Planning to Take an Education Loan for Higher Studies? Here’s What to Know About Interest Rates in 2025

The cost of higher education in India has risen sharply over the past few years, making quality learning more expensive than ever. While getting admission to a top university is a proud moment for families, the financial burden of tuition fees, hostel expenses, books, and other essentials can quickly add up. For many middle-class households, an education loan becomes the most practical way to make dreams of higher education a reality.

Rising Education Costs in India

Today, pursuing higher studies in India or abroad can cost anywhere from a few lakh rupees to over ₹1 crore, depending on the institution and course. With inflation affecting all aspects of education—from infrastructure to academic materials—families increasingly rely on banks and financial institutions to manage the growing expenses.

Recognizing this, both public and private sector banks as well as non-banking financial companies (NBFCs) in India offer a wide range of education loan products tailored to students’ needs. These loans cover tuition fees, accommodation, travel, and other study-related costs.

Moratorium Period: Pay After You Study

One of the most attractive features of an education loan is the moratorium period—a grace duration during which students are not required to start repaying the loan immediately. Typically, repayment begins only after the completion of the course or after securing employment. This flexibility ensures that students can focus on their studies without financial stress.

PM Vidyalakshmi Scheme: Support for Deserving Students

To make education more accessible, the Government of India introduced the Prime Minister Vidyalakshmi Scheme (PM Vidyalakshmi). Under this initiative, students who secure admission in any of the country’s 860 top educational institutions (QHEIs) are eligible for collateral-free education loans.

The scheme’s benefits are linked to the applicant’s annual family income, and eligible students may also receive an interest subsidy, reducing the repayment burden. All scheduled commercial banks, regional rural banks (RRBs), and cooperative banks participate in this program, ensuring nationwide coverage.

Tax Benefits on Education Loans

Education loans also offer valuable tax advantages. Under Section 80E of the Income Tax Act, borrowers can claim a tax deduction on the entire interest paid toward the loan. This benefit is available for a maximum period of eight years or until the interest is fully repaid, whichever is earlier. This tax relief provides significant financial relief to both students and their parents.

Compare Interest Rates Before You Apply

Before applying for a loan, it’s essential to compare the interest rates offered by various banks and NBFCs. Even a small difference in rates can make a substantial impact on the total repayment amount. Below are some indicative rates for 2025:

• State Bank of India (SBI): 7.15% – 10.15% per annum

• HDFC Bank: 10.50% per annum

• ICICI Bank: 9.00% – 10.25% per annum

• Punjab National Bank (PNB): 8.55% per annum

• Bank of Baroda (BoB): 7.10% – 9.95% per annum

• Canara Bank: 7.10% – 10.35% per annum

Government banks generally offer lower interest rates compared to private banks, making them a more affordable choice for education financing.

Choosing the Right Loan: Key Considerations

While interest rates are important, there are other factors to keep in mind before finalizing an education loan:

1. Moratorium terms: Check how long the bank allows you to defer repayment.

2. Processing fees and hidden charges: These can vary from bank to bank.

3. Collateral requirements: Some banks may ask for security depending on the loan amount.

4. Repayment tenure: Longer repayment periods may reduce EMI pressure but increase total interest cost.

5. Subsidy eligibility: If you fall under the PM Vidyalakshmi scheme, you might be entitled to interest benefits.

Final Thoughts

In today’s competitive world, higher education has become the key to better opportunities—but it often comes with a heavy price tag. Thankfully, education loans have made it possible for deserving students to pursue their ambitions without financial barriers.

If you’re planning to take an education loan in 2025, carefully compare lenders, understand the repayment terms, and explore government-backed schemes for maximum benefits. A well-chosen loan can ease financial stress and pave the way for a brighter academic and professional future.