There are a lot of Indian students and their guardians who want to study abroad. By the end of 2024, there will be more than 13.3 lakh Indian students that are counted among those who go for study abroad. For this reason, the demand for foreign degrees is still an all-time high. However, accessing these foreign institutions requires enormous amounts of money for students, causing them and their parents to bank on education loans to make up for the difference.
Is it really advisable for one to take an education loan? Although taking one gives opportunities to explore different worlds in institutions, it has its own financial risks attached. Let’s delve into the pros and cons of taking education loans for studying abroad to help you make an informed choice.
Mobile Banking: Rising Demand for Education Loans
The cost of being a student overseas has gone up tremendously just like the rising inflation, currency fluctuations, and tuition fees. A CRISIL report says that the education loan portfolio of non-banking financial companies (NBFCs) in India has gone up to above ₹60,000 crore from ₹43,000 crore last year. This just proves how much loans become a necessity for aspiring students.
Advantages of Taking an Education Loan:
Financial Support to Aspiring Students
Everyone does not have the amount on hand to pay their international education expenses. An education loan fills this gap through:
- Tuition fees
- Accommodation costs
- Study materials and travel expenses
Moratorium Period for Repayment
Most lenders provide a moratorium period for 6 to 12 months after the completion of the course so that the student can settle into a job before actual repayment begins.
A Strong Credit History is Built
Timely EMI payments will enhance your credit score, enabling easy access to loans (home, car, or personal) in the future.
Flexible Options of Repayment
Flexible EMI schemes have been given by most banks and NBFCs, in respect of their income levels, which led to a comfortable repayment phase.
Disadvantages of Education Loans
- Long Debt Burden
The young people borrow large sums of money which are to be paid back over years. This means that early in the career, they are financially constrained. - High-Interest Accumulation
The interest is compounded; delays and unpaid payments lead to total repayment amounts considerably increasing. - Stress, Mental and Financial
Monthly installments may pressure one, especially if employment is not assured, or income, if at all, is insufficient. - Defaulting in Repayment of Loans
If one does not get a well-paying job, repaying debts becomes difficult and, therefore, spoils the score card at the end making it impossible to get future loans.
Key Factors to Consider Before Taking an Education Loan
Evaluate those important aspects before taking an education loan:
- Your Financial Situation – Whether you can keep up with the repayments without becoming overly strained.
- Job Prospects – The type of job you can expect and the salary you might earn in that career.
- Interest rates and any hidden charges, especially processing fees with the lenders.
- Loan Terms: Flexible repayment, moratorium period, penalties.
Current Education Loan Interest Rates in India (2025)
| Bank/NBFC | Interest Rate (p.a.) |
|---|---|
| State Bank of India | 7.90% – 10.90% |
| Punjab National Bank | Up to 12.60% |
| HDFC Bank | 10.50% onwards |
| ICICI Bank | 10.25% onwards |
| Axis Bank | 9.58% – 12.75% |
| Bajaj Finance | Up to 31.00% |
(Source: BankBazaar, as of April 15, 2025. Processing fees may apply.)