Studying abroad has become a common dream for Indian students and their families. Over the years, this dream has only grown bigger. As per government data, more than 13.3 lakh Indian students were studying overseas by the end of 2024. Countries like the USA, UK, Canada, and Australia are among the top choices. But foreign education comes with high costs, and not every family has enough savings to manage it. This is where education loans come into play.
Education loans are now seen as a way to bridge the gap between ambition and affordability. With tuition fees, hostel charges, travel, books, and day-to-day expenses – the total cost of studying abroad can go well beyond ₹30 to ₹50 lakh depending on the country and course. So, is taking an education loan for foreign studies a smart move or a financial risk? Let’s understand in detail.
Why More Indian Students Are Choosing Education Loans
India’s education loan sector has seen massive growth in recent years. According to a CRISIL report, NBFCs and banks in India had an education loan book worth over ₹60,000 crores in 2024, up from ₹43,000 crore in 2023. This sharp rise shows that more students are now dependent on loans to fund their studies abroad. The reasons are simple – foreign education is getting more expensive, and student aspirations are rising.
Let’s take a closer look at both sides – the benefits and the challenges.
Top Advantages of Taking an Education Loan for Studying Abroad
1. No Need to Break Family Savings
Education loans allow students to pursue their dream of studying abroad without their parents having to sell property, break FDs, or use retirement savings. It’s a structured way of financing education without disturbing family finances.
2. Covers Almost All Expenses
Most education loans cover tuition fees, accommodation, books, travel, insurance, and even living expenses. This helps students manage everything without financial stress during their studies.
3. Moratorium Period (Grace Time After Study)
Many banks and NBFCs offer a moratorium period of 6 to 12 months after the course ends. During this time, students are not required to repay the loan immediately. This gives them time to find a job and settle down.
4. Improves Credit Score
Timely repayment of an education loan helps build a good credit history. This can be useful later in life when the student applies for home loans, car loans, or credit cards.
5. Flexible Repayment Options
Banks and financial institutions now offer flexible EMIs based on income. Some allow step-up repayment (lower EMI in beginning and higher later), which eases the burden on freshers who earn less initially.
Disadvantages of Taking a Student Loan for Foreign Education
1. Heavy Debt at a Young Age
Students who take large loans of ₹30 lakh or more start their careers with big liabilities. At 22-25 years of age, this can be mentally and financially stressful.
2. Interest Burden
Education loans attract interest rates, and if the repayment is delayed, the interest keeps adding. Over time, the student might end up paying almost double the loan amount.
3. Monthly EMI Stress
After completing the course, managing living expenses along with loan EMIs can be tough, especially in the initial career phase when salaries are limited.
4. Job Uncertainty
Not every student gets a high-paying job right after completing their course. If the job search takes time or salary is less, paying the EMI becomes difficult. This can also damage the credit score.
5. Extra Charges
Apart from the interest rate, many lenders charge processing fees, insurance fees, and late payment penalties. These add to the cost of the loan.
Key Factors to Consider Before Applying for an Education Loan
Before rushing to apply for a student loan, it is important to plan smartly. Here are some tips that every student and parent should keep in mind:
- Calculate Total Cost: Estimate the complete cost of studying including tuition, visa, living, and travel expenses.
- Check Your Finances: Know how much your family can afford to contribute and how much needs to be borrowed.
- Job Prospects After Course: Study the placement record of the college and salary trends in your field.
- Loan Repayment Timeline: Understand when you need to start repaying and how much your monthly EMI will be.
- Compare Lenders: Different banks and NBFCs offer different interest rates, loan amounts, and terms. Always compare 3-4 options before finalizing.
- Read the Fine Print: Carefully read terms related to interest calculation (fixed or floating), moratorium period, penalties, and prepayment charges.
Education Loan Interest Rates of Major Indian Banks (As of April 2025)
Here’s a snapshot of the current education loan interest rates offered by major Indian banks and NBFCs. Keep in mind that interest rates can change and vary based on your profile, loan amount, and course.
| Bank/NBFC | Interest Rate (Per Annum) |
| State Bank of India | 7.90% to 10.90% |
| Punjab National Bank | 4.00% to 12.60% |
| Bank of Baroda | 7.90% to 14.25% |
| Canara Bank | 8.35% to 11.75% |
| Bank of Maharashtra | 7.85% to 10.55% |
| Indian Overseas Bank | 8.50% to 12.75% |
| Tamilnad Mercantile Bank | 11.75% to 13.00% |
| Karur Vysya Bank | 12.05% to 14.55% |
| Axis Bank | 9.58% to 12.75% |
| IDBI Bank | 4.00% to 11.50% |
| UCO Bank | 8.50% to 11.70% |
| Bajaj Finance | 10.00% to 31.00% |
| Tata Capital | 11.50% to 13.50% |
Note: Apart from interest, banks may also charge processing fees and insurance. Check with the lender before applying.
How to Make the Best Use of Education Loan?
If you’re planning to take a student loan for foreign studies, here are a few smart tips:
- Start repaying the interest during the study period if possible. This reduces the overall loan burden.
- Choose a reputed course and university that offers better chances of employment.
- Apply for scholarships or part-time jobs abroad to reduce loan dependency.
- Discuss repayment plan with your parents and choose a co-applicant with stable income.
