Education Loan Guide 2025: Best Indian Banks with Lowest Interest Rates

As the cost of higher education continues to rise, more students are turning to education loans to fund their studies. These loans help cover key expenses like tuition fees, accommodation, books, travel (for overseas courses), and more. However, choosing the right bank or lender is just as important as choosing the course itself.

Here is a deep-dive analysis of what education loans involve, how they work in India, and which banks currently offer the most competitive interest rates.

About education Loan

An education loan is a type of loan taken in the student’s name, usually with a parent or guardian as a co-applicant. It helps pay for tuition and other costs, including travel for studying abroad. Repayment usually starts after a break—called a moratorium—which lasts for the course duration plus another six to twelve months.

Also Read: BREAKING: FM Sitharaman Announces More Support For Higher Education Loans Upto Rs 10 Lakh | Republic World

Types of loans

Education loans are mainly of two types—those for studying in India and those for studying abroad. Loans for domestic courses are usually easier to get, especially if the amount is below Rs 7.5 lakh, as they often don’t require any collateral. On the other hand, loans for overseas education cover more costs and generally need security if the amount is high.
Notably, students from financially weaker backgrounds can get support through government schemes like the Central Sector Interest Subsidy (CSIS). To apply for such loans, students can use the Vidya Lakshmi Portal, a platform set up by the government.

Best loan rates

Public Sector Banks (PSBs) still offer some of the most student-friendly education loan options. For instance, SBI provides loans starting at around 8.15% per year, with amounts going up to Rs 1.5 crore for overseas studies if collateral is provided. Other banks like PNB, Bank of Baroda, and Canara Bank offer similar schemes, often with easier terms for smaller loans and special benefits for female students.
In comparison, private lenders such as ICICI Bank and Axis Bank allow for larger loan amounts—especially for studying abroad—but their interest rates are higher, typically between 10.5% and 13%.
Non-banking financial companies (NBFCs) like HDFC Credila are quicker in processing loans and offer flexible repayment options, though their rates are usually higher and they don’t qualify for government interest subsidy schemes.

Which Loan to Go For?

A back-of-the-envelope calculation shows that even a minor difference in interest rates can lead to a significant cost gap over a 7–10 year repayment period. Before applying, it’s important to compare terms—such as moratorium periods, collateral needs, prepayment penalties, and institutional tie-ups. Some lenders offer rate concessions for top universities or meritorious applicants.
Most banks now accept online applications, and using the Vidya Lakshmi Portal helps students apply to multiple banks with a single form.