How do banks calculate Interest on Education Loan in India? In India, interest calculation of education loan is done in two parts. * If you keep paying your interest from the very first month, then the interest would be calculated as Simple Interest, unlike other loans, wherein you pay compound interest from day 1 with no choice*. However, if you do not pay your interest every month, then the interest would be calculated as Compounded Interest. So, choice is yours, would like to pay interest less or more?

## Lets calculate interest:

### Part 1:

During moratorium period, Simple Interest is calculated on the amount which you have already taken for your fees. Remember, in school maths, there use to be a formula for simple interest? Right, the same one, that is

#### SI=(PxRxT)/100;

where, SI=Simple Interest

P=Principal Amount

R=Rate of Interest, here it would be per annum always

T=Time, here it would be in days always

Therefore, now the formula will be

#### SI=(PxRxT)36500

Now, lets say, your education loan amount is Rs.4.00 lakhs. Loan tenure is 15 years after moratorium period. And, your course duration is 4 years. It means your moratorium period will be 4 years + 12 months, which is equal to 5 years or 60 months, in case of your unemployment after course completion. If you have secured employment, in that case, your moratorium period will be 4 years + 6 months after securing job, which makes a total of 4.6 years or 54 months.

- Now, for instance, on Nov 04, 2016 you have requested for Rs. 1.00 lakh for your 1st semester fees. Once this amount gets debited from your loan account on Nov 04, 2016, you will be start charging simple interest on this Rs. 1.00 lakh from 4th day of Nov 2016. Lets calculate Interest now. As per formula,

P=Rs.100000.00

R=9.35+1.50=10.85% per annum (Please check the latest Rate of Interest from the Bank)

T=27 Days i.e. from Nov 4, 2016 to Nov 30, 2016

That means, the Simple Interest which you need to pay on Dec 1, 2016, is

SI=(100000×10.85×27)36600 = Rs.800.00,

Note: Here, instead of 365 Days, 366 Days are taken for calculation, because, 2016 is a leap year.

- If you do not pay this interest amount on Dec 1, 2016, then Dec 1, 2016 onward, your principal amount would become Rs.100800.00, and interest for Dec 206 will be calculated on this principal.
- Now, you have requested your 2nd semester fees on Apr 4, 2017. The amount of the fees is Rs.1.00 lakhs.

##### How, the Interest will be calculated this time, lets see.

- If you keep paying your monthly interest every month, in that case your principal amount should remain same, that is Rs.1.00 lakh, and we will assume the same so that you can understand the calculation better.
- Previous outstanding of Rs.1.00 lakh and, new outstanding of Rs.1.00 lakhs, so total principal amount will be Rs.2.00 lakhs. Now, as per formula,

P=Rs.200000.00

R=10.85% pa

T=27 Days

Therefore, SI=(200000×10.85×27)/36500 = Rs.1605.00

During your moratorium period, calculation of SI will done in the same way. This was the one part of the calculation. Now, lets proceed to the 2nd part.

### Part 2:

Once your repayment starts, that is the repayment of 1st EMI, then, interest will be compounded annually. Lets see how?

- Lets say, when your repayment starts, your outstanding is Rs.4.00 lakhs, as you kept repaying interest in every month during your moratorium period. On this principal, compound interest will be calculated for 15 years @ 10.85% pa to convert the total amount of Principal & Interest both, into monthly EMI, which is a fixed amount and can’t be changed. So, now the amount which you will be paying as EMI every month, will be calculated using below mentioned formula:

### Amount = P 1 +R/100^n

where, P=Principal amount, that is the total outstanding

R=Rate of Interest, here its 10.85% pa

n=Loan Tenure, here its 15 years

So, the calculation of EMI will be somewhat like this:

Hence, your EMI for next 180 months or 15 years is Rs.4508.80. And, this calculation is valid only, if you are simultaneously repaying your monthly interest during moratorium period. If you want, you can always consider prepayment option. In case of PSU Banks there is no charge for prepayment, however, Private sector banks charge some extra amount for prepayment. So, this option varies bank to bank. There are many apps available for EMI Calculation, so you can always calculate Interest before you plan for any loan.

One very important thing which I would love to discuss here. And, that’s the tax benefit on the interest amount of your education loan under Section 80(E) of Income Tax Act . Repayment of monthly interest is mandate to avail this benefit. And, this is the best strategy to repay your student loan on time.

*I have tried to explain this complicated calculation in most simple way. Please, comment below to add to the topic or for any queries.*

Hello, very informative, however bit confusing where you said loan amount is 4 lakh for 4 years duration and than fee for 1st semester is 1 lakh, as normally for a 4 year course, there are 8 semesters and then it would be 8 lakhs !

I took a loan of 2 lakh for a 4 year course in 2007 and the interest limit was 14.05% from SBI (i have no idea why this is was high). I didn’t took much interest in reading the statement back then, But when I look now its all confusing and I can’t understand the online statement I looked for after going to bank again last year just to check. I have average knowledge about how loan works. the loan was taken in August 2007 and my father closed the loan account in 2011 and transfered it to his office as the interest rate was much down there. But in the statement, the bank has taken interest of 29000 every year from 2007 to 2010 ! Please can you help with understanding this. Thanks in advance.

Hi Naveen,

Thanks for appreciating the post. Let me clear your confusion. Here, 4.00 Lakhs loan amount was an example. Generally, there are 4 semesters in 4 years course, here I assumed 4 semester in 4 years course.

Now, coming to your query. As you said, your loan amount was 2.00 Lakhs from Aug 2007 to 2010 @ 14.05. You have not mentioned loan closure month. In education loan, mostly, interest is charged on daily reducing basis, so each day is important in calculation.To calculate interest for this loan, we need exact information such as what was your study period? Did you pay interest for your loan from the 1st month of the disbursement of loan? As I wrote in my post that in Education Loan, interest is calculated in two ways-one is simple interest, which is during your study period; and, the other is compound interest, which begins with the commencement of your repayment or EMI.

About then ROI, interest use to be higher earlier. Now-a-days, ROI are quite low for almost every loan, except personal loan.

If you want, you may email me your loan statement to connect2moneymaya@gmail.com and I may look into your loan statement to help you with the understanding of your loan interest calculation.

hi! I hope you remember out discussion. As you suggested I mailed you my loan statements. If you had a chance to look at my email it would be great.

Subject line is “Education Loan statement from Naveen”

Thanks again.

Sure Naveen, but I haven’t received your mail yet. My email is “connect2moneymaya@gmail.com”!!!

Hello Bhumi! I did send it. I have sent it again right now. If you still can’t locate it. send a test email to- naveenrawat88@hotmail.com

Regards.

Hello Bhumi, waiting for your reply of my email.

thanks.

Hi Naveen,

If you see, the interest amount which you were paying was constant i.e. Rs.500.00, however, the interest which was accumulating in the account was more than that.

Now, since the interest you were paying was lesser then the actual interest, therefore, the remaining interest was getting added to your principal amount and, next month’s interest was being calculated on the new principal i.e.actual principal + excess interest not paid by you. And, this made you pay extra interest on interest.

Also, your ROI was not same during loan tenure, it was ranging from 12.05% pa to 14.05% pa. And, yes, ROI use to be higher in those days.

Hope, this helps. Feel free to ask if you have any further queries.

Hello mam,

My loan amount is 2,85000 an i am paying the emi of 12,100 per month for 5 years. I have started tp pay emi after 1 yr completion of my course.

@Shivanshu don’t you think the EMI is too much?

hello, i have been trying to understand this for a while but cudnt , you have made it simple…thanks!!

please change from 4.6yrs to 4.5 yrs , its not written 4.6 yrs#editingrequired

thanks again

Hi Samarth,

Thanks for appreciating.

That’s 4 years and 6 months i.e. 4.6 years.

Hello Bhumi,

Wonderful article of the calculations of Education Loan. Cleared much of the concepts on the topic. But I still have some quries.

1. While calculation of the EMI, we make use of the compound interest formula for arriving at the EMI ? During this calculations, what is the frequency on which compound interest is calculated ? Yearly ? Monthly ? Could you please show in detials how the numbers for the EMI’s are calculated ?

2. What will happens to the above cases, when there is any pre-payment ?

Hi Anand,

Thanks for appreciating. Coming to your queries:

1. During moratorium period, simple interest is applied. Once your repayment starts, compound interest is applied. And, both the interest are calculated per year.

Example of EMI calculation:

Let’s assume loan amount is Rs.4.00 Lakhs, ROI is 10.85% per annum and loan tenure is 10 years excluding moratorium period, will consider that as 5 years (4 years + 1 year). Also, during moratorium period, interest was not repayed for any month. So, your principal amount at the end of 5 years becomes Rs.686646(=Rs.400000 + Rs.286646). Now, EMI will be calculated on compound interest @ 10.85% per annum, where principal amount is Rs.686646 and tenure is 10 years. So, the EMI will be Rs.9400.00.

Therefore, initial loan amount was Rs.4.00 Lakhs and total interest amount is Rs.728000. So, total repayment will be Rs.1128000 on loan of Rs.4.00 Lakhs.

2.If there is any pre-payment in the above case, in that case that particular amount will be adjusted in interest as on pre-payment date. Then the remaining amount, if any will be adjusted in the principal amount. And, after adjustments whatever amount comes will be used for EMI calculation by the same method. Also, sometimes, after pre-payment, EMI amount doesn’t change but, it reduces the loan tenure from 120 months to whatever it comes after calculation.

Hope, this helps.

By definition of Compound interest, if the interest is added to the principle every month and Interest for the next month is calculated on the combined amount( in this case 100800), then the calculation is Compound and not simple Lets assume that the loan amount is 1L and the interest for the first month is Rs. 919,— {100000*10.85*(31/36600)}. If we add this to the Principle and then calculate the Interest for next month, (100919*10.85*(31/36600)= Rs.927, aren’t you using CI, with interest compounded monthly. According to me the interest for second, 3rd, and 4th month should also be SI- 919 for each month and not what u said. Once the moratorium period ends, Assume your total outstanding is 6L. Now when the interest is calculated it will be CI, { 600000*10.85*(31/36600) }= Rs- 5514 This should now get added and become the new Principle amount (600000 +5514), and the interest for the next month should be 5564 [ (605514*10.85*(31/36600)) }. Let me know your thoughts. You can mail me rohan_agrawal86@yahoo.com

Hi Rohan,

If you keep paying your interest from the very first month, then the interest would be calculated as Simple Interest, unlike other loans, wherein you pay compound interest from day 1 with no choice. However, if you do not pay your interest every month, then the interest would be calculated as Compounded Interest. So, choice is yours, whether you want to repay your interest during moratorium as Simple Interest or Compound Interest.

Very usefull explanation

I have a doubt will please clarify that

I have taken loan in 2010. I I didn’t pay monthly

In 2015 I paid some amount in 2016 I cleared total amount. For income tax saving I have to the statement of interest paid in financial year.

But bank people are saying we don’t have that feature. I will send you full loan account statement will you please clarify how much amount I can show under income tax savings scheme. Thanks in advance.

Hi Bharath,

Sure !!!

and how is the calculation if i do not pay any inerest during motaration period .plz elaborate this

Hi Prince,

If you do not pay any interest during your moratorium period, then your interest amount will get added to your principal amount and next interest will be calculated on your new principal amount. For instance, if your initial principal amount is Rs.1,00,000.00 and interest is Rs.833.00, which you do not pay; then your principal for the next month will be Rs.1,00,833.00 and now interest will be calculated on this new principal.

Hope, this helps.

Madam please throw some light on educational loan interest subsidy scheme and show a calculation of interest after moratorium period

Hi Jack,

There are two criteria, depending which interest subsidy is being given if:

1. Co-borrower Parent’s annual income less than Rs.4.00 Lakhs; and

2. During moratorium period, interest to be paid every month without fail.

And, about interest calculation after moratorium:

Interest would be calculated on the sum of total amount disbursed and the unpaid interest as on date.

Hope, this helps.

Hi Jack,

Education Loan Subsidy would be given if:

1. Co-borrower parent’s annual income is less than Rs.4.00 Lakhs; and

2. During Moratorium period, interest to be paid every month without fail.

And, about interest calculation after moratorium period:

After moratorium period, compound interest would be calculated, where principal amount would be taken as total disbursed amount and the unpaid interest amount as on date.

Hope, this helps.

Hi Team,

Hope you will be able to clear my doubt. My brother has taken a educational loan of 750,000 (2.5 lakhs each for 3 years) starting April 2011 for his MBBS course which is 5.5 years starting 2010 sep. We have given our house document as mortgage. Except for visiting bank for the submission of bonafide we dint pay any amount as interest. He completed his course in Apr 2016. Around end of july we paid 5,00000 and then some 250000. We have received a subsidy of 1.55 lakhs. Can you pls help us would be the balance amount to be paid so that we can get our document back.

Hi Shabi,

First of all, ROI is not mentioned by you, so interest calculation is not possible. Second, exact date of disbursement would be needed. I would suggest you, please visit the branch from where your brother has the loan and ask them for the loan closure amount, they would tell you the exact amount. And, after that, if you think that you have any doubt in any calculation, feel free to get back to me.

Hope, this helps !!!

Thanks for the reply. In 2 days i can send you the statement which i got from bank.

Sorry for missing the details. ROI is 12% and April 11, 2011 is the date of disbursement of first Rs. 250000. Then Apr 2012 we got another 250000 and in Apr 2014 we got the balance amt of Rs. Rs. 250000. Hope it helps. In between we dint not pay any amount. Meanwhile we got a statement from bank starting altogether we have to pay close to 13 lakhs to get the documents back. Can you give me a rough estimate on how much will be repayment amount.

Hi Shabi,

Total Principal amount is Rs.7,50,000.00 @12%. Since your brother did not pay interest during the moratorium period, therefore, complete interest amount got added to your principal amount and hence the total amount to be paid is Rs.1305815.00. So, not paying the interest during the moratorium period has made a huge total of interest amount only i.e. Rs.5,55,815.00. Now, you said that you have paid Rs.7,50,000.00; so to get your documents back, youi need to pay the remaining amount i.e.around 5,55,815.00.

Hope, this clarifies the matter !!!

Yeah Bhumi. Thank you so much for the details. In the final amount which you have mentioned over here. Have you deducted the subsidy amount (1.55 lakhs) which we have got from the government.

No Shabi, I haven’t deduct any amount. The calculation I have given is the pure loan based calculation. So, if you have received any subsidy, reduce that amount from your total paid amount. At the same time, education loan is paid to the student’s account directly, instead of adjusting that in loan. So, check accordingly.

Thank you so much. We have made the payment of Rs.7.5 lakhs in July 2016. So until that day what would have been the interest amt.

Total amount to be paid after July 16 is approx. Rs.4,97,684.00.

Hope, this is helpful to you !!!

Thanks for the details Bhumi. I have one more doubt. As mentioned we dint pay any interest during the moratorium period, but from government we got a interest subsidy of 20, 000 every year. Is there any way we can wave off a little bit of interest by showing interest subsidy as a reason. Because when we got loan we informed the bank that we will not be able to pay any amt as interest instead we have applied for subsidy from govt coz my mom’s salary was very minimal at tat time.

Shabi,

Was the subsidy amount got credited into your loan account? If yes, then your interest amount should be less. If not, then, you have only one option, that is talk to your branch manager and request him to waive off the interest amount or some part of interest amount.

Yeah it got credited to the loan account directly. Thank you for the the details.

Can I send you the detailed statement which I got from bank. Can you calculate the interest for me. If so pls send me your mail id. Thanks in advance

Sure Shabi !!!

Hi Bhumi,

I have emailed you the statement. Kindly check and revert back.

Sure Shabi !!!

ma’m…myself narayan rai…my father took an education loan of 3lakhs for my brother’s b-tech(4 years course)..

at 11% intrest from pnb…..in 2011…..no S.I is paid during moratorium period!!….

.and he is paying 5,900 Rs/month as EMI…..for 10 years tenure period

..ma’m can u please explain how interests is charged in detail………and what if…we want to pay complete amount in one shot…then how much would be amount???please help!!

Hi Narayan,

Information is incomplete. Exact dates of loan disbursement and exact amount of disbursements are also required.

hello mam, i want to clear a doubt about change in intrest rates.. i took education loan in 2007for myself. and i am regularly paying this without a miss. just aquery that my intrest rate is still going as per SBAR but as to my knowledge it got chnged to base rate a long ago nd now to mclr. but bank has not shifted it to base rate and now giving me a excuse that i didnot applied for same.. but as a student i guess 99% dont have dis knowledge about same. and i am still paying high intrest rates.. what actions i should take for same.. thanku

Hi Ankita,

Most of the banks do not take initiative regarding the same. And, that’s why it’s the loanee who needs to request for the same. However, many of the branch managers do inform their clients about any changes in the rate of interest of any other changes related to loan, but at the same time, it completely depends on the branch manager. And, yes it is true that most of the loanees do not know about such things. That’s why, while taking loan or before taking loan, you must read all the term and conditions of the loan, also, you must ask every possible question about the same.

Hello Ma’am,

regarding that calculation form ‘Part-1’, I couldn’t understand how did you get the rate as 9.35 and where did you get the additional 1.50? Thank you.

“R=9.35+1.50=10.85% per annum”

Hi Kennedy,

9.35 is the base rate (Now, base rate has changed to MCLR); and, 1.50 is the additional rate of interest which varies from bank to bank. So, in total it makes 10.85%pa. For latest rates, please contact bank directly.

Hope, this helps !!!

Hii, Good evening. its a very much informative blog. i took education for B.Tech(4 years). Total amount=2,80,ooo interest rate=11.25%. On august 2012 i took loan. In august 2016 i completed my Graduation. In july 2017 i got job. Now i want to repay the loan. i didnt paid any interest rate till now. i want to pay total amount for 5 years period. what will be EMI. sorry if there any wrong sentence formation.

please help me in this regard. how much EMI i have to pay.

Hi Sudarshan,

If we assume your loan disbursement date is Aug.01,2012; then till Jun.30,2017 the total amount to be paid by you is aprx. Rs.4,85,637.00 (including loan amount and interest from Aug.2012 @11.25%).

Now, if you start repaying this amount @11.25% from Jul.2017 for next 5 years, your EMI would be aprx. Rs.10,620.00.

Hope, this helps !!!

Thank you so much bhumi.

Ma’am I closed my education loan recently which was scheduled to terminate in 2022 by paying outstanding amount in one go,now I am in confusion that will I get education subsidy even after closure of loan,?

Ma’am I closed my education loan recently which was scheduled to terminate in 2022 by paying outstanding amount in one go,now I am in confusion that will I get education subsidy even after closure of loan,?

Hi Nayan,

If you ave paid interest regularly during your moratorium period, you will definitely get subsidy. It’s advisable to request for education loan subsidy to your bank branch in writing, so if there are any possibilities, you will get it.

Hope, this helps !!!

Hello Ma’am,

I took education loan in 2009 from pnb on interest rate of 11.25% as stated on loan sanction letter,but now when I asked bank person about interest rate he said at present it is 14% .he mentioned it was on basis of BPLR .So.i want to know that if interest rate are floating under BPLR and when RBI replaced BPLR with MCLR , shouldn’t my loan interest scheme should also change from BPLR to MCLR.

Looking forward to hear from you soon.

Hi Laxman,

Yes, the present Interest Rate system is MCLR. However, if your bank says that it is under BPLR system, then, ask them the same thing in writing. Write a request letter to the branch manager and ask him to mention all the interest rate applicable on your loan since day 1 and under which scheme. Once you get that in writing, accordingly, you can proceed.

Hope, this helps !!!

Hello Mam, Such a nice information you have provided with example. I request you to kindly elaborate regarding prepayment loan,

Hi Prashant,

Thanks for appreciation !!!

Prepayment of loan means, preclosure of loan. Let’s say you have a loan from 2012 to 2020; and, you got money in 2017 to repay your complete loan. That is what prepayment of a loan is.

Hope, this helps !!!

Hello Mam,

In 2012 I took educational loan Rs 300000 with ROI 12.75%.On 1 July 2017 moratorium period ended and I got loan estimate from bank. Nearly 52000 subsidy came during the moratorium period and now the total amount i have to pay is Rs 380000. how much amount i have to pay as EMI for next 5 years(2017 July -2022 July.)

Looking forward to hear from you soon.

Hi Sanuraj,

If Rs.380000.00 is your principal amount, then @12.75% pa, your EMI for next 5 Years would be around Rs.8598.00 per month. You can calculate your EMI using my EMI Calculator “http://www.moneymaya.in/emi-calculator/” on the site.

Hope, this helps !!!

Thank you

Very well explained !! Thank you!!

I have a question for you though!

I am assuming that your explaination applies to all nationalised banks in India.

Let’s assume the case that I do not pay the simple interest during the moratorium period. But, I get a job immediately after my graduation. And now, I decide to repay the whole principle amount plus the accrued interest during the moratorium period by the end of that year itself. In that case, will they calculate the compound interest for EMI ? If yes, then how?

An example would be really helpful!

Thanks in advance!

Regards,

SOHIL SHAH.

Hi Sohil,

Yes, in such case Compound interest will calculate your EMI. Now the principal amount for EMI calculation will be total disbursed amount + Accrued Interest till date.

Hope this helps !!!

Thanx for info.

But i have doubt that somemtimes you said during moratorium period if i didn’t paid any amount Interest will be compound as you exaplain above.

But sometimes you say that during moratorium period Calculation will be on simple interest.

I took loan like 1 lakh in june 2013,

1 lakh in june 2014, 1 lakh in june 2015….now 4 years gone (course completed in june 2016) on 10% interest. Now my moratorium period over. I want to calculate my principal amount on which emi will calculated since july 2017. Now my principal amount will be 3,90,000 as per simple interest ?

Or,4,00,510 as per compound interest?(i added my intrest as principal each year periodicaly ).

Or principal amount will be something else? One more Question,in compound interest they interest will be added in principal on every year or on every month? Or 3 or 6 month

Hi Chandan,

From day one of loan disbursement, simple interest is applicable on monthly basis. Now, if you do not pay interest on monthly basis, that interest is added to the principle; and, then interest is calculated. So this is compound interest.

ROI applicable on your loan is per annum. During moratorium period, interest calculation is on monthly basis. And, after moratorium period, total amount (that is principal and unpaid interest plus interest for the complete tenure) is divided into EMI.

Hope this helps !!!

Sir ,

The way you explained is very good but I am confused with mine ,I started college in the year 2013 and paid my 1st year fee I took loan and it got sanctioned in 2014 ,I took my first amount as 135000 approx and gave it as fee .now it’s 4 year course so 2017 I graduated ,I got job ,so I want to know what would be my moratorium period ? And till now I have not paid anything to the bank ? Interest rate was 13.5 SBI .when would the repayment will begin ?

Hi Rohit,

Since you got the loan sanctioned in 2014, therefore your moratorium period will be 4 years i.e. from 2014 to 2018 (Course Completion + One extra year).

You should have paid monthly interest during moratorium period, that would have helped you reducing your interest burden.

You should start repaying your loan. And your EMI will start from 2018, the month on which your loan got sanctioned.

Hope, this helps !!!

I have an educational loan of approx 3 lakhs which has become 4.5 lakhs now including interest. Central government subsidy for interest has come only once in last 6 years. What is the ideal method of paying this imagining I have 5 lakhs in hand after 12 months?If I pay 1 lakh now, will it be deducted for principle sum or interest? What if subsidy comes next day after I pay full amount?

Hi Nandeesh,

If you pay 1 lakh now, it will be adjusted in the interest amount 1st, and the remaining amount (if any) will be adjusted in the principle amount.

If you get subsidy next day, it will also be adjusted in the same way i.e. 1st interested amount will be adjusted and then principle amount will be adjusted by the remaining amount.

The ideal method to repay any loan is keep paying as and when you have the funds. This helps you saving the interest.

Hope this helps !!!

Hi,

I need your assistance regarding education loan,details of which are stated below.

Total loan amount = 2,80,035 (disbursed in 10 different installments from August 2013 to December 2016)

I didn’t pay any interest during my course duration(2013-2017).

I’m eligible to get interest subsidy under the scheme of MHRD,GoI.

I have mailed you complete details…please reply.

Hi Amrit,

Please check your mail !!!

Hi Mam,

I also thought that my entire interest has been refunded as subsidy.However, the loan account statement shows only a credit of 20,500 till date as subsidy.

Can you please explain why only this much amount is credited and not the whole interest.

Hi Amrit,

You get subsidy amount only, if you repay the complete interest amount during moratorium period. So, if you have paid monthly interest during your moratorium period, you will get the same amount as subsidy.

Hope, this helps !!!

I have taken education loan from canara bank at an interest rate of 10.75%. I have taken only 350000 of the 4lakh sanctioned money. Now the bank says i need to pay 7126in 120emis which means i have to pay 855120 totally.

I havent paid anything yet. My course just got completed and as per bank my repayment schedule will satrt from jun 2018.

But by calculating different online calculators with this principle and interest percentage i need to pay only about 5000 for a tenure of 10years. kindly help

Hi Niyas,

you need to check about the rate of interest. Because, from 2014 till now, Rate of interest change multiple times. And, ask your bank to provide you the repayment schedule as well as your loan account statement from day 1. Then, check all the details.

Also, you can mail me those documents on connect2moneymaya@gmail.com.

Hope, this helps !!!

I got rs117800+15200 on jun 2014 then rs 117800 on 28th may 2015 and last 100000 on 28th april 2016. My course finished on 2017 may. And i got a job. I approached bank for repayment ,then they said i need to pay 8,55,120 for 3,50,800rs loan.

Hi Mam,

As per your guidance (5th November,2017), I requested my branch manager in written to give me Education Loan Interest Certificate which I need to submit to my employer to get tax rebate under section 80E. However, the manager gave me only a copy of a/c statement and refused to provide interest certificate stating the bank cannot issue any such certificates.

Please help me as i need to furnish the certificate before my employer by 6th March.2018.

It would be of great help to me if you can mail me the format of Education Loan Interest Certificate which i can take a print and get it signed by the manager to resolve the issue by 5th March.

Regards

Amrit

Hi Amrit,

Bank cannot deny you from providing a loan or interest repayment certificate. Please check your email for the format.

Hope, this helps!!!

Hi Bhumi,

Please do not get me wrong but the figures gave by you gives out the below calculation:-

P= 400000

Interest= 10.85%

Tenure= 15 Years

Total Amount after 15 years comes out to be – 400000(1+10.85/100)^15 = 1,875,406.66

Please guide me if I am wrong.

Hi Arnav,

Please refer to any of the EMI Calculators available online.

Hope, this helps!!!

Hello

I took a education loan of 4 lakhs in 2010.my course got over in 2015, and I started paying loan in 2016.i still have a huge amount to pay back considering the fact that I didn’t pay any interest amount during my period of study. I am planning to go for higher studies and won’t be earning during that period. Do banks have such criteria wherein I can go without paying my monthly installments or will they add up interest during that period also

Hi Neha,

If you are going for higher education and securing a loan for the same from the same bank, in that case, they may reschedule the repayment of the loan. However, in all cases, interest will keep adding to your principal amount.

Hope, this helps !!!

Hi Bhumi,

Indeed a great guidance service to technocrates about commerce in a very lucid way with most appropriate examples.

Now I need 1 clarification and 2 your advice.

1a.Is it mandatory to pay interest of the disbursed amount every month and keep the loan account interest free during repayment holiday/moratorium period to avail 80E benefit?

b.My Total expenses would be around 45lac but I have applied for 28 lac and got sanction accordingly, Now my query is If I have to pay 8lac as my fees in the first sem can I get entire 8 lac as my disbursement or they will set the disbursement with the margin ratio?

2. which one is beneficial ,paying interest of the disbursed amount every month or pay along with the principal after the moratorium period.I am not elligible for the Interest subsidy of MHRD.

Thanks.

Hi Mit,

Thanks for appreciating !!!

Coming to your queries:

1a. Yes, it is mandate to keep repaying monthly interest of the disbursed amount during repayment holiday/moratorium period to avail 80E benefit.

b. Both the options are possible. Your bank may disburse the entire 8 lac as your semester fees, depending upon the mutual & written agreement between you and the branch manager. However, your bank may also disburse your semester wise fee as per the margin ratio mentioned in your loan sanction letter, which is actually the ideal process.

2. It’s always better and advisable to keep repaying monthly interest of the disbursed amount from the very first month during the moratorium period to avoid paying interest on interest irrespective of your eligibility for the interest subsidy.

Hope, this helps !!!

Thanks for the clarity, few more doubts,

1 The interest subsidy scheme is valid only for study in India?

2.Insurance is mandatory or advisable, which type of insurance would be better if necessary?

Happy to Help Yashesh!!!

1. Yes, interest subsidy scheme is valid only for study in India.

2. LIC is the most preferred company for PSU banks when it comes to mandate insurance for any loan. It should be a life insurance of the student(in case of education loan) or the borrower.

Hope, this helps !!!

HI ! Bhumi

I have come across the scheme called “Padho pardesh” which enables us interest subsidy by MHRD.

My doubt is that interest subsidy scheme by the MHRD has any income limit of the parent? because the student’s total income is not falling in the ceiling limit of 4.5 lac but his father’s income is more than that limit, still will he be eligible for interest subsidy?

HI Mit,

The benefits of the Scheme would be applicable to those students belonging to economically weaker sections, with an annual gross parental or family income upper limit of Rs. 4.5 lacs per year (from all sources). Income proof shall be required from the students from such public authorities which are authorized by the State Governments for certification of income status for this Scheme, including Central and State Sector Schemes.

Hope this helps !!!

Hi,

Please clarify my doubt. I took education loan on 4th November 2011 of rs. 83475 for the first year at rate of interest 12.5% and then for the 2nd , 3rd and 4th year amount was Rs. 88475 per year (in month of july every time) . I completed my course in June 2015. I joined my company in 2016 so I started re-paying it in April 2016 as Rs.5000/month. Till then there was no interest being deducted from my account but suddenly on June 2017, Rs. 1,58,726 was deducted from my loan account saying Interest amount transferred from accured. I have calculated incured amount as per above it still its higher in my case. Could you please have a look and let me know. i will be highly obliged.

Thanks,

Hi Mansi,

If you have not paid any interest from the very first month of the loan disbursement, in that case, interest amount is correct. It is advisable to get your loan account statement and cross check. You can use EMI Calculator on this website to verify. For any queries, feel free to reach out.

Hope, this helps !!!

I have education loan of 400000 from SBI bank for 4 years of education . I am going to pay the EMI after getting job(After 6 months of education). The tenure for EMI payment they gave is 84 months and 13600 is EMI. Interest rate is 12.70 %. pa

Which Sums up to be total amount more than 11l. I cant understand how they calculated.

Can tell me how MHRD subsidy works and can I apply it.

Thanks in Advance

Hi Sai Krishna,

For 4.00Lakhs principal @ 12.7% for 84 months + 48 months of education = 132 months, total interest payable will be around 3,44,233.00 & total amount payable i.e. principal + interest should be around 7,44,233.00. This is the amount if you do not repay interest every month from the very first month.

However, if you start paying interest from the first month, after 4 years, you will have to repay lesser interest on your principal amount.

Talk to your bank branch manager and get the clarification on the same.

About Education loan interest subsidy:

The benefits of the Scheme would be applicable to those students belonging to economically weaker sections, with an annual gross parental or family income upper limit of Rs. 4.5 lacs per year (from all sources). Income proof shall be required from the students from such public authorities which are authorized by the State Governments for certification of income status for this Scheme, including Central and State Sector Schemes.

Hope, this helps !!!