Public sector banks are materially cheaper than NBFCs on education loans, and for study in India they should be the first call — but they are slower and stricter on collateral, which is why families under an admission deadline end up at an NBFC paying several points more. Start the bank process before the offer letter arrives, not after. Lender by lender, the spread is on education loan interest rates.
| Education loan rates today | 8 – 15 % p.a. |
|---|---|
| What it means | PSU banks at the lower end; NBFCs and overseas-focused lenders higher. |
as of 2026-08-15 · Lender rate cards · reported
What to know
Compare on total cost across the full life of the loan, including the moratorium. Interest accrues during the study period whether or not you pay it, and a lower rate with a longer moratorium can cost more overall than a slightly higher rate where you service interest from the start. Where the family can afford it, paying the interest during study is the single most effective saving available on this product. Put the sanctioned amount and the tenure through the EMI calculator to see what servicing it during the moratorium is worth in rupees.
Section 80E allows a deduction for the entire interest paid, with no cap, for up to eight years — but only under the old tax regime. For a large overseas loan that is a meaningful benefit, and it is one of the few remaining reasons a young earner might rationally stay on the old regime. Run both regimes before assuming — the Section 80E tax benefit is worked through separately.
Frequently asked questions
Which bank is best for an education loan?
For study in India, public sector banks are generally cheapest, particularly under the schemes routed through the Vidya Lakshmi portal. For overseas study at large ticket sizes, specialist NBFCs are faster and more flexible on collateral, and price accordingly; education loans for studying abroad covers that route, and Vidya Lakshmi and the government schemes covers the domestic one.
Do I need collateral for an education loan?
Loans up to ₹7.5 lakh can be covered under the Credit Guarantee Fund Scheme for Education Loans without collateral, subject to the scheme terms. Above that, banks typically require security, while some NBFCs lend unsecured at a higher rate against a co-applicant’s income — see collateral-free education loans.
When does repayment start on an education loan?
After the moratorium, which normally covers the course period plus six to twelve months. Interest accrues during that period regardless — servicing it while studying materially reduces the total repaid.
Sources
- Ministry of Education / NSDL — Vidya Lakshmi — central education loan portal (primary source)
- Income Tax Department, Government of India — Section 80E — deduction for interest on education loan (primary source)
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