How to repay an education loan

Unlike other loans, in case of education loan the repayment does not start until after the course is over.

Moratorium for repayment
The repayment of the loan starts one year after the completition of the course of six months after getting a job, which ever is earlier. So, if the course is an undergraduate course of four years, the repayment can start after five years.

After moratorium

Once the moratorium is over, that is one year after the course, the repayment will start even if the student has not got a job. So, in case you are not able to find a job during campus placement or within one year, be prepared to start repayment from your own funds.

Income-tax benefit
Once repayment starts the borrower can avail of benefit, under Section 80-E of the Income-Tax Act.

Discount on interest
ome banks offer a concession of up to 1% for full tenure of the loan if full interest is serviced during the moratorium period and including course duration. The interest should be serviced promptly soon after application but not later than the following month to avail the concession.

How is EMI calculated
The accrued interest during the moratorium period and course period is added to the principle and repayment is fixed in Equated Monthly Installments (EMI). If full interest is serviced before the commencement of repayment; EMI is fixed based on principle amount only.