Driven by rising private university fees, India's outstanding education loans have grown by nearly 40 percent in three years to reach Rs 1.37 lakh crore in 2025, reflecting a trend where fewer students are borrowing significantly larger average amounts. While public sector bank disbursements rose to 7,36,580 students in FY 2023-24, lenders are offering various loan structures with interest rates ranging from 9 to 16 percent and post-moratorium repayment periods lasting up to 15 years. Loan approvals depend on a holistic assessment of the institution's reputation and the co-applicant's credit profile, where a CIBIL score of 750 or above is highly preferred for smooth approval. Additionally, while tangible collateral is standard for loans exceeding Rs 7.5 lakh, the recently introduced PM Vidyalaxmi Scheme has waived this security requirement for students attending top-tier, NIRF-listed institutions.

Driven by rising private university fees, India's outstanding education loans have grown by nearly 40 percent in three years to reach Rs 1.37 lakh crore in 2025, reflecting a trend where fewer students are borrowing significantly larger average amounts. While public sector bank disbursements rose to 7,36,580 students in FY 2023-24, lenders are offering various loan structures with interest rates ranging from 9 to 16 percent and post-moratorium repayment periods lasting up to 15 years. Loan approvals depend on a holistic assessment of the institution's reputation and the co-applicant's credit profile, where a CIBIL score of 750 or above is highly preferred for smooth approval. Additionally, while tangible collateral is standard for loans exceeding Rs 7.5 lakh, the recently introduced PM Vidyalaxmi Scheme has waived this security requirement for students attending top-tier, NIRF-listed institutions.

Driven by rising private university fees, India's outstanding education loans have grown by nearly 40 percent in three years to reach Rs 1.37 lakh crore in 2025, reflecting a trend where fewer students are borrowing significantly larger average amounts. While public sector bank disbursements rose to 7,36,580 students in FY 2023-24, lenders are offering various loan structures with interest rates ranging from 9 to 16 percent and post-moratorium repayment periods lasting up to 15 years. Loan approvals depend on a holistic assessment of the institution's reputation and the co-applicant's credit profile, where a CIBIL score of 750 or above is highly preferred for smooth approval. Additionally, while tangible collateral is standard for loans exceeding Rs 7.5 lakh, the recently introduced PM Vidyalaxmi Scheme has waived this security requirement for students attending top-tier, NIRF-listed institutions.

The demand for education loans has risen sharply over the past decade. Public sector banks disbursed loans to 7,36,580 students in FY 2023-24, up 17 per cent from 6,29,594 students in the previous year. Loan sizes are increasing as fees at private universities are often several times higher than those at government institutions.

Education loan outstanding in India has increased by nearly 40 per cent in just three years, from Rs99,086 crore in 2023 to Rs1.37 lakh crore in 2025. However, the number of active loan accounts has fallen from 23.36 lakh in 2014 to 20.63 lakh in 2025. This suggests that while fewer students are availing education loans, those who do are borrowing larger amounts.

Students look for clarity on repayment tenure, interest rates and repayment flexibility. Repayment tenure is the total period available to repay the loan after the moratorium ends. “The moratorium covers the course duration plus 6 months after graduation or employment, whichever comes first. Government banks offer repayment periods of 12 to 15 years after the moratorium ends, while private banks cap it at 7 to 10 years. NBFCs cap the total tenure at 10 years, moratorium included,” said Harsh Grover, co-founder of LoansJagat.

Interest rates on education loans can be fixed or floating. Rates across lenders currently range from around 9 to 16 per cent. State Bank of India charges 9.90 per cent for loans without collateral and 9.40 per cent for loans with collateral, while female students receive a 0.50 per cent concession across most public sector banks. Repayment is flexible to an extent, with banks offering step-up EMI plans, under which borrowers begin with smaller instalments after graduation and gradually increase repayments as their income grows.

On the other hand, security for education loans can take the form of a third-party guarantor, a co-applicant or a tangible asset. Loans up to Rs4 lakh generally do not require collateral under the Indian Banks’ Association Model Education Loan Scheme. A third-party guarantee is typically sufficient for loans between Rs4 lakh and Rs7.5 lakh.

“Lenders ask for tangible security, such as immovable property or fixed deposits, beyond Rs7.5 lakhs. The PM Vidyalaxmi Scheme, passed in November 2024, has done away with these conditions for NIRF-listed institutes,” said Grover.

While disbursing loans, lenders assess the credit profile of the parent and the placement track record of the institution where the student has secured admission, but no bank evaluates these factors in isolation. Most lenders prefer a co-applicant CIBIL score of 750 or above for smooth approval. Students with no credit history rely largely on the credit profile of their parent or guardian.

“A lower parental score does not automatically mean rejection, but expect higher interest rates and stricter collateral demands,” said Grover. “Institute reputation, separately, carries real weight. A student who gets admission in an IIT or IIM will get faster approvals and better interest rates than a student who gets admission in some lesser-known private college, even if both meet the same stated criteria. In practice, CIBIL score is not a single criterion but is considered along with income stability, presence of collateral, credibility of the course and ranking of the institution.”

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