Hello friends! Imagine your child has secured admission to a prestigious institute like an IIT or IIM, but the worry of fees has plagued the entire family. Sleepless nights, and uncertainty about the future is looming.
But wait! What if I told you there’s an option where you can take a loan without the stress of immediate repayment—just focus on your studies, and pay the EMIs comfortably later?
Yes, I’m talking about the moratorium option for education loans. It not only reduces your financial burden but also gives wings to your educational dreams. Today, we’ll discuss this in detail so you can make the right decision. Let’s get started!
What is a moratorium period, and why is it special in education loans?
First, let’s understand it in simple terms. The moratorium period is a kind of grace period, where both the principal and interest payments on the loan are deferred.
According to government guidelines, this period typically ranges from the full duration of the course plus 6 to 12 months. For example, if you have a 4-year engineering course, the moratorium can last 4 years + 1 year = 5 years. During this period, you have no EMIs, no pressure – just focus on your studies.
The Reserve Bank of India (RBI) has made this mandatory for all public sector banks to relieve students of financial stress. According to a GyanDhan report, this period gives students additional time to search for jobs without being burdened by interest.
But remember, interest continues to accrue, which is added later. Therefore, smart planning is essential.
I have personally spoken to many families who feel relieved by this option. The same applies if you are studying abroad – you simply get an additional 6 months after the course.
Benefits of the Moratorium: Why Choose This Option?
Now let’s discuss the benefits.
1. Stress relief – Not having to worry about EMIs during your studies allows you to focus 100% on your studies. Tata Capital explains that this period helps families manage multiple financial commitments, especially when parents are co-applicants.
2. Flexibility – Some banks, like Axis Bank, offer the option to extend this period by up to 12 months if the course is extended.
3. Subsidies – If the family’s annual income is up to ₹8 lakh, a 3% interest subsidy can be availed under the PM-Vidyalaxmi scheme, which is applicable only during the moratorium. This is valid for the top 860 quality institutions – no collateral, no guarantor!
4. Tax benefits – Under Section 80E, loan interest is exempt from income tax.
Overall, this option not only simplifies the current situation but also strengthens long-term financial planning.
⚠️ But be careful – using the full term can increase interest. For example, a loan of ₹7.5 lakh at 8.5% interest can grow to over ₹10 lakh during a 5-year moratorium, as warned by the Economic Times. Therefore, start paying interest during the term, if possible.
Eligibility and Application Process: Simple Steps
Who can avail such a loan?
- Must be an Indian citizen.
- Admission to a recognized course (merit or entrance-based).
- Stable income of the co-applicant (parent or guardian).
Loan amount:
- Up to ₹10–20 lakh in India.
- ₹50 lakh to ₹1.5 crore abroad.
Interest rates start at 8.5%, depending on the bank.
Application process
- Gather documents: admission letter, fee structure, ID proof, income proof.
- Apply online on the bank’s website (SBI, HDFC offer digital processing).
- Collateral like property or FD can reduce rates, but unsecured loans are available.
- Approval within 15–30 days; disbursement is made directly to the institution.
Ask the bank:
- Will simple interest be charged?
- Is an extension possible?
Sites like Nomad Credit offer free eligibility checks.
How to Repay: Smart Tips
- EMIs start once the moratorium ends.
- Tenures range from 7–15 years, with no foreclosure charges.
- At SBI, repayment is after loan period + 1 year, and prepayment is free.
- ICICI Bank suggests shorter tenure, paying interest first, and using collateral.
👉 Use an EMI calculator – it can save 20–30% of the total interest.
If you get a job, prepay immediately. NBFCs like Propelled offer 10-year tenures, with an EMI holiday.
Remember, timely repayment improves your credit score.
Conclusion: Take action now!
Friends, the education loan moratorium option opens the door to education, provided you use it wisely. It not only provides financial freedom but also secures your future.
If your child is ready for education, talk to your bank today. The time has come to fulfill your dreams – don’t delay!
If you have any questions, ask in the comments. We’re here for you.