Vishal Ma 
Understanding student loan interest rates helps students plan education expenses wisely.
Student Loan Interest Rates: Complete Guide for Students
Higher education has become increasingly expensive across India and abroad. To manage these costs, student loans (education loans) play a crucial role. However, one of the most important factors to consider before taking a loan is the student loan interest rate.
This article explains what student loan interest rates are, how they work, and provides a comparative table of interest rates offered by different lenders in India.
What Is a Student Loan Interest Rate?
A student loan interest rate is the percentage charged by a bank or financial institution on the loan amount borrowed for education purposes. This interest is calculated annually and added to the total repayment amount.
In India, student loan interest rates typically range between 8% and 13% per annum, depending on the lender and borrower profile.
Student Loan Interest Rates in India (Comparison Table)
| Lender Type | Bank / Institution | Interest Rate (Approx.) | Interest Type |
|---|---|---|---|
| Public Sector Bank | State Bank of India (SBI) | 8.15% – 9.65% | Simple Interest |
| Public Sector Bank | Punjab National Bank (PNB) | 8.20% – 10.25% | Simple Interest |
| Public Sector Bank | Bank of India (BOI) | 8.30% – 10.50% | Simple Interest |
| Private Bank | HDFC Bank | 9.50% – 13.00% | Compound Interest |
| Private Bank | ICICI Bank | 10.00% – 13.50% | Compound Interest |
| NBFC | Axis Finance | 11.00% – 15.00% | Compound Interest |
| NBFC / Fintech | Avanse / InCred | 11.50% – 16.00% | Compound Interest |
Note: Interest rates may vary based on course, university, loan amount, collateral, and student profile.
Factors Affecting Student Loan Interest Rates
1. Course and Institution
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Top institutions (IITs, IIMs, AIIMS, Ivy League universities) usually get lower interest rates.
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Private or lesser-known colleges may attract higher rates.
2. Loan Amount
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Loans up to ₹4 lakh generally have lower interest.
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Loans above ₹7.5 lakh often require collateral and may have higher rates.
3. Collateral Security
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Secured loans (property, FD, insurance) offer lower interest.
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Unsecured loans have higher interest rates.
4. Academic Performance
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Strong academic background and employability reduce lender risk and interest rate.
Simple Interest vs Compound Interest
| Type | Explanation |
|---|---|
| Simple Interest | Interest calculated only on principal amount (mostly in public banks) |
| Compound Interest | Interest calculated on principal + accumulated interest (common in NBFCs) |
👉 Public banks are generally more affordable due to simple interest during the study period.
Moratorium Period and Interest
The moratorium period is the time during which students are not required to pay EMIs.
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Usually includes course duration + 6–12 months
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Interest continues to accrue during this period
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Paying interest early can significantly reduce total repayment
Tax Benefits on Student Loan Interest
Under Section 80E of the Income Tax Act (India):
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Full tax deduction on interest paid
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Available for up to 8 years
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Applicable only to education loans
Is Taking a Student Loan a Good Decision?
A student loan is a smart financial choice if:
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The course has strong career prospects
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The institution is recognized
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Expected income can comfortably manage EMIs
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