Education Loan Calculator

About the Education Loan Calculator

An education loan is not paid out at once and not repaid at once. The bank pays the fees in instalments — a disbursement each year or term — and you start repaying only after a moratorium: the length of the course plus a grace period, a year in the Indian Banks’ Association’s model scheme. During the moratorium the loan earns simple interest on what has been paid out. You can pay that interest as it falls due, often for a lower rate, or let it build up; then it is added to the loan and your EMI is worked out on the larger amount.

This calculator follows the loan month by month: enter each disbursement, the course and grace months, the rate and the repayment period, and choose what happens to the interest during the moratorium. You get the EMI, the loan when repayment starts, the total interest and everything you pay, with a side-by-side look at paying the interest during the course versus letting it add up. EMIs can also step up each year for a career that starts on a lower salary. For a loan from an Indian lender, it also lists the interest you can deduct under section 129 of the Income-tax Act, 2025 in the old tax regime — for eight tax years from the year you start paying interest — and the tax it can save.

Common uses

• Seeing the EMI a course will leave you with before you choose a bank or a college.
• Deciding whether to pay the interest during the course, and what the concession is worth.
• Planning stepped-up EMIs that fit a starting salary.
• Checking which tax years the section 129 deduction covers, and what it saves in the old regime.

How the moratorium interest is worked out

The IBA’s Model Educational Loan Scheme says “simple interest to be charged during the study period and up to commencement of repayment”, that paying it then is optional, and that the “accrued interest will be added to the principal amount borrowed while fixing EMI for repayment”. The moratorium is the “course period + 1 year”, and a bank “may” give a 1% interest concession if the interest is paid during the study period and the moratorium (IBA scheme).

So each disbursement earns interest from the month it is paid out to the end of the moratorium:

interest = amount × rate × months ÷ 12

The interest is charged on what was paid out, never on interest — that is what makes it simple. If you pay it every month, the loan stays at the amount paid out; if not, the unpaid interest is added on when repayment starts.

The EMI and stepped-up EMIs

Repayment is in equal monthly instalments: EMI = P × i ÷ (1 − (1 + i)^−n), with P the loan when repayment starts, i the yearly rate ÷ 12 and n the number of months. The IBA scheme allows up to 15 years and mentions stepped-up instalments for careers that start on a lower salary. With a yearly step-up of g, the first instalment is P ÷ Σ (1 + g)^⌊(k − 1) ÷ 12⌋ ÷ (1 + i)^k and each later year’s is (1 + g) times the year before; the loan is still repaid in full by the last month.

The scheme also says no prepayment penalty is charged, so paying extra when you can shortens the loan.

The tax deduction in India (section 129)

Under section 129 of the Income-tax Act, 2025, an individual can deduct “amount paid as interest during a tax year” on a loan from a bank (or another notified financial institution or an approved charitable institution) taken for the higher education of themselves, their spouse or children, or a student they are the legal guardian of, paid out of income chargeable to tax. There is no upper limit, but it is allowed only for “the initial tax year and seven tax years immediately succeeding” it — the initial tax year being the one in which you start paying the interest — or until the interest is fully paid (Income-tax Act, 2025).

The deduction is not available in the new regime, which leaves out Chapter VIII deductions other than a few listed ones (section 202), so it helps only if you opt for the old regime. The tax saved is worked out at the Tax Year 2026-27 old-regime rates, with the 4% cess, for every year shown. The calculator counts the interest you actually pay each year — interest added to the loan during the moratorium becomes part of the loan, and your bank’s interest certificate is what to go by.

Limitations

• Interest is worked out monthly, each month as 1/12 of a year. Banks that charge interest daily, or whose rate floats with a benchmark, will differ.
• Disbursements are taken at the start of their month; enter the month the bank actually pays.
• The rate during repayment stays fixed once it starts. Prepayments, missed payments and extra moratoriums for unemployment are not modelled.
• The tax saving uses the Tax Year 2026-27 old-regime rates for every year and your taxable income as you type it; future rates and incomes may differ.
• Student loans with income-based repayment (as in the UK or Australia) work differently and are not covered.

Privacy

Everything is calculated in your browser. The amounts, dates and income you enter are never uploaded or stored.