Education Loan Interest Rates 2024: A Complete Guide

Education Loan Interest Rates
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Education loans are a great way to secure funds for higher education. The financial assistance provided by various public banks, private banks, and NBFCs helps students to pursue global dreams. At the time of applying for an education loan, interest rates are one of the most important factors to consider. Different banks and financial institutions have different terms and conditions regarding interest rates. Student loan interest rate depends upon a lot of factors like loan amount, credit score, repayment period, income of the co-applicant etc.

Let’s understand all about the interest rates on student loans, comparing different lenders, types of interest rates, interest rate calculators and other important things.

Overview of Education Loan Interest Rate

Education loan interest rates refer to the interest charged by the borrower on the amount of loan availed by the students. It is calculated by considering RLLR (repo-rate linked lending rate) and the spread determined by the lending institution. Various factors affect the interest rate calculation on education loans, thus different banks have different effective interest rates for the borrowers.

Major public and private sector banks like State Bank of India (SBI), Bank of India, ICICI Bank, HDFC Bank, Union Bank of India etc provide the lowest education loan interest rates. They offer competitive rates of interest ranging from 8.50% to 11.45% p.a. The table below shows the interest rates on education loans from different lenders.

Comparing Interest Rates on Education Loan

Bank Name Education Loan Interest RateProcessing Fee
Kotak Mahindra BankUpto 16% p.a NIL
UCO Bank10.85 p.a to 12.10% p.a NIL
IDBI Bank8.50% p.a to 11.10% p.a 1% of the loan amount + taxes
(The amount is refundable at the time of disbursement)
Federal Bank12.75% p.a to 14.25% p.aINR 3000- 7500 + applicable taxes
Bank of India 9.25% p.a onwardsStudy in India- NILStudy in Abroad – INR 5,000
Axis Bank13.70% p.a to 15.20% p.a 2% of the loan amounts plus GST 
Tamilnad Merchantile Bank12.60% p.a to 12.80% p.aNo processing charges for studies in India.1% of the loan amount above INR 7.5 lakhs for studies abroad.
Karur Vyasa Bank12.05% p.a to 14.55% p.aNIL
ICICI Bank9.85% p.a to 14.00% p.a Upto 2% plus GST on sanction amount
HDFC Bank 9.50% p.a onwards 1% of the loan amount or INR 1000 (whichever is higher)
Indian Overseas Bank9.75% p.a onwards NIL
Karnataka Bank10.48% p.a onwardsContact the Bank 
Canara Bank10.65% p.a to 11.35% p.a NIL
Bank of Maharashtra 9.45% p.a onwardsNIL
IDFC First Bank 10.15% p.a onwards Upto 1.5% of the loan amount 
Bank of Baroda11.40% p.a onwardsNo processing fee is charged for a loan amount Up to INR 7.50 Lakh1% of the loan amount up to INR 10,000. 
Union Bank of India 9.25% p.a to 12.50% p.aNIL
State Bank of India11.15% p.a onwardsNothing is charged on a loan amount below INR 20 LakhIf the loan amount is above INR 20 Lakh: INR 10,000 (plus taxes) 
Punjab National Bank9.45% p.a onwards0.35% of the loan amountMinimum- Rs. 2,500/Maximum- Rs. 15,000/

Also Read: Want to know about the minimum family income needed to avail of study abroad education loans? Check out all the details in our blog on minimum family income requirements for education loans.

Types of Interest Rates in Education Loan

The lending institution can charge fixed or floating interest rates on education loans. A fixed interest rate remains unchanged/ status during the total loan repayment tenure. A floating interest rate keeps on changing with the change in repo rate and other market conditions that influence it. 

The terms and conditions and the interest rate adopted by the bank determine the type of interest rate that will be levied on the education loan by the borrowers. Most private and public sector banks in India providing education loans to study abroad provide floating interest rates. 

Floating interest rates are calculated as the sum of RLLR and Spread. RLLR is the Repo Linked Lending Rate usually set by the RBI. Spread is calculated individually by the banks based on the credit risk premium over and above RLLR. Some banks use MCLR- Marginal Cost of Funds based Lending Rate. It is the minimum lending rate below which the banks are not permitted to lend. 

The table below presents some of the popular banks and their interest rate calculation on education loans to study abroad. Going through the same can help you understand all about education loan interest rate calculation-

Karnataka Bank Education Loan Interest Rate
Federal Bank Education Loan Interest Rate
Canara Bank Education Loan Interest Rate
Union Bank Education Loan Interest Rate
PNB Education Loan Interest Rate
Bank of India Education Loan Interest Rate
Indian Bank Education Loan Interest Rate

How to Calculate EMIs on Education Loans?

The three factors that affect EMIs on education loans are the interest rate on the loan, repayment tenure and loan amount. The formula that is used by banks to calculate EMIs on education loans is mentioned below: 

EMI Amount = [P x R x (1+R)^N]/[(1+R)^N-1]

Here P = Principal Amount, R = Rate of Interest and N = Number of Years for Repayment (calculated in months) 

Also Read: Though student loans can fund your education, maintaining them can occasionally feel burdensome. Check out our blog on Pro Tips for Managing Student Loans that you must consider and pursue hassle-free studies.

Discount on Interest Rates Offered by the Banks

Many public and private sector banks provide discounts on interest rates when lending education loans. One of the major discounts provided by most Indian banks is the interest concession of 0.5% to girl students. Popular banks like SBI, Central Bank of India, Indian Overseas Bank, IDBI Bank, Bank of Baroda, and many more follow the same.

Banks also offer discounts on interest rates to borrowers who have an excellent CIBIL score. For example, SBI gave a concession of 55 bps to borrowers with CIBIL scores of 750–800. The effective interest rate became 8.60% instead of 9.15%. Some banks also offer a concession on education loan interest rates to the wards of bank personnel.

Income Tax Benefits on Education Loan Interest Rates

Did you know that borrowers can claim income tax rebates on education loans. It means that the interest paid on the education loan can be claimed for deductions. Mentioned below are some of the things that you should keep in mind while applying for a student loan that can help you get a concession in an education loan:

  • If you have a good credit score then you can get a concession on the principal amount. 
  • Under section 80E borrowers are eligible for tax concessions. Borrowers need to provide interest certificates during tax filing to claim for the same. For example- if you have availed education loan from ICICI Bank, an ICICI interest certificate for the financial period can help you claim the benefits of the same. 
  • If you will pay the interest amount during the moratorium period then also you can get a concession on the principal amount. 
  • Central Government schemes like CGFSEL and Dr Ambedkar’s central scheme on education loans can help you get interest subsidy on the education loans.

Also Read: Know about the most inclusive LGBTQ+ scholarships all around the world. Explore various options that can be availed in the US, Australia, New Zealand, the UK and Canada

FAQs

What are Education Loan Interest Rates?

Education Loan Interest Rates are the cost of the loaned amount in terms of %. The % of interest is calculated on the total education loan issued. It can be variable or fixed depending upon the policies of the loan issuer.

Which banks have the lowest education loan interest rates?

Popular banks like IDBI Bank, Bank of India, ICICI Bank, HDFC Bank, Union Bank of India, and SBI provide the lowest education loan interest rates. They offer competitive rates of interest ranging from 8.50% to 11.45% p.a.

What discounts are provided on education loan interest rates?

One of the major discounts provided by most Indian banks is the interest concession of 0.5% to girl students. Popular banks like SBI, Central Bank of India, Indian Overseas Bank, IDBI Bank, Bank of Baroda, and many more follow the same. Some banks also offer a concession on education loan interest rates to the wards of bank personnel.

What education loan interest rate is high for collateral-free loans?

When borrowers take collateral-free education loans, the banks charge higher interest interest as the risks associated with such loans are high.

Can I get a 100% education loan?

Yes, banks do cover 100% education-related expenses. However, there is a certain limit under which banks provide full coverage of expenses. 

Who is eligible for an education loan?

A candidate who has a good academic record and an admission letter from a university is generally eligible for an education loan. For detailed eligibility criteria go through the information above in the blog. 

How can I get an education loan without income proof?

Without any proof of parental income, the most suitable alternative is to have a financial co-applicant. 

What is interest on education loans?

Interest on education loans varies from 4% to 16% depending upon the bank or loan issuer. The interest rate is dependent on various factors such as inflation, credit risk, policies, the period for which the loan is issued, etc.

We hope this blog helped you clear your doubts related to education loan interest rates, factors to consider, eligibility criteria and so much more!

To know more about education loans, the best bank accounts for students, forex and banking experience for global students or international money transfers, reach out to our experts at 1800572126 to help ease your study abroad experience.

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About Prachi Gupta

Prachi is a SEO content writer who have written many well researched blogs in the field of Finance and Education loans. Through her critical thinking and problem solving skills she strives to help students so that they can overcome financial hurdles in their education journey. She comes up with creative answers for students looking for financial aid by fusing her in-depth financial expertise with her compassionate attitude. She is a sought-after expert in the sector due to her dedication to demystifying complicated financial topics. Numerous students have received the advice they require from her articles and thorough guides, enabling them to overcome financial obstacles and realise their educational aspirations.

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