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
Prepay if your loan rate is above roughly 10 percent, because clearing it is a guaranteed, tax-free return at that rate and no investment reliably beats it. Below that, and once you hold three months of expenses as an emergency fund, splitting between the two is reasonable. Section 80E lowers your effective rate, so factor that in before deciding.
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.
