The Same ₹25 Lakh Can Cost ₹32,000 A Month Or ₹47,000#
Two students borrow ₹25 lakh at the same interest rate for the same ten years. One starts paying ₹32,349 a month. The other starts paying ₹47,715.
Neither bank made a mistake. The difference is that the second student had a five-year course and let interest build up during it, while the first began repaying straight away. It is the single most overlooked fact about education loans: the EMI on your sanction letter is only half the story, because the loan you eventually repay is bigger than the loan you drew.
This post gives you a reckoner you can use in five minutes: monthly instalments for loans from ₹5 lakh to ₹75 lakh, over 5 to 15 years, with two extra columns that adjust for the moratorium. Then it explains what the numbers mean, so you can plan rather than just look up.
Background: What An EMI Is, And Why Moratoriums Bend The Maths#
EMI stands for equated monthly instalment. It is the fixed amount you pay every month so that, by the last instalment, both the principal (the money you borrowed) and the interest have been cleared. Early in the loan, most of each EMI goes towards interest. Later, most goes towards principal.
The standard formula, if you enjoy such things, is:
EMI = P × r × (1 + r)^n ÷ ((1 + r)^n − 1)
where P is the loan amount, r is the monthly interest rate (the yearly rate divided by 12, so 9.5 per cent a year becomes 0.79 per cent a month), and n is the number of months. You will never need to work it out by hand, because every bank and calculator does it for you, but it helps to know that only three things move the answer: how much, how fast and at what rate.
The moratorium is the repayment holiday that education loans allow. It usually covers your course period plus about a year, or six months after you find a job, depending on the lender. The IBA's Model Education Loan Scheme, the template that banks follow, says simple interest is charged during this period and the accrued interest is added to the principal when EMIs begin.
Simple interest means you pay interest only on the amount borrowed, not on interest already accrued. Compound interest means interest is charged on interest as well. The moratorium period uses simple interest, which is kinder, but once the accrued interest is added to your principal and EMIs start, you are paying interest on the larger sum.
Two more points on the assumptions in this chart:
The rate. I used 9.5 per cent a year. SBI's rate card runs from 6.90 to 9.90 per cent depending on the scheme, and the bank's average rate on education loans for April to June 2026 was 9.31 per cent. Other public sector banks are in a similar band, and non-banking lenders are higher. If your rate is lower, your EMI will be a little lower. Rates on public sector education loans are floating, so they can change during the loan.
The moratorium columns. They assume the entire loan was drawn on day one and simple interest at 9.5 per cent built up for three years (a two-year MBA plus a year of grace) or five years (a four-year degree plus a year of grace). That is the worst case. Real loans are drawn in instalments as fees fall due, so the true figure sits a little lower. Your bank's calculation will differ by a few rupees because of day-count conventions.
The Chart: Monthly EMI At 9.5 Per Cent#
Read across the row for your loan amount. The first five columns show EMIs when repayment starts immediately after the loan is drawn. The last two show what the EMI becomes, over a ten-year repayment, if unpaid interest from the moratorium has been added first.
| Loan (₹ lakh) | 5 years | 7 years | 10 years | 12 years | 15 years | 10 years after a 3-year moratorium | 10 years after a 5-year moratorium |
|---|---|---|---|---|---|---|---|
| 5 | ₹10,501 | ₹8,172 | ₹6,470 | ₹5,832 | ₹5,221 | ₹8,314 | ₹9,543 |
| 10 | ₹21,002 | ₹16,344 | ₹12,940 | ₹11,664 | ₹10,442 | ₹16,628 | ₹19,086 |
| 15 | ₹31,503 | ₹24,516 | ₹19,410 | ₹17,496 | ₹15,663 | ₹24,941 | ₹28,629 |
| 20 | ₹42,004 | ₹32,688 | ₹25,880 | ₹23,327 | ₹20,884 | ₹33,255 | ₹38,172 |
| 25 | ₹52,505 | ₹40,860 | ₹32,349 | ₹29,159 | ₹26,106 | ₹41,569 | ₹47,715 |
| 30 | ₹63,006 | ₹49,032 | ₹38,819 | ₹34,991 | ₹31,327 | ₹49,883 | ₹57,258 |
| 40 | ₹84,007 | ₹65,376 | ₹51,759 | ₹46,655 | ₹41,769 | ₹66,510 | ₹76,345 |
| 50 | ₹1,05,009 | ₹81,720 | ₹64,699 | ₹58,319 | ₹52,211 | ₹83,138 | ₹95,431 |
| 60 | ₹1,26,011 | ₹98,064 | ₹77,639 | ₹69,982 | ₹62,653 | ₹99,766 | ₹1,14,517 |
| 75 | ₹1,57,514 | ₹1,22,580 | ₹97,048 | ₹87,478 | ₹78,317 | ₹1,24,707 | ₹1,43,146 |
How to read it. Take a ₹30 lakh loan, common for an MBA or a foreign master's. Ten years of repayment with no moratorium costs ₹38,819 a month. After a three-year moratorium, the same loan and tenure costs ₹49,883. After five years, ₹57,258. Same bank, same rate, same ten years of repayment. The only variable is time spent studying while interest accumulates.
What The Moratorium Really Costs#
Look at the ₹25 lakh row for ten-year repayment. With no moratorium, you would repay about ₹38.8 lakh in total, of which ₹13.8 lakh is interest. With a five-year moratorium and interest left to accumulate, you repay about ₹57.3 lakh, of which about ₹32.3 lakh is interest. The moratorium did not make the loan free. It postponed the bill and enlarged it.
There is a rule of thumb hiding here. At 9.5 per cent, every year of moratorium adds roughly 9.5 per cent to the amount on which you will pay EMIs. Five years adds close to 47.5 per cent, which is why a ₹25 lakh loan behaves like a ₹36.9 lakh loan by the time you start repaying.
The way to shrink this is to service the interest during your course. On ₹25 lakh at 9.5 per cent, simple interest comes to about ₹19,800 a month, which is a lot for a student. But even partial payments help, and many banks offer an interest concession of about 1 per cent on the rate if you keep paying interest during the course. The IBA model scheme includes this concession, and SBI's product summaries mention it too. Ask the branch to write it into your sanction.
A gentler tactic is to borrow in stages. Draw only what each semester needs, and interest accrues only on the amount actually disbursed. In the worst-case column of the chart, the full sum is drawn on day one, so staged drawing beats the numbers shown.
Rate And Tenure: Two Dials You Can Turn#
The rate dial. Take ₹25 lakh over ten years:
- At 7.9 per cent: ₹30,200 a month
- At 8.5 per cent: ₹30,996
- At 9.5 per cent: ₹32,349
- At 11 per cent: ₹34,438
- At 13 per cent: ₹37,328
Each additional percentage point costs roughly ₹1,300 to ₹1,450 a month on a loan this size. That is why comparing offers, and asking about concessions for girl students or for interest paid during the course, is worth the effort. It is also why floating rates deserve a plan. Recalculate at two percentage points above your quote. If that figure feels unmanageable against your expected salary, the loan is bigger than your position can bear.
The tenure dial. A longer tenure lowers the EMI and raises the total cost. On ₹25 lakh at 9.5 per cent:
- Five years: EMI ₹52,505, total interest about ₹6.5 lakh
- Fifteen years: EMI ₹26,106, total interest about ₹22.0 lakh
Stretching from five to fifteen years halves the monthly burden but more than triples the interest. Public sector banks allow up to 15 years of repayment after the moratorium, and it is tempting to take all of it. The smarter route is to choose the longest tenure your first salary can comfortably handle, then prepay when you can.
Sizing A Loan Against A First Salary#
A common planning rule, used by financial planners rather than laid down by any regulator, is that fixed loan repayments should not exceed about 30 to 40 per cent of your take-home pay. Check the chart against your likely starting salary.
Suppose you expect ₹60,000 a month in hand. A ₹25 lakh loan repaid over ten years after a five-year moratorium needs ₹47,715 a month, which is nearly 80 per cent of that pay. The same loan over 15 years after a three-year moratorium would be lower, but still heavy. Either the loan should be smaller, the interest should be paid during the course, or the salary assumption is optimistic. It is better to discover this now than after you sign.
Two practical checks:
- Use take-home, not CTC. Cost to company is a pre-tax figure and often includes variable pay. Your EMI is paid from what actually lands in the account.
- Add life costs. Rent, transport and family commitments sit on top of the EMI.
Prepaying, Tax And The Small Print#
Prepayment. Education loans generally allow you to pay extra or close early without a penalty. Canara Bank's Vidya Turant and SBI's PM-Vidyalaxmi page both state zero prepayment charges. Lump sums, such as a bonus, go straight against the principal. Ask whether prepayment shortens the tenure or lowers the EMI. Shortening the tenure saves more interest.
Tax. Interest paid on an education loan has long been deductible for up to eight years with no upper cap, under Section 80E of the old Income Tax Act. Sources report that the same benefit now sits under Section 129 of the Income-tax Act, 2025. It has historically been available only under the old tax regime, so confirm with a tax adviser which regime you will use before counting on it.
Read the letter. Look for the processing fee, insurance premium if bundled, the benchmark and spread that set your floating rate, and how the interest during the moratorium is treated.
Frequently Asked Questions#
How is an education loan EMI calculated?
It uses the loan amount, the monthly interest rate and the number of months of repayment, through a standard formula that splits each payment between interest and principal. Any bank or online education loan EMI calculator gives the same result for the same inputs, give or take a few rupees.
Do I pay EMI during the course?
Usually not. Banks offer a moratorium covering the course period plus roughly a year, or six months after a job. Simple interest still accrues, and you can either pay it as you go or let it be added to the loan when repayment begins.
What is the EMI on a ₹20 lakh education loan?
At 9.5 per cent over ten years, about ₹25,880 a month with no moratorium. After a five-year moratorium with interest left to accumulate, it rises to about ₹38,172. The figures shift with your actual rate and disbursement pattern.
Should I choose a longer tenure to keep EMIs low?
Only up to the point your budget requires. A longer tenure lowers the monthly payment but increases the total interest, sometimes dramatically. Choose the shortest tenure you can manage, and use prepayments to shorten it further when you can.
Does the interest rate change during my loan?
For most public sector education loans, yes. Rates are floating and linked to a benchmark such as the repo rate. When the benchmark changes, your EMI or your tenure will adjust. Test your budget at a rate two points higher than the quote.
Is there a penalty for repaying an education loan early?
Generally not. Several public sector schemes state zero prepayment charges, but check your sanction letter, especially with non-banking lenders, before assuming.
Can I get a tax benefit on education loan interest?
The interest has long been deductible for up to eight years under Section 80E, now reported as Section 129 of the Income-tax Act, 2025. It has historically applied only under the old tax regime, so confirm your position with a tax professional.
Calculations use the standard EMI formula at 9.5 per cent a year with monthly compounding, checked in a spreadsheet on 26 September 2026. Moratorium columns assume full disbursal on day one and simple interest capitalised at the end of the moratorium, following the IBA Model Education Loan Scheme. Rate context comes from SBI's rate card effective 9 June 2026. Your lender's own schedule is the final word.
