High-quality education comes at a premium. This is true both in India and abroad. Fortunately, most of the Indian banks and other NBFCs offer a student loan with a tenure as high as 15 years. But a question occurs – when does the student loan repayment start? Knowing this information is vital to properly plan expenses and understand the monthly financial strain it will pose in the form of loan repayment EMIs.

Student Loan – A Brief Overview

Here is the key information you need about a student loan and its repayment terms.

• A student loan can cover the tuition cost of the course being pursued. It can also cover associated expenses like boarding, lodging, books, and other miscellaneous charges.
• There is no fixed interest rate on a student loan. Different lenders offer the loan at various rates ranging between 8% p.a. to 15% p.a. The factors affecting the rate include the credit score of the applicant, the institution being applied to and its location, the type, and cost of the course being pursued, etc.
• While seeking a loan up to ₹4 Lakhs, neither any collateral nor a downpayment is needed. Loans above ₹7.5 Lakhs require a guarantor or a collateral and mandate an upfront down payment of 5-15% of the loan amount.
• Most lenders offer a moratorium period of 6 - 12 months after the completion of the course. This period is intended to provide relief to the borrower and give them time to find a job. Once they are employed, the student loan repayment starts and needs to be completed within the stipulated time frame as agreed upon while taking the loan. While some banks give a loan tenure of 5-7 years, others have a higher repayment period of up to 15 years.
• During the duration of the course and moratorium period, simple interest is levied by the lender. Once the student loan repayment starts, the accrued interest is added to the principal amount and the monthly instalment (EMI) is fixed accordingly.

Wrapping It Up

With an abundance of student loan providers, the onus lies on you – the borrower – to carry out thorough due diligence before applying for a loan. Evaluate lenders on the basis of interest rates, repayment options, eligibility criteria, flexibility and convenience of applying, reputation, overhead expenses, and customer service. Naturally, the ideal lender will offer low-interest rates, customisable EMIs, a longer moratorium period, and lower administrative costs and charges. Options of a loan top-up can come in handy while studying abroad and in need of urgent funds. Another useful feature is charge-free prepayment or pre-closure of the loan. This way, you get the option to clear your student loan earlier than expected and save on the interest.

Frequently Asked Questions

1.Can we repay the education loan early?

Yes, most lenders do not levy a pre-closure charge allowing you to repay the student loan before its closure date. However, since this benefit is specific to each lender’s policies, it cannot be generalised. Hence, it is recommended you consult your loan advisor or relationship manager to know if any charges are applicable for prepayment, and if yes, then request the breakdown of the costs.

2.How long until student loans are forgiven?

Most lenders expect you to start repaying the loan upon getting a job. They provide a moratorium period of 6 months to 1 year upon the completion of the course. Within this period, it is expected that you will get a job and start paying the loan back over the course of the subsequent 5-7 years (as mentioned in the loan agreement. Leading banks such as the Federal Bank offer a 15-year window to repay the loan.