Best Student Loans In India

Did you know? 

The education loan market in India has seen significant growth over the past decade. As of 2024, the market is valued at approximately INR 1.2 lakh crore (USD 16 billion). The Compound Annual Growth Rate (CAGR) for education loans in India has been around 12% over the last five years. 

Interesting, right? But, why? 

In India, education isn’t just a pathway to personal growth—it’s a ticket to success and a better future. With prestigious institutions and competitive programs, the demand for quality education is sky-high. However, this excellence comes at a price. Higher education costs have been steadily rising at 10% or more, making it challenging for many families to afford without financial assistance. That’s where student loans come into play, bridging the gap between your dreams and reality. 

This blog aims to guide you in selecting the best student loan options available in India. Whether you’re aiming for an engineering degree, a medical seat, or an international MBA, This page will provide you with insights and tips to ensure you make an informed choice. Let’s dive in and find the perfect loan to fuel your educational journey! 

What is a student loan? 

A student loan is financial aid specifically for education expenses. It covers tuition, books, and living costs. In India, banks and financial institutions offer these loans. The interest rates for student loans in India range from 8% to 15%. As of 2023, over 3.5 lakh students avail student loans annually. 

The loan amount depends on the course and institution. For studies in India, the maximum loan amount is ₹10-15 lakhs. For international studies, it can go up to ₹80 lakhs or more. 

Repayment usually starts after the course completion. There is a moratorium period, typically 6 months to a year. During this period, repayment is not required. Student loans can be secured or unsecured. Secured loans need collateral, while unsecured loans do not. 

Student loans are a crucial tool to make higher education accessible. They ensure that financial constraints don’t hinder your educational goals. 

Types of student loans available in India 

Secured vs. Unsecured Loans 

Secured loans require collateral, such as property or fixed deposits. They usually offer lower interest rates and higher loan amounts. Unsecured loans don’t need collateral but may have higher interest rates and lower loan limits. Both types have their advantages, and the choice depends on your financial situation and risk tolerance. 

Feature Secured Loans Unsecured Loans 
Collateral Required Not required 
Interest Rates Lower (6%-12%) Higher (10%-15%) 
Eligibility Criteria Stricter due to collateral requirement More lenient 
Approval Time Longer due to collateral verification Quicker 
Secured vs. Unsecured Loans 

Government vs. Private Loans 

Government loans are offered by public sector banks and come with subsidized interest rates. They often have favorable terms, especially for economically weaker sections. Private loans are provided by private banks and financial institutions. They offer more flexibility but may have higher interest rates. The choice between the two depends on your eligibility and specific needs. 

Government vs. Private Loans 
Student loan

Key student loan features 

Loan Amount and Coverage 

Student loans in India can range from ₹1 lakh to ₹1 Cr or above, depending on the course and institution. Coverage may include tuition fees, accommodation, living expenses, books, travel cost, and supplies. 

  • Tuition Fees: The primary component of student loans is tuition fees, which can be up to 100% of the total course cost. This ensures you can focus on your studies without financial worry. 
  • Accommodation and Living Expenses: Loans also cover accommodation costs, whether on-campus or off-campus. Living expenses like food, travel, and daily necessities are included, often up to ₹1-2 lakhs per year. 
  • Books and Supplies: Books, study materials, and essential supplies are covered under student loans. This can amount to ₹50,000 to ₹1 lakh per year, depending on the course requirements.  . 

Interest rates

Interest rates for student loans in India range from 8% to 15%. The rate depends on the lender, loan type, and borrower’s credit profile

Fixed vs. Variable Rates 

Fixed rates remain constant throughout the loan tenure, providing predictability in repayments. Variable rates fluctuate with market conditions, which can be beneficial or risky depending on economic factors. 

FeatureFixed Interest Rate Variable Interest Rate
Interest Rate StabilityInterest rate remains constant throughout the loan termInterest rate fluctuates based on an underlying benchmark or index
Loan PaymentsPredictable and consistentVary based on interest rate changes
FlexibilityLess flexible if borrower wants to change terms or exit the loan earlyMore flexible, but with greater risk of rate changes
Initial RateGenerally higher than variable ratesOften lower than fixed rates, especially for introductory periods
RiskLower risk due to predictable paymentsHigher risk due to potential rate changes
Loan TermsAvailable for various terms, from 6 months to 10 yearsTypically available for shorter terms, such as 5/1 or 7/1 ARMs
ForecastingEasier to forecast cash flow due to predictable paymentsMore challenging to forecast cash flow due to changing rates
Attractive FeaturesPredictable payments, flexibility in loan termsAttractive introductory rates, lower initial rates
DisadvantagesHistorically more expensive over the life of the loanGreater risk of rate changes, potentially higher total cost

Subsidized vs. Unsubsidized Interest 

Subsidized loans have the government paying the interest during the study period. Unsubsidized loans require the borrower to pay all the interest, even during the study period. 

FeatureSubsidized LoansUnsubsidized Loans
Interest PaymentGovernment pays interest while borrower is in school, during the 6-month grace period, and during deferment periodsBorrower is responsible for paying interest from the time the loan is disbursed
EligibilityAvailable to undergraduate students who demonstrate financial needAvailable to both undergraduate and graduate students, regardless of financial need
Interest RateFixed rate of 4.99% for undergraduate students, disbursed between July 1, 2022 and June 30, 2023Fixed rate of 4.99% for undergraduate students, disbursed between July 1, 2022 and June 30, 2023; 6.54% for graduate students
RiskLower risk due to government-paid interestHigher risk due to borrower responsibility for interest payments
ForecastingEasier to forecast cash flow due to predictable interest paymentsMore challenging to forecast cash flow due to changing interest rates
FlexibilityLess flexible if borrower wants to change terms or exit the loan earlyMore flexible, but with greater risk of rate changes

Repayment Terms and Options 

Repayment typically starts after the course completion, with a moratorium period of 6-12 months. Options include standard EMIs, step-up EMIs, or flexible repayment schedules based on the borrower’s income. 

Grace Period 

Grace period

The grace period is a post-study duration during which repayment is not required, usually 6-12 months. This allows graduates time to secure a job before starting repayments. 

Loan Tenure 

Loan tenure can vary from 5 to 15 years, depending on the loan amount and repayment capacity. Longer tenures reduce EMI amounts but increase total interest paid. 

EMI (Equated Monthly Installment) Options

EMI options include standard fixed EMIs, where the amount remains constant. Some lenders offer step-up EMIs, which start low and increase over time, matching the borrower’s growing income. 

Eligibility criteria for student loans in India

Eligibility criteria for student loans in India typically include factors such as admission to recognized courses, Indian citizenship, and specific age limits. Financial institutions assess applicants based on academic performance, course accreditation, and co-applicant guarantees.

Basic eligibility requirements for students

Students must be Indian citizens to qualify for student loans in India. Additionally, they should have a strong academic record and a clear career plan. 

Age Limits: 

Most lenders require students to be between 18 and 35 years old. This range ensures the borrower is mature enough to manage the loan and its repayment. 

Academic Qualifications: 

Applicants must have completed their higher secondary education (12th grade). They should also have a consistent academic record with no gaps in their education. 

Admission to Recognized Institutions:

Students must have secured admission to recognized institutions in India or abroad. This includes universities, colleges, and professional courses approved by the relevant authorities. 

Co-applicant Requirements: 

A co-applicant, usually a parent or guardian, is mandatory for most student loans. The co-applicant shares responsibility for loan repayment, adding an additional layer of security for the lender. 

Role of Parents/Guardians: 

 Parents or guardians often act as co-applicants, providing financial backing. Their involvement is crucial, especially for securing higher loan amounts or better terms. 

Financial Stability and Credit History of Co-applicant: 

The co-applicant’s financial stability and credit history significantly impact loan approval. A good credit score (typically 700 or above) and stable income increase the chances of loan approval and better interest rates. 

Comparing the best banks for student loans in India 

Here’s a comparison of student loans offered by some of the top banks in India. 

Bank/Institution Interest Rate* Loan Amount Repayment Tenure Processing Fee Collateral Requirement Moratorium Period 
State Bank of India (SBI) 7.50% – 10.75% Up to ₹1.5 crore Up to 15 years Up to ₹10,000 Required for loans above ₹7.5 lakh Course duration + 1 year 
HDFC Bank 9.55% – 13.25% Up to ₹40 lakh (can be higher for premier institutes) Up to 15 years Up to 1% of loan amount Required for loans above ₹7.5 lakh Course duration + 1 year 
ICICI Bank 10.25% – 11.75% Up to ₹1 crore Up to 10 years Up to 1% of loan amount Required for loans above ₹7.5 lakh Course duration + 6 months 
Axis Bank 10.50% – 13.00% Up to ₹75 lakh Up to 15 years Up to 1.5% of loan amount Required for loans above ₹4 lakh Course duration + 1 year 
Punjab National Bank (PNB) 8.75% – 10.50% Up to ₹1 crore Up to 15 years Up to 1% of loan amount Required for loans above ₹7.5 lakh Course duration + 1 year 
Bank of Baroda 7.85% – 10.25% Up to ₹1 crore Up to 15 years Nil for loans up to ₹4 lakh, otherwise up to 1% Required for loans above ₹7.5 lakh Course duration + 1 year 
Canara Bank 8.75% – 10.50% Up to ₹40 lakh (can be higher for premier institutes) Up to 15 years Up to 1% of loan amount Required for loans above ₹7.5 lakh Course duration + 1 year 
Avanse Financial Services 11.75% – 16.00% Up to ₹1 crore Up to 12 years Up to 1% of loan amount Required based on loan amount and institute Course duration + 6 months 
Credila (HDFC Credila Financial Services) 11.85% – 13.75% Up to ₹1 crore Up to 10 years Up to 1.5% of loan amount Required based on loan amount and institute Course duration + 1 year 
InCred Education Loan 11.75% – 14.00% Up to ₹1 crore Up to 15 years Up to 1% of loan amount Required based on loan amount and institute Course duration + 6 months 

*The interest rates are subject to change and may vary based on the profile of the borrower, co-applicant, and the institution/course of study. 

How to apply for an education loan in India 

Here are simple steps you can use to apply for a student loan – 

  • Research and Compare Loan Options: Evaluate various banks and loan schemes for the best interest rates and terms. 
  • Documents Required for Student Loan: Gather necessary documents like admission proof, income proof, identity, and address verification. 
  • Fill Out the Loan Application Form: Complete the application form accurately with all required details. 
  • Submit the Application and Documents to the Bank/ loan provider: Provide the filled form and documents to the chosen bank. 
  • Loan Processing and Approval: The bank reviews the application and verifies the documents. 
  • Disbursement of the Loan Amount: Upon approval, the bank disburses the loan amount directly to the institution or as per agreed terms. 

How to apply for an education loan in India 

Choosing the right student loan can greatly impact your financial well-being. Here are some tips to help you make an informed decision: 

  • Compare Interest Rates and Total Cost: Look beyond just the interest rate; consider the total cost of the loan over its tenure. 
  • Check for Hidden Charges and Fees: Be aware of any processing fees, prepayment penalties, or other hidden charges that may affect the overall cost. 
  • Understand Repayment Terms and Flexibility: Ensure you understand the repayment schedule, EMI amount, and any flexibility in repayment options. 
  • Consider the Reputation and Customer Service of the Lender: Choose a lender with a good reputation for customer service and transparent policies. 
  • Evaluate Additional Benefits: Look for loans that offer additional benefits like interest subsidies for certain categories of students or moratorium periods post-course completion for job search or further studies. These benefits can significantly reduce your financial burden in the long run. 

Benefits of choosing EduFund for your student loan 

Although we’ve talked about how you can choose the best student loan in India, let us give you a shortcut to that – EduFund! 

Here’s what we can offer you! 

Loan Features What EduFund Offers 
Competitive Interest Rates EduFund offers competitive interest rates starting from 5.5%. 
No Processing Fees No processing fees, ensuring you save on upfront costs. 
Flexible Repayment Options Customizable repayment plans based on your financial situation. 
Quick and Easy Application Process Streamlined application process for faster loan approval. 
Pre-Approved Loan Offers Pre-approved loan offers based on your eligibility. 
Expert Loan Advisors Access to expert loan advisors for guidance and support. 
Online Account Management Convenient online account management for loan tracking. 
Additional Benefits Additional benefits like interest subsidies and tax benefits. 

Choosing the right student loan is pivotal for a successful academic journey. With careful research, comparison, and consideration of factors like interest rates, repayment terms, and lender benefits, you can make an informed decision.