Guidance
Education Loans
Education loan schemes, interest rates, lender comparisons, and how to actually get approved.
Education loans in India: what actually happens when you apply
An education loan is debt, structured specifically for study costs, usually with a moratorium (no repayment) until course completion plus a grace period. Getting the terms right matters more than getting a loan — the difference between a well-structured loan and a bad one is often lakhs of rupees in extra interest over the repayment period.
Last verified: 1 September 2026. Interest rates change with RBI's repo rate and each bank's internal policy — always confirm the current rate directly with the lender before signing.
Who lends, and how they differ
| Lender type | Examples | Typical strength |
|---|---|---|
| Public sector banks | SBI, Bank of Baroda, Punjab National Bank, Union Bank | Lower interest rates, Credit Guarantee cover for loans without collateral up to a defined limit, slower processing |
| Private banks | Axis Bank, ICICI Bank | Faster processing, sometimes higher rates than PSU banks |
| Dedicated education-loan NBFCs | HDFC Credila, Avanse, Auxilo, InCred | Fastest processing, higher approval rates for study-abroad and niche courses, generally higher interest than PSU banks |
| Abroad-focused fintech lenders | Leap Finance, Prodigy Finance, MPower Financing | No India-based collateral or co-signer needed for study abroad in some cases, higher rates, smaller loan sizes typically |
Collateral: what "collateral-free" actually means
Loans up to a defined threshold (currently ₹7.5 lakh under the Credit Guarantee Fund Scheme for Education Loans, CGFSEL, at participating banks) can be sanctioned without collateral or a third-party guarantee, backed instead by a government credit guarantee. Above that threshold, most banks require either:
- Collateral (property, fixed deposit, or other approved security), or
- A creditworthy co-applicant/guarantor, usually a parent, with sufficient income and credit history
NBFCs and fintech lenders sometimes waive collateral above the PSU threshold in exchange for a higher interest rate — read the trade-off carefully rather than assuming "collateral-free" is automatically the better deal.
The PM Vidyalaxmi scheme
Announced to widen access to education loans, PM Vidyalaxmi routes eligible students at listed quality institutions (a defined list of top-ranked government and private institutions) toward collateral-free loans up to ₹7.5 lakh with interest subvention for lower-income households, applied for through the Vidya Lakshmi portal. See our full PM Vidyalaxmi explainer for eligibility, the institution list, and how interest subvention is calculated.
Section 80E: the tax benefit most borrowers miss
Interest paid on an education loan (not the principal) is fully deductible from taxable income under Section 80E, for up to 8 years from when repayment starts — with no upper limit on the deduction amount, unlike most other tax sections. This applies to loans taken for the borrower, spouse, children, or a student for whom the taxpayer is a legal guardian. See our Section 80E walkthrough with worked examples.
Documents you'll need
- Admission letter/offer letter from the institution
- Fee structure and cost estimate (tuition, hostel, and for study abroad, visa/travel estimates)
- KYC documents for the student and co-applicant
- Income proof and last 2-3 years' income tax returns for the co-applicant
- Academic records (marksheets from the qualifying exam onward)
- Collateral documents, if applicable
Tools
Related reading
- PM Vidyalaxmi scheme explained
- Section 80E tax deduction, with examples
- Education loan for MBBS: government, private, and abroad
- Education loans for studying abroad
- If you're deciding between an Indian college and studying abroad, see College Costs and Study Abroad Costs
More on education loans
Education Loan for MBBS - Government, Private, and Abroad
How education loans differ for government MBBS, private MBBS, and MBBS abroad, and what lenders actually look for at each cost tier.
PM Vidyalaxmi Scheme Explained - Eligibility, Institutions, and How to Apply
How the PM Vidyalaxmi education loan scheme works, which institutions qualify, interest subvention rules, and the application process via Vidya Lakshmi.
Section 80E Education Loan Tax Deduction - How It Works, With Examples
How the Section 80E tax deduction on education loan interest works in India, who can claim it, and worked examples of the actual tax saving.
Vidya Lakshmi Portal - Step-by-Step Application Guide and Common Errors
How to register and apply for an education loan on the Vidya Lakshmi portal, and how to fix the most common application problems.