How to Plan Your Student Loan Repayment?

✓ Education Loan Repayment Process

✓ Repayment Duration 12- 15 Years (Excluding Moratorium Period)

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Loan repayment is one of the biggest concerns of most students who contemplate on borrowing an education loan to fund their higher studies abroad. A lot of higher education aspirants in India view an abroad education loan as a major liability. More often than not, a lot of them forget to consider the fact that with a little planning and contemplation, this myth can be debunked very easily. In order to plan your loan repayment process, it is important to understand the education loan repayment policies of lenders in India.

This article will give you a brief layout of the same so that it helps you in planning your education loan repayment process effectively. Embedded below is the 29th episode of Loanflix which will give you a greater insight into the education loan repayment process of Indian lenders.

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What is a Moratorium period in the education loan repayment process?

A moratorium refers to a gap in tenure. So, in terms of education loans, a moratorium period on loan repayment refers to a loan holiday granted to the applicants before their repayment process begins.  Now the major reason why this can be seen as a benefit is that the moratorium period is applicable only in the case of education loans. This provision is not granted for loans of any other nature.

Coming to the topic, a moratorium period generally refers to a certain period in your loan tenure during which you will not be expected to commence your loan repayment. Students can commence their interest payment during this period (this depends on their lender’s policies), however, the EMI payment strictly begins after the moratorium period. Let’s see how public banks and NBFCs implement this moratorium period.

If you are stuck at any stage of your education loan repayment process or are not sure how to proceed with the same, do get in touch with the financial team.

Loan Repayment Process of NBFCs

The biggest plus point of borrowing an education loan from NBFCs is the fact that applicants are not required to pledge collateral security for the same. Most lenders of unsecured education loans offer a moratorium period for the length of the course. However, they still do charge partial or full interest payment from borrowers. The interest payment of unsecured education loans can be done by borrowers partially or fully.

The interest amount can vary between INR 2000 to INR 10,000, depending on the total education loan amount availed by students. The principal amount of unsecured education loans is repaid in the form of EMIs soon after students complete their course period. The final education loan repayment period granted by the lenders of an education loan without collateral can go for up to 10 years. This education loan repayment period also includes the moratorium period. 

Read more about Education Loan Terms: A Glossary of Common Education Loan Terminology

Government Bank Education Loan Repayment Process

The loan repayment process of government banks is, in a way, convenient for students due to their flexible repayment terms. When it comes to the process, there are three important phases that you need to know of. Most government banks grant a payment-free moratorium period. That is, candidates who have borrowed their education loans from government banks, need not begin contributing towards their loan repayment till the end of the moratorium period.

The moratorium period generally consists of the course duration, plus six to twelve months after the course (this clause is dependent on your lending bank’s policies). The interest for this period is calculated on a simple interest basis, by government banks. The EMI payment is expected to begin at the end of this time in the loan tenure. So, in short, the government banks do not ask their loan applicants to begin the repayment process until the moratorium period ends.

Almost all government banks grant an education loan repayment period of 12 years to 15 years from the end of your moratorium period. This tenure starts once your loan repayment holiday gets over. Get in touch with the  WeMakeScholars team at the earliest to know more about how to plan your education loan repayment process.

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Why Apply Through WeMakeScholars

Most students try to repay their education loans as soon as they can. Hence, they opt for smaller loan tenures. At WeMakeScholars, we always advise our students to opt for longer loan tenures. While planning for your education loan repayment, it is extremely necessary to cater to financial contingencies. Students are generally able to repay their education loans as soon as they are employed abroad. However, if this doesn’t happen, then opting for a shorter loan tenure for the student loan repayment process may not work in their favour. Hence, it is always recommended that you opt for a longer repayment term. 

In order to plan your education loan repayment process more effectively, get in touch with WeMakeScholars and let our financial officers help you out regarding the same.

Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 14+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it’s free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, and France among others.

Education Loan FAQs

  • What happens if I miss a student loan payment?

    If you miss a student loan payment, you may face late fees, penalties, and damage to your credit score. So, It's important to contact your lenders immediately to discuss the options available for the repayment of your Loan amount.

  • Are there any tax benefits to paying off student loan interest?

    Yes, If you paid interest on a loan within the financial year, the amount paid can be claimed as a deduction from your taxable income. This deduction has no limit or maximum amount, meaning you can subtract the entire interest amount paid from your taxable income under Section 80E of the Income Tax Act in India. We always suggest students consult with a tax professional to determine their eligibility. and can get more tax benefits.

  • What should I do if I am struggling to make my student loan payments?

    If you are having difficulty making your student loan payments, you can contact with WeMakeScholars directly to discuss the options available through which you can repay your loans. We provide support to our students till their repayment. You may be able to temporarily postpone or reduce your payments through deferment till the time you get your new job.

  • How can I determine my monthly loan payments?

    You can use WeMakeScholars student loan repayment EMI calculator designed especially for monthly loan payments based on factors such as your loan balance, interest rate, repayment plan, and various other factors to estimate your monthly payment.