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When financing your education, the education loan interest rate either makes or breaks your budget. In 2025, these rates, spanning 8.5% to 17% p.a, varied across public banks, private lenders, and NBFCs. Whether you’re eyeing a degree in India or abroad, understanding the education loan interest rate is crucial to securing an affordable deal.
From calculation methods like RLLR and MCLR to factors like credit scores and loan tenure, this guide covers it all. We’ll compare top lenders, break down how your education loan interest rate is set, and share proven tips to lower your costs. Let’s dive in and turn complexity into clarity!
Table of contents
- What Are Education Loan Interest Rates?
- Education Loan Interest Rates with Different Banks
- How Are Education Loan Interest Rates Calculated?
- How to Calculate EMIs with Loans Interest Rate?
- Factors Influencing Education Loan Interest Rates
- How to Find the Best Education Loan Interest Rates
- Discounts and Tax on Education Loan Interest Rates
- FAQs on Education Loan Interest Rate
What Are Education Loan Interest Rates?
Education loan interest rates represent the cost of borrowing money for your studies in top universities in India or abroad. Loan interest rates are calculated as a percentage of the loan amount. Lenders set these rates using a base rate (e.g., RLLR or MCLR) plus a “spread” tailored to risk and profit. They come in two main types:
- Fixed Rates: Locked in for the loan term, offering EMI stability (e.g., U.S. federal loans at 5.5%-7.5% in 2025).
- Floating Rates: Adjust with market conditions, common in India (8.5%-17% p.a.), tied to RBI’s repo rate.
In India, public banks often deliver the lowest education loan interest rates, while private banks and NBFCs charge more for flexibility. Knowing the cheapest education loan interest rates in India is your first step to affordable financing.
Also Read: Education Loan for Abroad Studies by Indian Government
Education Loan Interest Rates with Different Banks
Here’s a snapshot of education loan interest rates from top Indian banks and lenders based on the latest trends and bank policies:
| Lender | Interest Rate Range | Processing Fee |
| State Bank of India | 8.55% – 11.15% p.a. | Nil (up to INR 20L); INR 10,000 + taxes (>INR 20L) |
| Bank of Baroda | 8.75% – 11.40% p.a. | Nil (up to INR 7.5L); 1% up to INR 10,000 |
| Punjab National Bank | 8.45% – 10.75% p.a. | 0.35% (Min INR 2,500, Max INR 15,000) |
| Union Bank of India | 8.50% – 12.50% p.a. | Nil |
| Canara Bank | 9.65% – 11.35% p.a. | Nil |
| HDFC Bank | 9.50% – 13.50% p.a. | 1% or INR 1,000 (higher) + GST |
| ICICI Bank | 9.85% – 14.00% p.a. | Up to 2% + GST |
| IDFC First Bank | 9.50% – 13.00% p.a. | Up to 1.5% |
| Axis Bank | 13.70% – 15.20% p.a. | 2% + GST |
| Federal Bank | 12.75% – 14.25% p.a. | INR 3,000 – INR 7,500 + taxes |
Takeaway: Public sector banks in India like SBI and Union Bank shine with rates starting at 8.5%-9%, while private lenders like Axis and Federal cater to flexibility at 13%-15%+. Choose wisely!
How Are Education Loan Interest Rates Calculated?
Lenders and banks use three key methods to determine education loan interest rates, each linked to economic benchmarks and adjusted by a spread. Here’s how they work:
1. RLLR-Based Rates
- Base: RBI’s repo rate (6.5% in 2025).
- Formula: Repo Rate + Spread = RLLR
- Example: SBI’s 6.5% + 2.5% spread = 9% p.a.
- Used By: SBI, PNB, Canara Bank, Bank of India.
- Why It Fluctuates: Quarterly repo revisions reflect inflation or policy shifts.
2. MCLR-Based Rates
- Base: Marginal Cost of Funds-based Lending Rate.
- Formula: MCLR (Funds Cost + Operating Costs + Tenor Premium) + Spread
- Example: Karnataka Bank’s 8% MCLR + 2% spread = 10% p.a.
- Used By: Karnataka Bank, Federal Bank.
- Why It Matters: Monthly/quarterly updates affect EMIs.
3. EBLR-Based Rates
- Base: External Benchmark Lending Rate (e.g., repo or treasury bills).
- Formula: EBLR + Spread
- Example: Union Bank’s 6.5% + 2.5% = 9% p.a.
- Used By: Union Bank, Indian Bank.
- Why It’s Transparent: Ties rates directly to market benchmarks.
Daily Interest Example: For a INR 25L loan at 9% p.a.:
- 9% ÷ 365 = 0.0246% daily
- INR 25,00,000 × 0.000246 = INR 615/day
How to Calculate EMIs with Loans Interest Rate?
Your loan repayment hinges on the EMI. Use this formula:
EMI = [P × R ×(1+R)N] / [(1+R)N – 1]
Here, P = Principal, R = Monthly Rate (Annual ÷ 12), N = Months
Example: INR 15L at 9% p.a. over 7 years (84 months):
- R = 0.0075
- EMI ≈ INR 25,305
For instant results, try an Education Loan EMI Calculator from Fly.finance—just input your loan details.
Factors Influencing Education Loan Interest Rates
Beyond calculation methods, these variables influence your student loan interest rates:
- Credit Score: Above 750? Enjoy rates as low as 8.6% (e.g., SBI discount). Below 600? Expect 12%+.
- Loan Amount & Tenure: Larger loans (INR 40L) or longer terms (15 years) increase risk, pushing rates up.
- Co-Signer: A parent with solid finances can cut rates by 0.5%-1%.
- Collateral: Secured loans (e.g., with FDs) score lower rates than unsecured ones (14%-17%).
- Course & Institute: Top 100 QS-ranked universities or job-ready courses (MBA, MS) may earn concessions.
- Economic Trends: Repo hikes (e.g., to 7%) raise floating rates across the board.
How to Find the Best Education Loan Interest Rates
With education costs skyrocketing—INR 30L+ for an international master’s—every percentage point counts. Here’s how to snag the lowest education loan interest rates:
- Shop Around: Compare rates and fees on various online portals.
- Negotiate: Leverage a high CIBIL score or co-signer for discounts.
- Grab Subsidies: Schemes like CGFSEL (up to INR 7.5L) or Dr. Ambedkar Interest Subsidy ease the load.
- Pay During Moratorium: Covering interest during the grace period (course + 6-12 months) can lower rates.
- Watch Fees: A 9% rate with a 2% processing fee might cost more than a 10% rate with no fees—do the math.
Also Read: Expenses Covered in Education Loan
Discounts and Tax on Education Loan Interest Rates
Indian banks and loan lenders roll out attractive concessions, such as rate reductions for female students and rewards for stellar credit scores, while the government offers tax relief under Section 80E. These perks can cut thousands off your student loan costs, transforming a hefty repayment into an affordable commitment. Here’s how to make the most of these advantages.
Discounts on Education Loan Interest Rate
Banks in India provide targeted discounts to ease your education loan interest rate, making repayment more manageable. Here’s what’s on the table:
- Female Students: Enjoy a 0.5%-1% reduction on your education loan interest rate. Top banks like State Bank of India (SBI) and Punjab National Bank (PNB) lead this initiative, empowering girls with rates as low as 8.05% instead of 8.55%.
- High CIBIL Scores: A credit score above 750 can unlock savings. For example, SBI offers a 0.55% discount—think 8.6% instead of 9.15%—rewarding financial responsibility with a lower education loan interest rate.
- Bank Staff Wards: If your parent works at a bank, you might qualify for exclusive rates. Lenders like Bank of Baroda and Indian Bank often reserve special education loan interest rate deals for employees’ children, shaving off extra percentage points.
These discounts can save you lakhs over your loan repayment term—every fraction of a percent counts!
Tax Benefits: Section 80E
Beyond discounts, the Indian government boosts your savings with tax deductions on your education loan interest rate payments. Under Section 80E of the Income Tax Act:
- What You Get: Deduct 100% of the interest paid on your education loan—no upper limit!
- Duration: Claim this benefit for up to 8 years, starting from the year you begin repayment.
- How to Claim: Submit an interest certificate from your lender (e.g., SBI or HDFC) when filing taxes. For instance, if you paid INR 50,000 in interest in 2025, that full amount reduces your taxable income.
This perk doesn’t apply to the principal—just the interest—but it’s a powerful way to offset your education loan interest rate costs, especially in the early years of repayment when interest dominates your EMI.
This was all about how to calculate the education loan interest rates. Understanding education loan interest rates empowers you to fund your dreams affordably. Take action now—compare lenders, calculate your EMI, and secure your education without overpaying.
FAQs on Education Loan Interest Rate
An education loan interest rate is the percentage charged on the borrowed amount to fund your education. It can be fixed (unchanging) or floating (tied to market rates like the RBI repo rate), ranging from 8.5% to 17% in India in 2025.
In 2025, education loan interest rates in India range from 8.5% to 17% per annum, depending on the bank, lender type (public, private, or NBFC), and whether the loan is secured or unsecured.
– Public banks like SBI and PNB offer lower rates starting at 8.45%.
-Private banks and NBFCs may charge up to 17%, especially for unsecured or flexible loans.
Lenders calculate the education loan interest rate using methods like RLLR (repo rate + spread), MCLR (marginal cost of funds + spread), or EBLR (external benchmark + spread), adjusted for risk and borrower profile.
Public sector banks usually offer the lowest interest rates for education loans. As per current trends:
– Punjab National Bank (PNB): 8.45% – 10.75% p.a.
– State Bank of India (SBI): 8.55% – 11.15% p.a.
– Union Bank of India: 8.50% – 12.50% p.a.
These banks also have low or zero processing fees and offer special discounts for female students, co-signers, or high credit scores.
While 0% interest loans are not offered directly by commercial banks, you can reduce your burden significantly through government subsidy schemes and smart repayment strategies:
– Government Schemes like CGFSEL or the Dr. Ambedkar Central Interest Subsidy Scheme offer interest waivers for eligible students, especially those from economically weaker sections.
– Paying interest during the moratorium period can help reduce overall loan costs.
– Opting for secured loans or applying with a co-signer can get you a lower rate, potentially under 8.5%, which is as close to zero interest as practically possible in the current market.
Your education loan interest rate depends on your credit score, loan amount, repayment tenure, co-signer’s finances, collateral, and the prestige of your chosen institute.
Yes, you can reduce your education loan interest rate with a good CIBIL score, a strong co-signer, collateral, or by availing subsidies (e.g., SBI offers a 0.5% interest concession for female students).
The EMI for a INR 10 lakh education loan depends on the interest rate and tenure. Here’s a quick example using the standard EMI formula:
– Loan Amount (P): INR 10,00,000
– Interest Rate (R): 9% annually or 0.0075 monthly
– Loan Tenure (N): 7 years (84 months)
– EMI = [P × R ×(1+R)N] / [(1+R)N – 1]
Plugging the numbers in:
EMI ≈ INR 16,870/month
A fixed education loan interest rate stays constant, while a floating rate fluctuates with market conditions (e.g., RBI repo rate changes), common in India.
Yes, under Section 80E in India, you can deduct 100% of the interest paid on your education loan interest rate for up to 8 years—submit your lender’s certificate when filing taxes.
Your education loan interest rate varies due to lender type (public banks offer lower rates, private banks charge more), calculation method (RLLR, MCLR, EBLR), and your financial profile.
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