Education Loan at Zero Interest Rate in India

Education Loan at Zero Interest Rate

Studying at a top university can be costly, and paying for fees and living expenses is a common worry for students. Education loans help, but banks rarely offer true zero-interest loans. In 2026, you can still reduce your loan cost by using government schemes, interest subsidies, and smart repayment options.

Can You Get Zero Interest Education Loans in India for 2026?

Banks and NBFCs do not offer education loans at 0% interest as a regular product. They always charge interest, and the idea of a zero-interest loan is mostly a misunderstanding.

However, the Indian government and some alternative platforms and child plans that offer interest subsidies or interest‑free payment support that feel like low or no interest under specific conditions.

Government Schemes to Lower Education Loan Cost

The following government child education plans help students minimise the real interest cost of education loans by giving them full or partial subsidies.

PM‑Vidyalaxmi Scheme

The Government of India started the Pradhan Mantri Vidyalaxmi Scheme in late 2024. It helps eligible students get interest subsidies on education loans taken from participating banks. Under this investment plan, the government pays part or all of the interest during the study period and moratorium, which reduces the overall loan burden and makes education more affordable.

Feature	Details
Loan Type	Collateral‑free & guarantor‑free loans
Eligible Students	Admitted to top Quality Higher Education Institutions (QHEIs)
Interest Subsidy	3% interest subvention on loan up to ₹10 lakh during the moratorium period
Credit Guarantee	Govt covers 75% default risk (for loans up to ₹7.5 lakh)
Annual Slots	1 lakh students get an interest subsidy each year
Total Outlay	₹3,600 crore (till 2030‑31)
Application	Online at the PM‑Vidyalaxmi portal
Priority	Students with technical/professional courses & government institutions.

How Does an Interest Subsidy Work?

If you take a loan of ₹7 lakh with an interest rate of 8.5%:

Normal interest due in a year: ~₹59,500
Government pays 3% interest subsidy: ~₹21,000
You save ~₹21,000 in interest during the moratorium year

Your effective interest does not become zero, but it reduces significantly.

Central Sector Interest Subsidy (CSIS)

Students from families with annual income up to ₹4.5 lakh pursuing recognised technical or professional courses may get a full interest subsidy (interest waived during moratorium).

100% interest subsidy during the moratorium period
Applicable for education loans from scheduled banks only
Covers technical and professional courses in India and abroad
Available for students from families with an annual income of up to ₹4.5 lakh
The government pays the interest on your behalf during your studies
The benefit is available only once per student

Pro Tip: Many students miss this because banks don’t automatically apply it — so ask specifically when you apply.

NBCFDC Education Loan Scheme (Backward Classes)

This scheme offers education loans at concessional interest rates to students from backward classes to support higher studies in India and abroad.

Low interest rate of 4% (only 3.5% for girls)
Loan up to ₹15 lakh (India) and ₹20 lakh (abroad)
Family income limit of ₹3 lakh per year
Covers professional and technical courses
Lower repayment burden due to reduced interest rates
Focus on socially and economically backward students

Dr Ambedkar Central Sector Scheme (OBC/EBC)

This program pays all interest on loans for OBC and EBC students who are studying overseas for higher education.

100% interest subsidy throughout the time of the moratorium
Only for research outside of the country
The loan amount is between ₹20 lakh and ₹30 lakh.
Open to students from OBC and EBC
No interest is charged during the course and for one year after, which lowers the overall cost of student loans considerably

Andhra Pradesh - Jagananna Vidya Deevena

Jagananna Vidya Deevena is a state government scheme that fully reimburses tuition fees for eligible students from low-income families.

The annual family income limit is ₹2.5 lakh.
includes professional courses, degrees, and diplomas.
Direct payment of fees to colleges
So far, almost ₹4,000 crore has been released.
Helps students from areas with lower incomes.

How to Choose the Most Effective Education Loan Plan?

True Zero-Interest Education Loans Do Not Exist: Banks and NBFCs always charge interest on education loans. What reduces the cost is government interest subsidy support, not a real 0% loan.

Use Government Interest Subsidy Schemes First: Schemes like PM-Vidyalaxmi and CSIS can pay part or all of the interest during the study and moratorium period, lowering your burden.

Compare Loans Using Effective Interest Cost (EIC): Do not rely only on the advertised interest rate. Compare the total repayment amount to understand the real cost of the loan.

Ask for Special Concessions and Discounts: Always ask if the bank offers lower rates for girl students, top institutions, or strong co-applicant profiles.

Manage the Moratorium Period Smartly: Paying simple interest during the study period can reduce compound interest and save money in the long run.

Offer Collateral or Fixed Deposits If Possible: Providing property, FD, or a strong guarantor can help you get a lower interest rate from the bank.

Apply Early With Complete Documents: Early and complete applications improve approval chances and eligibility for interest concessions.

Prepay Whenever Possible Without Penalty: Small prepayments after the moratorium can sharply reduce total interest and loan tenure.

Claim Tax Benefits Under Section 80E: You can claim a tax deduction on the full interest paid for up to 8 years, reducing your overall burden.

Track and Confirm Subsidy Application Status: Subsidies are not always auto-applied. Follow up with your bank to ensure benefits are credited correctly.

Conclusion

Today, banks do not offer true zero-interest education loans. However, government schemes and interest subsidies can reduce or fully cover the interest during the study and grace period. This makes the loan cost much lower than regular education loans. Students should focus on using subsidies, concessions, and tax benefits instead of chasing a 0% interest claim. With the right strategy, an education loan can become affordable and stress-free.

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