Cards & Loans · 7 min read
Repaying an education loan in India, honestly
The moratorium is not free, prepaying is usually right but not always, and Section 80E is the deduction most borrowers never claim.
Krish Dalal
Founder and editor, PaisaExpert. Master's in Business Management, SP Jain School of Global Management, London. · Last updated 2026-08-26
Education loans are the one debt most people take on before they understand debt. That is not a criticism, it is a description, and it is why the details below are worth ten minutes.
The moratorium is not a payment holiday
During the course and the grace period after it, you are usually not required to pay. Interest still accrues, and in most structures it is added to the principal, so you finish your degree owing more than you borrowed. On a ₹15 lakh loan at 10 percent across a four-year course plus a one-year grace period, the accrued interest can add well over ₹4 lakh before your first EMI.
Paying only the interest during this period, if you can, stops that compounding. Many students can manage part of it from a part-time income, and it is one of the highest-value uses of a small earning while studying.
Section 80E, the deduction people miss
| Section 80E | |
|---|---|
| What is deductible | The full interest paid, with no upper limit |
| What is not | The principal repayment |
| How long | Eight assessment years from when repayment starts |
| Who can claim | The borrower, or a parent or spouse who is repaying |
| Regime | Old regime only, not available under the new regime |
No cap on the interest amount makes this unusually valuable in the early years, when almost all of your EMI is interest. If you are in the old regime and paying an education loan, this deduction alone can change which regime is cheaper for you.
Frequently asked
What to do next
- Pay the interest during the moratorium if you possibly can.
- Check whether you have been claiming Section 80E; you can revise recent returns.
- Build three months of expenses before prepaying anything.