Last updated 12 Nov 2026
An education loan pays for a course of study, usually directly to the institution, and lets you start repaying after you finish. It suits students who have an admission or a likely admission and families who cannot pay the full cost from savings. The loan is decided and paid by the lender, based on the student's admission, the course, the institution and the repayment ability of the co-applicant, who is usually a parent or guardian.
This guide covers what is funded, how repayment is timed, when security is asked for, what to prepare, and how to compare offers. For the part where government schemes and scholarships can lower the cost, read Education loan subsidies, schemes and scholarships. For study overseas, see the study abroad education loan page.
What an education loan usually covers
Expenses lenders commonly include
| Expense | Usually included | Notes |
|---|---|---|
| Tuition and exam fees | Yes | Often paid straight to the institution in stages |
| Hostel, mess or rent | Yes, up to a limit set by the lender | Some lenders ask for proof such as a hostel receipt or rent agreement |
| Books, equipment and a laptop | Yes, against bills | Keep invoices; some lenders pay against a quotation |
| Travel (for study abroad) | Often included | Passage and visa costs, as the lender allows |
| Caution deposit, library and lab fees | Often included | Shown on the institution's fee schedule |
| Insurance for the student or loan | Sometimes financed | Ask whether it is optional or required |
| Study tours or project work | Where the course requires it | Needs a letter from the institution |
The sanction letter lists what will be paid and when. Money normally goes to the institution and to the student's account for living costs, not to anyone else.
Who can apply and who must co-sign
The student is the borrower. A parent, guardian or other earning relative usually joins as a co-applicant because the student has no income yet. The lender looks at the co-applicant's income, existing EMIs and credit history, as well as at the student's academic record and the course. See Co-applicant vs guarantor for how their responsibility differs.
- Indian citizenship is usual; some lenders also consider overseas Indians for certain courses.
- An admission, or a firm conditional offer, from a recognised institution. Lenders often keep lists of institutions and courses they prefer.
- A co-applicant with steady income and a clean repayment record.
- Age and course rules set by the lender.
The moratorium: when repayment starts
Most education loans give a repayment holiday, called a moratorium, that runs for the length of the course plus a further period after it. During the moratorium you are normally not asked to pay EMIs, but interest keeps building up on the amount paid out. The unpaid interest is added to the loan at the end of the moratorium, so the repayable amount is larger than what you drew.
Illustrative picture of a moratorium (round numbers, no rate)
| Stage | What happens | What it means |
|---|---|---|
| Course years | Money is paid out in stages; interest builds up | Your outstanding balance grows with each payout and with accrued interest |
| Grace period after the course | No EMI yet, interest still builds up | Time to find a job |
| End of moratorium | Accrued interest may be added to the principal | EMIs are worked out on the larger amount |
| Repayment | Regular EMIs for the agreed tenure | Pay on time to protect your credit history |
You can pay the interest during the moratorium even when you are not asked to. That keeps the balance from growing. Ask whether the lender accepts part-payments in this period and whether any interest benefit (see the subsidy guide) is available.
Collateral and security
Smaller loans are often offered without collateral, and larger ones usually need security. Lenders differ on where the line falls. Typical security is a residential property, a fixed deposit, an insurance policy with a surrender value, or a third-party guarantor, as the lender allows. The security stays with the owner and is released when the loan is closed. See the home loan and loan against property pages if a family property is to be offered, since valuation and legal checks apply.
- Ask what loan size needs collateral and what size does not.
- Ask what the lender accepts as security, and in what form.
- Ask about valuation and legal charges, which are set by the lender and usually paid by you.
- Ask when and how the security is released after closure (the NOC guide below explains this).
Documents usually asked for
Documents by purpose
| Purpose | Student | Co-applicant |
|---|---|---|
| Identity and address | Aadhaar (masked copy where allowed), PAN if available, passport for study abroad | Aadhaar, PAN, address proof |
| Admission | Admission or offer letter, fee schedule, entrance test result | Not applicable |
| Academic record | Mark sheets of recent examinations, entrance score | Not applicable |
| Income (salaried) | Not applicable | Recent salary slips, Form 16, bank statements |
| Income (self-employed) | Not applicable | Income tax returns, business proof, bank statements |
| Security (if any) | Not applicable | Property papers or deposit proof |
| Photographs and signatures | Yes | Yes |
See Loan documents and KYC for what each KYC paper is used for and how to keep it ready.
A worked example of the cost of waiting
Take a student who draws ₹8,00,000 in stages across a four-year course. Suppose interest builds up on the amount paid out throughout the course and for a year after, and no EMI is paid. The balance at the end is more than ₹8,00,000, because unpaid interest is added. The exact figure depends on the rate and the payout dates, which you will find in your sanction letter and Key Fact Statement. The EMI calculator can show the EMI for the larger balance over your chosen tenure. If the family pays the interest as it builds up, the balance stays at what was drawn and the later EMI is lower.
How to compare education loan offers
What to compare
| Item | Why it matters |
|---|---|
| APR in the Key Fact Statement | Shows interest and fees as one yearly cost on the same basis |
| Interest type and reset | A floating rate can move; ask how often it resets |
| Moratorium length | A longer one helps the student but adds interest |
| Collateral rule | Decides how much family property you must offer |
| Processing fee, insurance and other charges | Set by the lender; ask for the full list in rupees |
| Prepayment terms | Ask whether you can repay early and at what cost |
| Disbursal pattern | Direct to institution in stages is common; confirm the timeline against fee dates |
For current indicative rates, see the interest rates page. Rates depend on the lender, the course, the institution and the co-applicant.
Why applications are turned down
- The institution or course is not on the lender's accepted list. Ask before applying, and apply to lenders that accept it.
- The co-applicant's income is low or existing EMIs are high.
- The co-applicant's credit report shows missed payments. Check it early.
- Documents are incomplete, or the admission is not confirmed.
- Many applications in a short time. Each lender check shows on the report. This helps avoid unnecessary credit enquiries: compare eligibility first, then apply where you are likely to qualify.
How LOANZ 360 helps
LOANZ 360 is a loan aggregator, not a lender. You share your details with consent, they are compared with partner lenders' published eligibility criteria, and our team prepares a credit assessment summary before the file reaches a lender. You choose where to apply, and one advisor follows the file end to end. The lender decides, prices and pays out.
Frequently asked questions
Can I get an education loan without a co-applicant?
Most lenders ask for one because the student has no income. Some schemes and lenders may consider the student alone in limited cases, such as when future income is shown for certain professional courses. Ask each lender for its rule.
When do I start paying the EMI?
Usually after the course ends and a grace period set by the lender. Interest builds up in the meantime. You may pay the interest during the course to keep the balance from growing.
Does an education loan need collateral?
Smaller loans are often offered without it. Larger loans usually need security, such as property or a deposit. The cut-off differs by lender, so ask what applies to your loan size.
Can I pay the tuition fee to the institution directly from the loan?
Yes, that is the usual route. Lenders pay fees to the institution in stages and living costs to the student's account, against the fee schedule and bills.
What if I cannot find a job after the course?
Tell the lender early. Some lenders allow a longer moratorium or a restructure on request, but it is a lender decision. Missing EMIs without telling the lender hurts your credit history.
Is the interest on an education loan eligible for tax relief?
There can be tax relief on interest for higher education, depending on the regime and on who repays. Rules were renumbered under the Income-tax Act, 2025. Read the education loan tax guide and check with the Income Tax Department or a tax adviser.
Related reading: Education loan subsidies, schemes and scholarships, Education loan interest and tax, Co-applicant vs guarantor, Key Fact Statement and APR, Loan documents and KYC, Study abroad education loan, Domestic education loan, Moratorium, EMI calculator, Interest rates.
See Domestic Education Loan Ask an advisor about it