Student Loan Interest Rates: How They Affect Your Repayment

Student loan interest rates in India typically range from 6.85% to over 13% per annum, depending on the lender, collateral (secured vs. unsecured), and applicant creditworthiness. Different banks and financial institutions offer education loans with varying interest rates depending on factors such as the loan amount, course type, university, and the borrower’s profile.

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By comparing student loan interest rates in India, students can choose a lender that offer affordable borrowing and manageable EMIs.

What Is a Student Loan Interest Rate?

A student loan interest rate is the percentage charged by the lender on the borrowed amount (principal). It’s typically calculated on a daily reducing balance basis, which means interest is applied only to the outstanding loan amount.

There are two common types:

Fixed interest rate – stays the same throughout the loan tenure
Floating interest rate – changes based on market conditions

To understand how both options impact your monthly payments, you can use a Floating vs Fixed EMI Calculator and compare the difference in total interest and EMI over time.

Most education loans in India are offered at floating rates. Along with interest, many lenders also recommend taking out education loan insurance, which acts as a safety net during the loan tenure. In case of unforeseen events like death or permanent disability of the borrower, the insurance covers the outstanding loan amount, ensuring the repayment responsibility doesn’t fall on the co-applicant, usually parents or guardians.

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Student Loan Interest Rates in India

Below are the approximate education loan interest rates offered by some popular lenders in India.

Bank / Lender	Student Loan Interest Rate (Approx.)
SBI	8.5% – 11.5%
HDFC Bank	9.5% – 13%
Credila	10% – 13.5%
ICICI Bank	10% – 13%
Axis Bank	10.5% – 13%
PNB Bank

Note: Interest rates may vary depending on the course, institution, and applicant profile.

Lowest Interest Rate Student Loan in India

Choosing the lowest-interest-rate student loans can significantly reduce the overall cost of education. Public sector banks generally offer lower interest rates compared to private lenders.

Here are some tips to get the lowest education loan interest rate:

Choose Government Banks
Public sector banks usually offer lower interest rates and more flexible repayment options, especially for recognized courses in India and abroad.
Apply for Interest Subsidy Schemes
Schemes like the Central Government’s interest subsidy can reduce or completely cover interest during the study period for eligible students.
Maintain a Strong Academic Profile
A good academic record signals lower risk to lenders, which can help you secure better interest rates and loan terms.
Provide Collateral
Offering collateral such as property or fixed deposits often results in lower interest rates since it reduces the lender’s risk.
Compare Multiple Lenders
Checking offers from different banks and NBFCs helps you identify the most competitive interest rates and terms available.

How to Calculate Student Loan EMI?

To calculate your student loan EMI, you can use a standard formula used by banks and NBFCs:

EMI Formula:
EMI = P×R×(1+R)NP × R × (1+R)^NP×R×(1+R)N / (1+R)N–1(1+R)^N – 1(1+R)N–1

Where:

P = Loan amount
R = Monthly interest rate (annual rate ÷ 12 ÷ 100)
N = Loan tenure in months

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Ways to Manage Student Loan Interest

Start Paying Early (Even Small Amounts)

If possible, pay interest during the moratorium period. This prevents capitalization and keeps your loan from growing unnecessarily.

Make Extra Principal Payments

Any extra payment goes directly toward reducing the principal, which:

Lowers future interest
Shortens your loan tenure

Consider Refinancing

If you find a better deal later, refinancing your loan at a lower interest rate can:

Reduce EMIs
Cut total repayment cost

Choose the Right Tenure

Longer tenure → lower EMI but higher total interest
Shorter tenure → higher EMI but lower overall cost

Balance affordability with long-term savings.

Final Thoughts

Student loan interest rates may seem like just a number, but they have a lasting impact on your financial life. From your monthly budget to your long-term goals, everything is influenced by how much interest you pay.

Before choosing a loan, look beyond the headline rate. Understand how it behaves over time, how it affects your repayment structure, and what you can do to manage it better.

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FAQs

Q. What is the interest rate of a student loan?

Ans: The interest rate on a student loan is the cost charged by the lender for borrowing money, usually ranging between 8% to 14% per annum in India, depending on the bank, course, and borrower profile.
Q. What are the current interest rates on student loans?

Ans: As of now, most public sector banks offer rates starting from around 8%–10%, while private banks and NBFCs may charge slightly higher rates based on risk and loan type.
Q. How are student loan interest rates calculated?

Ans: Interest rates are determined based on factors like the lender’s base rate (MCLR or repo-linked rate), the applicant’s academic profile, course type, institution, loan amount, and whether collateral is provided.
Q. How to get the lowest interest rates on student loans?

Ans: You can secure lower rates by choosing government banks, maintaining strong academics, applying for subsidy schemes, providing collateral, and comparing multiple lenders before finalizing.
Q. What is a good student loan interest rate?

Ans: A good student loan interest rate typically falls between 8% to 10% per annum, especially if offered by a reputed public sector bank with favorable repayment terms.
Q. How do student loan interest rates affect my EMI?

Ans: Interest rates directly impact your monthly EMI. A higher rate increases your EMI and overall repayment, while a lower rate makes your monthly payments more affordable.
Q. What is the difference between fixed and floating interest rates?

Ans: A fixed rate stays the same throughout the loan tenure, giving you predictable EMIs. A floating rate changes with market conditions, so your EMI may increase or decrease over time.
Q. When does interest start on a student loan?

Ans: Interest usually begins from the date the loan amount is disbursed, not when repayment starts. This means your loan may grow even during the study or grace period.
Q. Which app offers the best interest rates for student loans in India right now?

Ans: No one app always has the lowest rate. The interest rates depend on your profile, the course you're taking, and the co-applicant. Bajaj Finserv, Paytm, and HDFC Bank are some platforms that let you compare options. However, public sector banks usually have better rates, especially for secured loans. Before making a decision, it's best to compare several lenders.

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˜The insurers/plans mentioned are arranged in order of highest to lowest Sum Assured(SA) offered by Policybazaar’s insurer partners offering term insurance plans on our platform, as per ‘first year premium of life insurers as at 31.03.2025 report’ published by IRDAI.

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