What an education loan really costs
Ordinary EMI calculators assume you start repaying the month you borrow. On an education loan you do not, and the years in between are where most of the cost is hiding. This one counts them.
Paying the interest while you study saves you ₹40.53 lakh over the life of the loan, and brings your EMI down from ₹1,11,590 to ₹66,324.
| Pay interest while studying | Let it build up | |
|---|---|---|
| Your EMI once repayment starts | ₹66,324 | ₹1,11,590 |
| Paid while you are still studyingOver the course and the grace period after it | ₹40,95,000 | Nothing |
| What you owe when EMIs begin | ₹60,00,000 | ₹1,00,95,000 |
| Total interest | ₹1.00 crore | ₹1.41 crore |
| Total you repay | ₹1.60 crore | ₹2.01 crore |
Why your EMI is not the whole story
An education loan gives you a moratorium: you do not pay an EMI while you are studying, or during the grace period the bank adds after your course finishes. What people miss is that the loan is still charging interest for every one of those months.
You can either pay that interest as it comes, which is a smaller amount every month while you are a student, or leave it. If you leave it, the bank adds it to what you owe, and from then on you are paying interest on the interest. On a loan the size of a medical degree, that single decision moves the total by more than most families expect.
Interest builds up at a simple rate through the moratorium and is added to the principal at the end of it, which is how the model scheme Indian banks lend under is written. Some lenders compound it instead, so treat the figures here as the better end of the range and ask your bank which one they do.
Two things worth asking your bank
Whether they will let you pay interest while you study. Most banks allow it and some quietly reduce your rate if you do. The saving above assumes you can.
What you can claim back. Under Section 80E the interest on an education loan is deductible, with no upper limit, for up to eight years from when repayment starts. It is one of the few deductions with no cap on it, and plenty of families never claim it. Confirm the details for your own situation with your bank or an accountant.
Working out what you can afford
The number this page gives you is the arithmetic. Which college is worth borrowing that much for is the harder question, and it is the one we sit down with families over.