The Reserve Bank of India (RBI) sets the guidelines that shape how education loans are offered by banks across India. Through various guidelines and policies, the RBI has made higher education more accessible while promoting fair lending practices.
Over the past 25 years, the RBI has introduced several key decisions that continue to influence education loans in 2025. While there are no major new updates from the RBI as of now in 2025, understanding the key elements of education loans will help you make informed financial decisions about your future.
Now, let’s explore the major historical decisions by the RBI that continue to influence education loans today.
Major historical decisions by RBI shaping education loans today
- Educational Loan Scheme (2001) to standardize loan terms across banks in India.
- Collateral-free loans up to ₹4 Lakhs (2010) to broaden access without collateral requirements.
- Interest Rate Deregulation (2016) allows banks to set rates based on market conditions.
- Service Area Removal (2012) prevents banks from rejecting education loan applications based on the applicant’s address.
- Integrated Ombudsman Scheme (2021) for a structured process to handle borrower complaints.
Over the years, these major decisions by the RBI have had a lasting impact on how education loans function today, making them more accessible and fair for students.
Now, let’s find out the specifics of loan amounts and repayment terms to understand what you can expect when seeking an education loan.
Also Read: Education Loan for Studying in the USA: Interest Rates, Courses, Requirements & Banks
Loan amounts and repayment terms
How much you can borrow and how you’ll be expected to repay it are two of the most important aspects of education loans. It’ll shape your financial future.
You have to think beyond the immediate need for money to pay for school and look at how this will impact you years down the line.
Loan amounts
Typically, education loans for higher studies in India can go up to ₹15-20 lakhs, while loans for studying abroad may range up to ₹30-50 lakhs for unsecured options and significantly higher for secured loans with collateral, sometimes exceeding ₹1 crore, depending on the bank and borrower’s profile.
Repayment terms
Typically, the RBI guidelines for education loans mandate banks to provide a moratorium period, which includes the entire course duration plus an additional 6 to 12 months.
This means you won’t have to start repaying your loan immediately after taking it out. Repayments generally start after you’ve completed school and secured a job. The repayment window itself is usually up to 15 years. Apart from this, there have been no new updates given by the RBI in 2025 that impact the moratorium period on education loans.
Note: While understanding loan amounts and repayment terms is crucial for planning your education financing, finding the best loan options can still feel daunting. This is where FundRight (by GradRight) makes a difference. With FundRight, you gain access to offers from over 15 trusted banks and NBFCs, all competing to give you the best terms. You can compare rates, find loans with no collateral or cosigner requirements, and secure options that fit your financial needs.
Here’s why FundRight stands out:
- No paperwork or bank visits—it’s all digital.
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- Quick disbursement, often within 10 days, so you can focus on your studies.
By using FundRight, you ensure that you’re making the smartest financial choice for your future.
Now, let’s move on to understanding interest subsidy schemes that can further ease the burden of education loans.
Interest subsidy schemes
Interest subsidy schemes can be a lifeline for students from economically weaker backgrounds. Here’s a look at some of the most important schemes.
Central Sector Interest Subsidy (CSIS)
The Central Sector Interest Subsidy is aimed at students whose family income is less than ₹4.5 lakhs per year.
Under this scheme, the government covers the entire interest on your education loan during the moratorium period, which includes both the time you’re studying and the 12 months following the completion of your course.
It is important because it keeps your loan amount from growing while you’re still in school. However, this benefit is only available to students studying in India
Dr. Ambedkar Interest Subsidy Scheme
For students from OBC and economically weaker sections pursuing postgraduate studies abroad, the Dr. Ambedkar Interest Subsidy Scheme offers similar support.
Like the CSIS, it takes care of the interest that accrues during the moratorium period, ensuring your loan balance remains manageable when you begin repayment after graduation.
Padho Pardesh Scheme
The Padho Pardesh Scheme offers a similar benefit to students from minority communities who are planning to study abroad.
The purpose of this scheme is to encourage students from minority backgrounds to pursue higher education internationally, making it easier to manage the financial challenges that come with studying abroad.
Now, let’s explore the RBI rules for education loan recovery and what they mean for you.
Also Read: Education Loan in India: Interest Rates, Process, Best Banks & More
RBI rules for education loan recovery
Missing payments can have serious implications, so it’s essential to understand how the RBI’s education loan recovery process works and what steps you can take to avoid financial challenges.
Now, let’s take a closer look at what happens in cases of loan default and the potential consequences you might face.
Loan default and consequences
Once you miss payments for 90 days, your loan is classified as a Non-Performing Asset (NPA). This is when the recovery process formally starts. If your loan is secured with collateral, like property, the bank can legally sell that asset to recover the outstanding balance.
Your credit score will be heavily impacted by this, and it will become harder to get any form of credit in the future.
Loan restructuring options
In case you’re unable to continue with the repayment or you find it difficult to manage, loan restructuring is one of the first things you should consider.
Restructuring essentially allows you to modify your loan terms so they better fit your current situation. One of the most common solutions is extending your repayment period. This lowers your monthly EMIs, which can ease the pressure immediately.
But be aware while you’ll be paying less each month, the longer term means you’ll be paying more in interest overall. So it’s important to weigh this carefully before making any decisions.
The RBI guidelines in 2025 remain the same regarding loan defaults and restructuring options.
Guidelines for loan settlement
Loan settlement is an option when full repayment becomes impossible. According to RBI guidelines for education loans, this is a negotiated process where the bank agrees to accept a reduced amount to close the loan.
But if you decide to settle a loan, it will significantly affect your credit score. It will make future borrowing extremely difficult and can take years to revive.
Collateral requirements
For unsecured loans that don’t require collateral, the loan amount usually ranges from ₹4 lakhs to ₹60 lakhs. The exact amount depends on factors like your academic profile, the course you’re pursuing, and the reputation of the institution.
Secured loans, on the other hand, require you to pledge collateral, such as property or fixed deposits. These loans can go as high as ₹1.5 crores, especially for students studying abroad.
Moratorium period
The moratorium period is one of the most borrower-friendly features of an education loan. This is the grace period during which no repayment is required, covering the entire course duration plus an additional 6 to 12 months after completion.
While no EMIs are due, interest accrues during this period, typically calculated as simple interest. The moratorium gives students time to secure employment before starting their repayment.
Interest rates on education loans
Education loans typically come with two types of interest rates, fixed and floating. Fixed interest rates do not change throughout the loan tenure, but floating interest rates keep fluctuating.
Several factors can influence the interest rate you’ll be charged on your education loan, including the loan amount, loan tenure, your credit score, the type of institution you’re attending, and whether you have a co-applicant.
Grievance redressal mechanism
The RBI mandates that all banks offering education loans have a grievance redressal mechanism in place to address borrower complaints. If a borrower encounters issues such as delays in disbursement, errors in interest calculation, or repayment concerns, they should first raise the issue with the bank.
Also Read: Education Loan for Study in Canada: Interest Rates, Courses, Requirements & Banks
FAQs
Education loan rules, as set by the RBI, provide a framework for eligibility, repayment, collateral requirements, and loan coverage. Loans are designed to cover tuition fees, living expenses, travel (for international studies), and other essential costs.
Recent updates focus on expanding interest subsidy schemes, making loans more accessible for students from economically weaker sections, and offering better restructuring options for repayment.
Yes, education loans cover a wide array of costs, including accommodation, travel for studying abroad, books, equipment, and other essential educational materials.
Yes, for loans up to ₹4 lakh, no collateral is required, making these loans unsecured. For higher amounts, a third-party guarantee or tangible collateral is required, depending on the loan size.
