How to reduce student loan debt

✓ Interest Rate for Education Loan

✓ Benefits of Education Loan Transfer

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The rate of interest has to be the most talked-about factor by students and parents when opting for an abroad education loan. Education loans can be a big help to students aspiring to study abroad but a slightly higher rate of interest of just even 0.5% can put students in a predicament for years to follow after their graduation or masters. Ideally, a student should enjoy their campus life instead of worrying about education loan repayment but due to the unfriendly repayment policies of some lenders, students remain under stress more than ever. 

If you land on this page, you must've probably taken a student loan at a higher rate of interest and are now looking for ways to reduce student loan debt. So don't worry, in this article, we'll discuss just that for both scenarios, either you're planning to take an education loan or you have already opted for one and are now abroad.

How does the rate of interest on education loans work?

Before we proceed with the ways you can decrease student loan debt off your shoulders, it is important to understand how the rate of interest on education loans works.

The misconception around the rate of interest is that many students and parents think the interest is charged on the entire sanctioned loan amount which is not true. The interest is only charged on the amount which students disburse from the bank. For eg. If you got 40 lakhs sanctioned from the bank but you disburse only 25 lakhs, then you are liable to pay interest on just 25 lakhs that you withdrew from the bank, not on the entire 40 lakhs.

Opting for an education loan

You may know that there are two types of education loans you can opt for i.e secured education loans and unsecured education loans.

Any student's first option should be a secured loan from public banks because, from public banks, you can get up to 1.5 crores depending upon the value of your pledged collateral security and your total loan requirement, at a rate of interest between 8-9% whereas private lenders rate of interest is 10% and above

Still, if you can't decide where to start, you can reach out to WeMakeScholars an organization funded and supported by the Ministry of IT, Government of India, and as this initiative comes under the Digital India Campaign, we do not charge any service charges, hence it's free of cost. We offer unbiased education loan support to students aspiring to study abroad.

A world of opportunities awaits! Wemakescholars is here to help you get the education you deserve


Scholarships can be another great way to fund your education abroad, though scholarships are  mostly partially funded still it helps reduce student loan debt in the future. You can apply for a scholarship both before and after you go abroad. 

For a scholarship, you need to apply almost a year before your intake season because for most of the scholarships the deadline for accepting applications ends almost a year before the course starts.

Some universities may have scholarship opportunities that may cover nearly all of your tuition. So once abroad, you can also search for scholarships. Talk to your teachers/professors, your academic advisor, and the financial aid office. Each of these people may know of different scholarship opportunities that you may be eligible for.

Part-Time Jobs

When you work, you reduce the amount you need to borrow from your sanctioned loan amount. A part-time job can help cut back on the amount you need to borrow for your living expenses. You can also use the money that you make and save it to cover the cost of your education fee. You can start paying back your student loan earlier and decrease student loan debt henceforth. Part-time jobs not just reduce student loan payments but help you develop stronger language skills and make new friends.

Aim to pay more than your EMI

Strategizing on how much to pay during your repayment plays a very crucial role. We advise students to pay more than their EMI installments each month to cut down on their loan tenure and loan amount significantly. Paying even Rs 2,000 extra each month will relieve the outstanding amount by Rs 24,000 a year. 

But it is also advised to check with the respective lending banks regarding this as a few banks levy prepayment charges on the extra amount paid on the EMIs.

Take advantage of tax deductions

Students can avail of tax benefits like Section 80E of the Income Tax Act of 1961 which states that a certain percentage of the interest paid towards your education loan can be declared by the loan applicant or the co-applicant as non-deductible. 

Students can utilize this scheme to the best of themselves and gain deeper insights into the subject. To know more, read this article: Education loan income tax exemption: Section 80 E (A complete guide)

Unlock your potential with WMS - we'll help you navigate the complicated world of education loans with ease

Pay interest during the moratorium period

While you are not required to pay incurred interest to government banks during a moratorium period but by paying off your incurred interest every month you can decrease student loan debt when the EMIs start.

Whereas private lenders ask you to pay either partial interest or full interest during a moratorium period. When you pay partial interest the remaining interest accumulates with the principal amount, so by paying full interest you can somewhat reduce student loan debt.

But still, the rate of interest offered by private lenders is higher than that offered by government banks. Here’s what you can do for student loan interest reduction.

Education loan transfer/takeover or refinancing

Education loan transfer is a process of transferring debt from one bank to another with a better repayment policy and for a lower rate of interest. It can greatly help with student loan interest reduction.

Education loan transfer can be done only when the repayment of your loan from an old bank has started in the form of EMI which means you can no longer disburse any amount from your old bank. 

Many a time due to the time limitations or unavailability of mandatory documents of their collateral at the moment, students opt for an unsecured education loan from a private bank or NBFCs. It is during their repayment period that students realize their loan is very expensive. Then to reduce student loan debt they head to government banks.

And since Government banks can only give secured loans above 7.5 lakhs, students are required to bring collateral in order to transfer their education loan from private lenders to government banks.

Benefits of transferring Education loan from unsecured to secured or from private lender to government bank

  • The difference between the rate of interest of private banks and government banks is almost 2-3%. And a lower rate of interest ensures reduced student loan payments for students.
  • Government banks are more relaxed when it comes to the repayment period. Even if a student for some reason misses 2-3 months EMIs, government banks don't bother much.

We have explained this topic in detail on our YouTube channel, in the 5th episode of Loanflix- Education Loan Transfer for a better rate of interest. Make sure to follow Loanflix to update yourself on education loans as it covers all current education loan policies.

As there are so many public and private lenders present in the market with their education loan products to offer, the difficulty isn’t in finding one, it’s in choosing the right one with the lowest rate of interest possible based on your profile. It can be overwhelming for students alone to go through the entire education loan transfer process from abroad. But you can take help from the WeMakeScholars.

Why process through WeMakeScholars?

Our team has closely helped 10,000+ 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 education loan process. 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 for us to help our students with their entire loan process with legal formalities done within the stipulated time frame.

Education Loan FAQs

  • How can I find scholarships to help reduce my student loan debt?

    WeMakeScholars have designed an elaborative, easy-to-use, and simple education loan portal that can help you search for scholarships, including scholarship search engines and databases. You can also check with your school's financial aid office or any professional organisations in your field of study. Be sure to read the eligibility criteria carefully and submit your applications by the deadline.

  • Can working part-time while in school help reduce my student loan debt?

    Yes, working part-time can help you earn extra money to put towards your student loan payments. However, it's important to balance your work and school responsibilities so that you can still focus on your studies and maintain good grades. Look for flexible jobs that will allow you to balance your work and school commitments.

  • Is paying more than the minimum monthly payment on my student loans worth it?

    Yes, paying more than the minimum monthly payment can help you pay off your loans faster and reduce the overall amount of interest you pay. However, most of the Indian lenders have changed their policy and now they don't charge any penalties or fees for prepayment of education loans.

  • What tax advantages are there for paying off student loan debt?

    In India, Section 80E of the Income Tax Act provides a tax deduction on the interest paid on education loans for up to 8 years or till the interest is paid. You can claim a deduction of interest paid on the education loan amount for your higher education.

  • How can I determine if refinancing or transferring my student loans is the right move for me?

    You should consider refinancing or transferring your loans if you can get a lower interest rate, which could help you save money in the long run. However, be sure to research your options carefully and compare interest rates and terms from different lenders. Better to contact with WeMakeScholars Financial Officers, they will provide you the necessary information regarding your education loan transfer and its process.