Should I pay interest during the moratorium?

If you (or your family) can afford the interest-only payment each month, paying it during the moratorium can substantially reduce your total lifetime cost — because the principal never grows. Several lenders also offer a 0.5-1 percent rate concession for borrowers who service interest during the moratorium. The trade-off is monthly cash flow during the study years.

Is collateral required for education loans?

Most lenders waive collateral for loans up to ₹7.5 lakh under the central-government Credit Guarantee Fund Scheme for Education Loans (CGFSEL). Loans between ₹7.5 lakh and ₹4 crore typically require either collateral (property, fixed deposit, LIC policy) or a creditworthy co-applicant, depending on the lender and the course. Loans for premier institutes (IIM, IIT, ISB and listed overseas universities) are often sanctioned with relaxed collateral norms.

Can I prepay my education loan without penalty?

Yes. The Reserve Bank of India prohibits prepayment penalties on floating-rate retail loans, and most education loans are floating-rate. Even on fixed-rate education loans, the majority of lenders waive prepayment charges as a goodwill measure. Verify the exact clause in your sanction letter, but in practice prepaying as cash flow allows is a high-leverage way to cut interest cost — because the early years of repayment are interest-heavy.

Education Loan EMI Calculator — Moratorium & 80E (India)

Education Loan EMI

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Education Loan EMI Calculator

Calculate monthly EMI for education loans with moratorium period (interest-accrual during study), repayment phase, and Section 80E tax-deduction estimate. Handles both simple-interest and compounded-interest moratorium policies.

Reviewed by the CalculatorKosh Editorial TeamUpdated June 2026Free · No sign-up

Loan Details

Loan Amount

₹

₹50 K₹5 Cr

₹10.00 Lakh

Interest Rate (per annum)

7%16%

Moratorium Period

months

0 mo72 mo

Course duration + 6-12 month grace. 0 = repayment starts immediately.

Repayment Tenure (after moratorium)

years

1 yr15 yrs

Moratorium Policy

Interest during moratorium

Pay interest during moratorium?

Tax Benefit (Section 80E)

Your tax slab

Drag sliders to explore different scenarios

Interest Rate10.5%

7%16%

What-If EMI / month

₹25,713

Monthly EMI (post-moratorium)

Starts after the 60-month moratorium · 84 monthly payments · Total lifetime cost: ₹21,59,852 (₹21.60 Lakh)

60-month moratorium

Principal grows ₹10,00,000 → ₹15,25,000

+ ₹5,25,000 of simple interest accrues before EMIs begin

Section 80E · first 7 years of repayment

₹1,26,970 saved in taxes

Deduct ₹6,34,852 of interest at your 20% slab

Moratorium interest

₹5.3 L

₹5,25,000

Effective principal

₹15.3 L

₹15,25,000

Total lifetime interest

₹11.6 L

₹11,59,852

Total lifetime cost

₹21.6 L

₹21,59,852

Repayment tenure comparison — same principal, rate & moratorium

Longer repayment means a lower EMI but much higher total interest.

Repayment	Monthly EMI	Total Interest	Lifetime Cost
5 yrs	₹32,778	₹9,66,692	₹19,66,692
7 yrs(your choice)	₹25,713	₹11,59,852	₹21,59,852
10 yrs	₹20,578	₹14,69,310	₹24,69,310
15 yrs	₹16,857	₹20,34,320	₹30,34,320

Where your money goes

Principal₹10,00,000

Moratorium Interest₹5,25,000

Repayment Interest₹6,34,852

Drag sliders to explore different scenarios

Interest Rate10.5%

7%16%

What-If EMI / month

₹25,713

How It Works

An education loan EMI works differently from a home or car loan in one critical way — the moratorium. During the moratorium period (your course duration plus 6 to 12 months of grace), you don't pay any EMI, but the lender keeps charging interest on the disbursed amount. That accrued interest is added to the principal at the start of repayment, and your monthly EMI is calculated on this new, larger effective principal.

The Two-Phase Formula

Phase 1 — Moratorium accrual. Most public-sector banks use simple interest: I = P × r × t. Some private NBFCs use monthly compounding: I = P × ((1 + r/12)^m − 1), where m is the moratorium in months. The accrued interest is added to the original principal to give the repayment-phase principal.

Phase 2 — Repayment EMI. The standard reducing- balance annuity formula EMI = P' × r × (1 + r)ⁿ / [(1 + r)ⁿ − 1], applied to the inflated principal P'.

The Pay-During-Moratorium Option

If you can afford the interest-only payment each month during study, the principal never grows and your repayment EMI is on the original loan amount. Several lenders also give a 0.5-1 percent rate concession when you opt in. The difference over a 5-year moratorium on a ₹10 Lakh loan at 10.5% is roughly ₹5.25 Lakh in lifetime cost — well worth it if cash flow permits.

Section 80E — Uncapped Interest Deduction

Under Section 80E of the Income Tax Act, the entire interest portion of your education-loan EMI is deductible from taxable income — with no upper cap. The benefit runs for up to 8 assessment years from the year repayment starts, or until the loan is fully repaid, whichever is earlier. It applies under both old and new tax regimes (FY 2026-27). Only the interest qualifies — principal repayment is not deductible.

Frequently Asked Questions

A moratorium is a grace window during which you don't pay EMIs — typically the duration of your course plus 6 to 12 months after graduation. The lender keeps charging interest on the disbursed principal during this period; the accrued interest is then added to the principal at the start of repayment, and your EMI is calculated on this new, larger amount.

Example: a ₹10 Lakh loan at 10.5% with a 60-month moratorium (4-year course + 12-month grace) under the simple-interest convention accrues ₹5.25 Lakh during the moratorium. Your effective principal at the start of repayment is ₹15.25 Lakh, and the EMI is calculated on that — not on the original ₹10 Lakh.