How It Works: Student Debt & Repayment Logistics
Education loans in India feature a unique structural component known as the Moratorium Period. This is a "holiday" period covering your academic course duration plus an additional grace period (usually 6 to 12 months post-graduation). During this time, you are not required to pay EMIs.
The Hidden Cost of the Moratorium
While you do not pay EMIs during the moratorium, banks still charge simple interest on the disbursed amount. This accumulated interest is added to your original principal once the repayment phase begins. For example, if you borrow ₹20 Lakhs and accumulate ₹5 Lakhs in interest during your studies, your EMI will be calculated on a principal of ₹25 Lakhs. Paying just the simple interest portion during your studies can drastically reduce your future EMI burden.
Education-loan interest tax treatment
Eligible education-loan interest may qualify for a deduction under the applicable tax law and tax regime. Check the rules for the relevant Tax Year before relying on a deduction or estimating tax savings.