment amount is a wise move to avoid big disappointments. For a well-structured calculation, click here for GyanDhan’s estimated earning tool.

    What will happen if you default on your education loan?

    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.

    Check Your Education Loan Eligibility Apply Here

    Tips for repaying the interest amount on your education loan 

    1. Analyze your financial condition and decide whether you can afford to pay the total or partial interest during the moratorium period. This analysis will help you get a clearer picture of the financial liability and your ability to repay, and thus help you plan and repay in an organized manner.
    2. Look for available subsidies: Capitalize on features such as margin money, lower interest rates for women, benefits of schemes like Rinn Raksha, Interest subvention by banks for differently-abled or economically weak students, and make use of various subsidies offered by the government.
    3. Take the loan amount in installments rather than in one go. This is because the interest is calculated on the amount disbursed and not on the amount sanctioned. Hence, taking loan amounts in installments will help students to reduce their interest burden.
    4. Opt for fixed interest rates when taking an education loan. Students read here to know how their interest rate can change and thus affect their EMIs. If they have already opted for a floating rate of interest, we suggest they understand interest fluctuations and plan for increments.
    5. Consider transferring the existing education loan to a new lender with a lower rate of interest. Once a student gets a job, their profile improves, and lenders agree on a loan takeover by offering a reduced interest rate. This will again help lower the EMI that the students need to pay.
    6. Tax benefits: Section 80E of the Income Tax Act, 1961, provides tax benefits to individuals who have availed of an education loan for pursuing higher education abroad. By claiming the tax benefits under section 80E, the borrower can significantly reduce their taxable income and save on income tax. It is advisable to carefully understand the eligibility criteria, documentation requirements, and other details before availing of the tax benefits under section 80E.
    7. Foreclosure: Foreclosure of an abroad education loan means paying off the outstanding loan amount in full before the due date. It is a process of early repayment of the loan, where the borrower makes a lump sum payment to the lender to clear the entire outstanding loan amount. Foreclosure can be initiated by the borrower voluntarily, or it can also be done by the lender in case of default or non-payment of the loan amount.

    How pre-planning education loan repayment help you save big?

    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.


    Calculate your Education Loan EMI Click Here

    How does refinancing help you?

    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.

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    Frequently asked questions

    Do we have to pay interest for education loans while studying?

    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.

    What is a partial interest in education loans?

    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.

    When does education loan repayment start?

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

    Can I pay an education loan after getting a job?

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

    Can I repay my education loan early?

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

Written by Ananya Ghai

A post-graduate with over three years of expertise in the education abroad industry, Ananya has a knack for writing blogs. Previously, she has worked as an IELTS trainer and SOP writer. A passionate writer and a literature geek, describe her perfectly.

Photo aman jain
Reviewed by Aman Jain

Aman Jain graduated from IIT Kanpur, and currently functions as the CMO at GyanDhan. He is deeply passionate about creating equality in higher education and has directly interacted with 2 Lakh students in his 8-year-long journey.

Specializes in:
Education loan , Study Abroad Admissions

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