Question 1

What is the moratorium period in education loans?

Accepted Answer

The moratorium period is a grace period during which you don't need to start EMI repayment. It typically covers the course duration plus 6-12 months after course completion. During this time, interest continues to accrue but payment is not required, giving students time to secure employment before starting repayments.

Question 2

What are the tax benefits on education loans?

Accepted Answer

Under Section 80E of the Income Tax Act, you can claim 100% deduction on interest paid on education loans for up to 8 years. There is no upper limit on the deduction amount. Only the interest component is deductible, not the principal amount. This applies to loans for self, spouse, or children's higher education.

Question 3

Do I need collateral for an education loan?

Accepted Answer

For loans up to Rs. 7.5 Lakh, most banks don't require collateral. For loans above Rs. 7.5 Lakh, collateral like property, fixed deposits, or third-party guarantee is typically required. Some banks offer higher limits without collateral for premier institutions like IITs, IIMs, or top global universities.

Question 4

What is the typical interest rate for education loans?

Accepted Answer

Education loan interest rates in India range from 8% to 15% per annum. Public sector banks typically offer 8-10%, private banks 9-12%, and NBFCs 11-15%. Rates depend on loan amount, collateral offered, credit score, and the institution you're financing. Premier institutions often qualify for lower rates.

Question 5

Should I pay interest during the moratorium period?

Accepted Answer

If financially possible, paying interest during the moratorium period is highly recommended. This prevents interest capitalization (interest being added to principal), which can reduce your total loan repayment by 20-30%. Even partial payments during this period help significantly in reducing the overall burden.

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