Top 9 Advantages of Education Loan You Need to Know

✓ Lowest Education Loan Interest Rate 

✓ Tax Benefits- Sec 80E

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With ever-increasing competition and soaring inflation, taking an education loan has become a requirement for most students who aspire to study abroad. 

Earlier, most parents were accustomed to utilizing their savings to finance their child’s education by liquidating assets like Gold, Fixed Deposits, land, etc. Nowadays parents have started accepting this paradigm shift of funding their children's education by taking an education loan.

This is due to the fact that both students and parents are now aware of the numerous advantages that an education loan may provide. They know it is better to opt for an education loan over a personal loan for education. 

You may know a few advantages yourself but this article will cover all the advantages of an education loan that a student can avail of for studying abroad. 

1. Lower Interest rates

When taking personal loans for financing education abroad, interest rates are predominantly higher compared to education loans. The interest rates on study loans are lesser. Also, Government banks provide an additional concession of 0.5% to all female students. 

2. Moratorium holiday-Pay after your course completion

This is one of the significant advantages of education loans. Unlike personal loans where a borrower is expected to start paying the incurred EMIs in the next months, education loan schemes come with a moratorium period.

The moratorium period is the time until which the EMIs don’t start or the student is not required to make any payments to the lender. Generally, the moratorium period includes course duration plus 6 months( can be extended to 12 months) so that the students can concentrate on their studies. 

3. A wide range of expenses covered

Education loan for abroad studies covers almost every necessary expense that a student might need to complete their education. It includes tuition fees, travel (tickets), house rent, university fees, food expenses, living expenses, a laptop, or any other apparatus required for your education.

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4. Education loan interest subsidy

The Government of India has introduced several education loan interest subsidy schemes for the benefit of loan applicants who belong to the financially backward sections of society. The subsidy schemes are given below. 

  • Central Sector Interest Subsidy Scheme
  • The Padho Pardesh Education Loan Interest Subsidy Scheme
  • Dr. Ambedkar Central Sector Scheme of Interest Subsidy

The advantages of these subsidy schemes include the waiver of the education loan interest charged during the moratorium period. However, post the moratorium period, these students are to start the repayment of EMIs by themselves.

5. Tax benefit- Section 80E

In Section 80E of the Income Tax of 1961, the loan applicant or the co-applicant can avail of the education loan income tax exemption. In simple terms, the loan applicant or the co-applicant can proclaim a certain percentage of the interest paid towards their education loan as deductible from the total income.

6 . Tax collection at source (TCS) on foreign remittance

As per TCS on foreign remittance, a person sending money more than 7 lakhs abroad in a financial year, has to pay an extra tax on amounts exceeding 7 lakhs. To provide relief to students who have taken education loans through a financial institution in India i.e banks or NBFCs, the rate of TCS shall only be 0.5% on amounts exceeding Rs 7 lakh. And the best part is the whole amount of TCS can be claimed back. 

7. Build your CIBIL score

CIBIL is the credit information report i.e. summary of your credit history till date. CIBIL score generally ranges between 300-900. A score above 750 is considered a good score. Education loan benefits your CIBIL as the timely repayment of EMIs will build the required score and will help you get a loan easily in the future like a home loan, car loan, etc.

8. No need to liquidate valuable assets

Mostly, parents liquidate valuable assets to bear education expenses which eventually disturbs long-term financial goals like buying land or a flat, children’s marriage, etc. By taking an education loan, banks retain your liquid assets like FDs, insurance, and Government bonds as security and grant you a loan against that security. Therefore, the loan taken for your education would not muddle in between your long-term financial goals. 

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9. Liberating your parents from loan burden

Taking an education loan can liberate parents from all financial burdens as the student is responsible to repay his education loan after the completion of his studies and the moratorium period. 

So, these are a few benefits of an education loan. Borrowing an education loan will help you meet the total costs of studying abroad. 

Student loan benefits a lot as it provides invaluable aid to students to support their higher education. If you are looking for an abroad education loan, apply through WeMakeScholars as our team will explain to you the education loan uses and will guide you through the entire process of student loans.

Why Apply through WeMakeScholars?

Our team has closely helped 25000+ students to process their education loans in a cost-effective way. We value students’ time and efforts because of which we provide you with all the required details and will guide you through the entire process of applying for your study abroad. We connect you with the best education loan lenders across India who can fund your education. Our team shares a special affinity with the education loan lenders because of which it is possible to help our students with the entire loan process with legal formalities done in the stipulated time frame. 


To conclude, students must now be aware of the advantages of education loans and how they can avoid exhausting their savings. However, even at WeMakeScholars our financial experts suggest taking an education loan to fund one’s higher education as there are innumerable uses of education loans. If you find yourself in such a situation where you are hesitating to avail of an education loan, or thinking that it can become a financial liability on your parents, we are just a call away. Connect with our team to get professional advice on education loans.

Education Loan FAQs

  • What makes education loans a better option than other loans for higher studies?

    Unlike other loans, education loans are designed specifically for higher education and offer lower interest rates, flexible repayment options, and longer repayment tenures. Education loans also have tax benefits, and in some cases, do not require collateral or guarantors. When you take a student loan, the lender gives you time (moratorium period) to study well and set your career after which you can start your EMIs. This option is not available for any other loans like personal loans, home loans, etc.

  • Do I need to provide any collateral for availing an education loan?

    Collateral is not always required for education loans in India, but it may be required for higher loan amounts or for certain types of courses or institutions. In some cases, lenders may accept a third-party guarantee or a co-borrower with a strong financial background in lieu of collateral.

  • How does the repayment process for education loans work in India?

    Repayment of education loans typically begins after the completion of the course, The repayment period can range from 5 to 15 years, depending on the lender and the loan amount. Repayments can be made in equated monthly installments (EMIs) or as per the repayment schedule agreed upon between the borrower and the lender.

  • What are the tax benefits of taking an education loan?

    Borrowers can claim a deduction on interest paid on their Education Loan under Section 80E of the Income Tax Act for the interest paid on education loans. This deduction can be claimed for a maximum of 8 years or till the interest is paid, starting from the year in which the repayment of the loan commences.

  • Can I use the funds from my education loan for expenses beyond tuition fees?

    Yes, education loans can cover other expenses related to higher education, such as living expenses, travel expenses, and even the purchase of a laptop or other equipment required for the course.