An education loan is a loan that pays for study: tuition fees and living costs, in India or abroad. It is repaid in EMIs, usually after the course ends. Some lenders also split school fees into monthly instalments for parents.
An education loan is different from most loans because the borrower usually has no income yet. The lender lends against the student's future earnings. So it looks at the course, the university, the country and the jobs that graduates usually get. It also checks the income and credit history of a co-applicant, usually a parent. For large loans, the lender may ask for security, such as a property or a fixed deposit.
Say a student from Vijayawada gets admission for a master's degree in Canada. The total cost is about ₹57 lakh: ₹25 lakh of tuition and ₹32 lakh of living costs for two years. She applies to a lender that specialises in study-abroad loans. The lender's credit decision engine scores her university, her course and her father's income. The loan is approved before she applies for her Canadian study permit, because the application must show proof of funds. When the fees are due, the lender pays the university directly, through an international education payments service. Living costs go to her account. Repayment starts six months after the course ends. Until then she pays only the interest, or nothing.
Behind the lender, a loan origination system collects the documents, such as the admission letter, marksheets and the parent's income proof, and creates the loan.
Education loans are often sold together with admissions help. A study abroad consultancy platform helps the student choose and apply to universities, and arranges the loan at the same time. In India, loans are also offered for online degree programmes and for coding bootcamps.
Education loans come from banks and from NBFCs that specialise in them, explained in NBFC vs bank. Indian tax law allows a deduction on the interest paid on an education loan from a bank or an approved financial institution, for up to eight years. Since April 2026, this deduction is in Section 129 of the Income-tax Act, 2025, which replaced Section 80E of the old Act. It can be claimed only under the old tax regime.