Education Loan EMI Calculator
The EMI after the course, and what letting the moratorium interest capitalise really costs.
- Simple interest over 54 months
- ₹9.00L
- If you service it: ₹16.67K/month, then EMI
- ₹26.43K
- If you let it capitalise, EMI becomes
- ₹38.32K
- Extra cost of not paying during the course
- ₹5.27L
- Principal
- ₹29.00L
- Total interest
- ₹16.99L
Year by year10 yrs
| Year | Principal paid | Interest paid | Balance left |
|---|---|---|---|
| Y1 | ₹1.78L | ₹2.82L | ₹27.22L |
| Y2 | ₹1.97L | ₹2.63L | ₹25.26L |
| Y3 | ₹2.17L | ₹2.43L | ₹23.08L |
| Y4 | ₹2.40L | ₹2.20L | ₹20.69L |
| Y5 | ₹2.65L | ₹1.95L | ₹18.04L |
| Y6 | ₹2.93L | ₹1.67L | ₹15.11L |
| Y7 | ₹3.23L | ₹1.37L | ₹11.88L |
| Y8 | ₹3.57L | ₹1.03L | ₹8.31L |
| Y9 | ₹3.95L | ₹65.29K | ₹4.36L |
| Y10 | ₹4.36L | ₹23.97K | ₹0 |
Reducing-balance EMI at a constant 10% annual rate — interest is charged on the outstanding balance, which the chart shows declining to zero over the tenure. The figures above assume the moratorium interest is capitalised, which is the default on most education loans: simple interest accrues through the course and grace period and is added to the principal every later EMI is computed on. Servicing it monthly instead avoids that, and many banks also shave 0.5 to 1 percentage point off the rate for doing so. Interest on an education loan is deductible under section 129 (the old section 80E) for up to eight years with no monetary cap — but under the old regime only, so most borrowers on the default new regime get nothing for it.
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Independent · No commissions · No fund-house data — how the numbers are computed
How it works
An education loan has a phase no other retail loan has: the moratorium, covering the course plus a grace period of six months at most public-sector banks or twelve at private lenders and NBFCs. No EMI is due during it. What is easy to miss is that interest still accrues — as simple interest, which is the concession — and you have to decide what happens to it.
You can service that interest monthly while studying, or let it capitalise into the principal. Capitalising is the default and it is not merely a deferral: it raises the principal that every subsequent EMI is computed on, so the cost compounds across the whole repayment tenure. The calculator shows both, and the gap between them is usually larger than borrowers expect.
Many banks also cut the rate by half a point to a full point for servicing interest during the course, which widens the gap further. That concession is worth asking about explicitly, since it is rarely offered unprompted.
Simple interest during the moratorium = P x annual rate x moratorium months / 1200. Capitalising: EMI is computed on (P + that interest). Servicing: EMI is computed on P alone, and you pay the interest monthly as it accrues.Total cost when servicing is the moratorium interest plus the EMIs on the original principal; when capitalising it is the EMIs on the inflated principal. The difference is what not paying during the course actually costs.
Frequently asked questions
How long is the moratorium on an education loan?
The course duration plus a grace period, which is six months at most public-sector banks following the IBA model scheme, and often twelve months at private banks and NBFCs. For a four-year degree that means a moratorium of 54 to 60 months, during which no EMI is payable but interest accrues throughout.
Should I pay the interest during the course if I can?
Almost always yes, if the money is available. Servicing it keeps the interest off the principal, so every later EMI is computed on the original amount rather than an inflated one, and many banks reduce the rate by 0.5 to 1 percentage point for doing so. The monthly amount during the course is small relative to the eventual EMI, and the saving compounds across the entire repayment tenure.
Is education loan interest tax deductible?
Yes, under section 129 of the Income-tax Act 2025 — previously section 80E — on the interest only, with no monetary cap, for up to eight years from when repayment starts or until the interest is fully repaid, whichever is earlier. The catch is that it is an old-regime deduction: under the new regime, which is the default, it is worth nothing, so most borrowers now get no benefit from it.
Does interest compound during the moratorium?
No — it accrues as simple interest, which is precisely the concession the moratorium represents. It is only once that accrued amount is capitalised into the principal at the end of the moratorium that it starts attracting interest itself. That is why servicing it during the course, or even paying it as a lump sum at the end, avoids the compounding entirely.