Education Loan Moratorium Calculator (India)
An education loan does not start with the first EMI. Interest runs from the first disbursement, through the course and the grace period after it, and if nobody pays it, the whole amount joins the principal before the EMI is even calculated. This models that, including staged release of the money, and prices the decision to service the interest instead.
Published as a markup over the lender's repo linked rate, so it differs by bank and by scheme.
SBI: one year after course completion or six months after a job, whichever is earlier. Six months for study abroad.
Up to 15 years after the moratorium ends, at most banks.
The IBA model scheme allows 1%, and SBI, IOB and others offer it. Set it to 0 if your lender does not.
Interest accrued during the moratorium
₹3,50,000
- Moratorium length
- 60 months
- Adds to the principal
- 35%
Principal when EMIs start, unserviced
₹13,50,000
- Original sanction
- ₹10,00,000
EMI if you let it capitalise
₹17,840
- Total repaid
- ₹21,40,842
EMI if you service the interest
₹12,668
- Rate after concession
- 9.00%
- Total outlay
- ₹18,70,109
Servicing the interest costs ₹2,70,733 less overall. That counts the ₹3,50,000 paid during the moratorium as well as every EMI, so it is the whole outlay and not just the EMI saving.
Servicing means paying about ₹5,833 a month on average through the moratorium, starting smaller and rising to roughly ₹8,333 once the whole loan is released, at a point when the borrower is usually still studying.
There is a tax consequence that pulls the other way. The education loan deduction, Section 80E under the 1961 Act and Section 129 under the Income-tax Act 2025, runs for the tax year you first pay interest plus the seven after it. Servicing during a 60-month moratorium starts that clock early, so roughly 5 of the eight years would fall before your first EMI, leaving about 3 for the repayment period when the interest is largest.
The count is approximate, because a tax year runs April to March and the exact number depends on the month your first payment lands. It also assumes you claim the deduction at all, which requires opting out of the default tax regime. This is worth putting to a chartered accountant rather than settling from a calculator.
The moratorium mechanic here follows the Indian Banks' Association model scheme and SBI's published repayment terms: simple interest through the course and grace period, added to the principal once when repayment commences, and an EMI fixed on the principal alone if the interest has been serviced first. It capitalises once, not every year.
Individual banks vary. Concessions for female borrowers, for collateral, and for institution ranking are common and are not modelled here, nor are processing fees, insurance premiums or prepayment. This computes the moratorium and the servicing decision, and it does not recommend a lender or tell you what to do.
Cite this calculator
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The Money Decoded. "Education Loan Moratorium Calculator (India)." https://themoneydecoded.com/calculators/education-loan
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The number every education loan calculator leaves out
Most tools sold as education loan calculators are home loan calculators with a different heading. They take a principal, a rate and a tenure, and return an EMI. That works for a car or a house, where repayment starts the month after the money arrives. An education loan has a gap of several years first, and the interest that builds in that gap is often the largest single number in the whole loan.
On a 10 lakh rupee loan at 10% with a four-year course and a one-year grace period, the moratorium interest comes to 5,00,000 rupees if the money is disbursed up front. That is half the sanction again, and it is added before the first EMI is computed. A calculator that skips it does not understate the loan slightly. It leaves out a third of what gets repaid.
How the moratorium actually works
Simple interest accrues on whatever has been disbursed, and if it is not serviced it is added to the principal once, at the point repayment commences. The Indian Banks' Association model scheme states that simple interest is to be charged during the repayment holiday, and that the accrued interest during that period is to be added to the principal with the EMI then fixed. SBI's own repayment page says the accrued interest of the course and moratorium period is added to the principal, and that if the full interest is serviced before repayment commences, the EMI is fixed on the principal amount only.
Once, not annually. This matters because a good deal of published material describes the interest as compounding each year through the moratorium, which produces a bigger number than the rule does. On the example above, annual compounding gives 16,10,510 rupees against the correct 15,00,000, an overstatement of 1,10,510. Our own guide carried that error until we checked it against the scheme documents.
Why staged release changes the answer
An education loan is normally paid out in instalments across the course, so interest runs only on what has actually been released. The IBA scheme is explicit that the loan is to be disbursed in stages as per requirement, directly to the institution where possible. A four-year course funded in four annual tranches has only a quarter of the money accruing interest in its first year, and the full amount only in the final year and the grace period.
The difference is large enough to change decisions. The same 10 lakh rupees at 10% over a five-year moratorium accrues 5,00,000 if paid out on day one, against 3,50,000 when released in four equal annual tranches. Assuming upfront disbursement, which every calculator we found does implicitly by ignoring the question, overstates the interest by 1,50,000 rupees, or 43%. The toggle above is there because the honest answer depends on which one your sanction letter describes.
What servicing the interest is really worth
Servicing keeps the accrued interest out of the principal, and most banks add a rate concession for doing it. The IBA model scheme allows a 1% concession where interest is serviced during the study period, and SBI, Indian Overseas Bank and others publish one. So the borrower who services gets two benefits at once: a smaller principal to amortise and a lower rate to amortise it at.
The calculator counts the money paid during the moratorium as well as every EMI, which is the only fair comparison. A tool that reports the EMI saving alone flatters the servicing option, because it quietly ignores the years of payments that bought the saving. What matters is the total outlay, and that is what the figure above reports.
The tax catch that pulls the other way
The eight-year window for the education loan deduction starts in the tax year you first pay interest, not the year your EMIs begin. Section 129 of the Income-tax Act 2025, which was Section 80E under the 1961 Act, defines the initial tax year as the one in which the borrower starts paying interest on the loan, and allows the deduction for that year plus the seven after it.
Servicing interest through a five-year moratorium therefore spends about five of those eight years before the first EMI falls due, and it spends them on the smallest interest payments the loan will ever produce. The deduction is uncapped, so the years when it is worth most are the early repayment years, when the EMI is mostly interest. This is a genuine tension between the two sides of the same decision, and it is not settled by arithmetic alone. It also assumes the deduction is claimed at all, which requires opting out of the default tax regime: see what claiming Section 80E actually costs.
What this calculator does not do
It does not recommend a lender or a scheme, and it does not tell you whether to service the interest. It prices both paths and leaves the choice where it belongs.
It leaves out several real things that vary by borrower and by bank: the 0.5% concession most public sector banks give female borrowers, rate differences for collateral-backed loans, pricing tied to institution ranking, processing fees, life insurance premiums bundled with the loan, prepayment, and any government interest subsidy scheme the borrower may qualify for. It also assumes a single rate for the life of the loan, whereas most Indian education loans are floating and move with the lender's repo linked rate.
Pair this with the guide
The companion post works through how interest is calculated on both US and Indian student loans, what capitalisation does to a balance, and the rate structures behind the numbers: How Student Loan Interest Works. For the tax side, and what claiming the deduction costs a filer in the default regime, see Section 80E Education Loan Deduction: What It's Worth.
Frequently asked questions
Is interest charged during the education loan moratorium?
Yes. Interest accrues from the first disbursement, through the course and through the grace period after it, and no bank waives it. What the moratorium suspends is the EMI, not the interest. The Indian Banks' Association model scheme specifies simple interest during the repayment holiday, and if that interest is not serviced it is added to the principal when repayment commences. SBI's repayment page describes the same treatment and adds that if the full interest is serviced before repayment starts, the EMI is fixed on the principal amount only. So the choice during the moratorium is whether to pay the interest now or borrow it.
Is moratorium interest simple or compound?
Simple, and it is capitalised once rather than every year. The IBA model scheme states that simple interest is to be charged during the repayment holiday and that the accrued interest is to be added to the principal, at which point the EMI is fixed. Many articles describe the interest as compounding annually through the moratorium, which overstates it: on a 10 lakh rupee loan at 10% across a five-year moratorium, annual compounding produces 16,10,510 rupees where the correct treatment produces 15,00,000, a difference of 1,10,510 rupees. Individual lenders can vary, so the sanction letter is the authority for your own loan.
How much does the moratorium add to an education loan?
It depends on the rate, the length of the moratorium and, more than most people expect, on when the money is actually released. A 10 lakh rupee loan at 10% disbursed in full on day one accrues 5,00,000 rupees across a five-year moratorium, which is 50% of the sanction. The same loan released in four equal annual instalments accrues 3,50,000 instead, because interest runs only on what has actually been paid out. The IBA scheme says the loan is to be disbursed in stages as per requirement, so staged release is the normal case and an upfront assumption inflates the figure.
Should I pay interest during the moratorium?
That is a decision for the borrower and the household, and this calculator prices both sides rather than choosing. Servicing keeps the accrued interest out of the principal and usually earns a rate concession, which most banks set at 1%, so the total outlay is normally lower. Against that, the money is paid while the student is still studying and often not earning, and there is a tax consequence: the eight-year window for the education loan deduction begins in the tax year interest is first paid, so servicing during the moratorium spends some of those years before the EMIs start. Worth putting to a chartered accountant.
How long is the moratorium on an Indian education loan?
The course period plus a grace period, and the grace period is where lenders differ. SBI states that repayment commences one year after course completion, or six months after securing a job, whichever is earlier, and six months after course completion for study abroad. The IBA model scheme uses course period plus one year or six months after getting a job, whichever is earlier. Repayment then runs up to 15 years at most banks, excluding the course and moratorium period, so the total life of the loan can approach twenty years.
Sources
- Indian Banks' Association, model educational loan scheme, for simple interest during the repayment holiday, the accrued interest being added to the principal before the EMI is fixed, the 1% concession for servicing interest during the study period, disbursement in stages, and the course period plus one year or six months after employment moratorium
- State Bank of India, education loan repayment, for the accrued interest of the course and moratorium period being added to the principal, the EMI being fixed on the principal alone where interest is serviced first, repayment commencing one year after course completion or six months after a job for study in India and six months after completion for study abroad, and the maximum 15 year term
- Indian Overseas Bank, education loan FAQ, for a second lender stating the same moratorium definition, the 1% concession for interest serviced during the moratorium, and the 15 year repayment excluding course and moratorium
- The comparison figures above are our own calculation on the standard reducing-balance amortisation formula, using simple interest across the moratorium capitalised once at commencement