Education Loans for Indian Students: How to Fund Your Study Abroad Plans

Education loans for Indian students are the most common way to fund a degree abroad, usually combined with scholarships and family savings. Indian banks and NBFCs lend for overseas study, and most central interest subsidy schemes only cover study in India, so your funding plan depends on choosing the right lender, winning scholarships, and meeting your destination’s visa funds rules.

Which Way of Funding Your Degree Suits You Best?

The right funding mix depends on your family’s assets, your academic profile, and your eligibility for targeted schemes. Use this as a starting point before comparing lenders.

Where Can Indian Students Get an Education Loan to Study Abroad?

Indian students can borrow from four types of lender. Comparing at least two is the simplest way to lower your total cost.

Do You Need Collateral for an Education Loan?

Under the Indian Banks’ Association (IBA) Model Education Loan Scheme, loans up to ₹7.5 lakh need no collateral and are backed by a government credit guarantee. Above that, most banks ask for property, fixed deposits, or insurance policies as security, though some lenders go much further without collateral.

For example, SBI’s Global Ed-Vantage scheme lends up to ₹3 crore, offers collateral-free loans up to ₹50 lakh for select premier institutions, and can sanction your loan before your visa.

Education Loan Terms to Understand Before You Sign

• Moratorium: Under the IBA model scheme, repayment starts after your course ends plus one year.
• Repayment period: Up to 15 years after the moratorium.
• Co-borrower credit history: Lenders check your parent or guardian’s income and CIBIL credit record, so clear any overdue EMIs or card dues before applying.
• Processing fees: These vary widely, so compare them alongside the interest rate.

Can the Indian Government Help Pay for Your Studies Abroad?

Yes, but support is targeted. The Central Sector Interest Subsidy scheme and PM-Vidyalaxmi apply to study in India only, and the Padho Pardesh subsidy for minority students was discontinued from 2022-23. The schemes that do support overseas study are aimed at specific groups.

The National Overseas Scholarship, run by the Ministry of Social Justice and Empowerment, funds Master’s and PhD study abroad with 125 fresh awards a year. It’s open to students from Scheduled Castes, Denotified Nomadic and Semi-Nomadic Tribes, and landless agricultural labourer or traditional artisan families, with gross family income up to ₹8 lakh a year.

• Dr Ambedkar interest subsidy: The Dr Ambedkar Central Sector Scheme covers interest during the moratorium on education loans for Master’s, MPhil, and PhD study abroad for eligible OBC and EBC students. Check that it’s accepting new applications before building it into your plan.
• State schemes: Several states fund their own residents, such as Telangana’s Ambedkar Overseas Vidya Nidhi for SC students. Check your state’s welfare department for current terms.

Which Scholarships Can Indian Students Win to Borrow Less?

Every scholarship you win reduces your loan and interest bill. The main options for Indian students are:

• Chevening Scholarships: The UK government’s fully funded award for one-year Master’s study.
• GREAT Scholarships: The 2026-27 round offered 12 awards for Indian students, each worth at least £10,000 towards UK postgraduate tuition. Watch the British Council India site for the next round if you’re starting in 2027.
• Government of Ireland International Education Scholarships: A stipend and full fee waiver for students from eligible countries, including India.
• Charpak and DAAD Scholarships: Government-backed funding for Indian students heading to France and Germany.
• Indian trusts: The Inlaks Shivdasani Foundation, JN Tata Endowment, and K.C. Mahindra Education Trust support students abroad, sometimes as repayable loan scholarships.

How Much Money Do You Need to Show for Your Student Visa?

Every major destination asks for proof that you can cover tuition and living costs, and education loan sanction letters are widely accepted. These are the current living cost requirements for a single student, as of 1st October 2026.

• UK loan letters must come from a government or regulated financial institution and confirm the loan is for you.
• Your loan is sanctioned in rupees but spent in foreign currency, so build a buffer for exchange rate movements between sanction and final disbursement.
• Several countries raise these amounts each year, so recheck the official page in the month you apply.

How Will You Pay Back Your Education Loan After You Graduate?

Your repayment plan depends on how long you can stay and work after your course. Post-study work rights give you time to find a graduate job before your moratorium ends and EMIs begin.

• Ask your lender for a full repayment schedule before signing, then compare the EMI with realistic starting salaries in your field and city.
• Paying simple interest during your course, where you can, stops it being added to your principal when repayment starts.
• Lenders weigh your course and university heavily, so STEM, business, and healthcare admits at well-ranked institutions often qualify for higher unsecured amounts.

How Can Your Family Save Tax on an Education Loan?

Two provisions under the Income-tax Act, 2025 can affect the cash flow and tax position of families funding higher education abroad: Section 394 on tax collected at source (TCS) for Liberalised Remittance Scheme (LRS) remittances, and Section 129 on the deduction for eligible education loan interest. Both apply to transactions and tax years from 1st April 2026.

Will You Pay TCS When Sending Fees Abroad?

Your bank or other authorised foreign exchange dealer collects TCS when it debits your account or receives your payment, whichever happens first. The rate depends on how the remittance is funded.

Under Section 394 of the Income-tax Act, 2025, qualifying LRS remittances for education or medical treatment attract 2% TCS only on the portion above ₹10 lakh. Remittances made from an education loan are excluded, but only where the lender is a financial institution as defined under Section 129. That means a bank, or another institution notified by the Central Government.

• Worked example: If your self-funded education remittances total ₹15 lakh in a financial year, TCS is generally ₹10,000, which is 2% of the ₹5 lakh above the threshold.
• Lender check: If you’re borrowing from an NBFC or international lender, confirm it qualifies as a financial institution under the Act before assuming nil TCS.
• Tax credit: TCS isn’t a separate final tax. The person it’s collected from can adjust it against tax payable or claim a refund, provided it’s correctly reported in their income tax records.

Can You Claim Tax Back on Education Loan Interest?

The deduction previously known as Section 80E of the Income-tax Act, 1961 continues as Section 129 of the Income-tax Act, 2025. An individual can deduct the full interest actually paid during the tax year, with no monetary cap, on a loan for higher education.

• Eligible lenders: A bank, a notified financial institution, or an approved charitable institution.
• Eligible students: You, your spouse, your children, or a student for whom you’re the legal guardian.
• Time limit: The tax year in which you start paying interest and the following seven tax years, or until the interest is fully paid, whichever is earlier.
• Payment source: The interest must be paid out of income chargeable to tax.

Section 129 covers interest only, so principal repayments aren’t deductible. The deduction isn’t available under the new tax regime, which is the default, so compare both regimes before filing. A loan labelled as an education loan doesn’t qualify automatically, as the lender, borrower, course, and purpose must all meet the statutory conditions.

When Should You Apply for Your Education Loan?

Working back from your intake, whether that’s September, January, February, or July, keeps your sanction letter ready in time for your visa.

1. Nine to twelve months before intake: Estimate your total cost and apply for scholarships, as many deadlines fall early.
2. Six to nine months before: Shortlist two or three lenders and check your co-borrower’s credit record.
3. Once you hold an offer: Apply for your loan, as many lenders can issue a pre-admission sanction on a conditional offer.
4. Three to four months before: Submit documents, including KYC, academic records, your offer letter, a cost schedule, co-borrower income proof, and collateral papers for secured loans.
5. Before your visa application: Get a sanction letter whose wording, amount, and date meet your destination’s financial evidence rules.
6. After your visa: Arrange disbursement, with tuition usually paid directly to your university.

How Can StudyIn Help You Plan Your Funding?

StudyIn counsellors build funding into your full application plan. We’ll help you estimate your real cost of study, shortlist universities that fit your budget, find scholarships you’re eligible for, and prepare financial documents that meet visa rules.

From course search to visa application and pre-departure, our support covers the whole journey and is free for students.

FAQs

Can Indian students get an education loan to study abroad without collateral?

Yes. Loans up to ₹7.5 lakh need no collateral under the IBA model scheme. Some lenders offer far more for strong admits, such as SBI’s collateral-free loans up to ₹50 lakh for select premier institutions.

Which is the best bank for an education loan for abroad studies?

There’s no single best bank. Public sector banks suit families with collateral, while NBFCs and international lenders suit students without it. Compare interest rate, processing fee, and collateral rules for your university.

Is TCS charged on study abroad fees paid through an education loan?

No. Remittances funded by an education loan from a recognised financial institution attract nil TCS under Section 394 of the Income-tax Act, 2025.

Does the Indian government subsidise interest on loans for studying abroad?

Only for some students. The Dr Ambedkar scheme covers moratorium interest for eligible OBC and EBC students when it’s accepting applications, while CSIS and PM-Vidyalaxmi cover study in India only.

How much tax can I save on education loan interest?

You can deduct the full interest paid each year, with no upper limit, for up to eight years under Section 129 (formerly Section 80E). It applies only under the old tax regime.

When should I apply for an education loan to study abroad?

Start as soon as you receive an offer. Many lenders issue a pre-admission sanction on a conditional offer, leaving time to secure a visa-compliant sanction letter.