Education Loan Calculator
Education Loan Calculator
See what an education loan costs once the course and the grace period are over: the interest that builds up while you study, the EMI on the larger balance, and how much the moratorium adds.
Education loan
$10,00,000 at 10%, paid out in two yearly parts of $5,00,000 for a 2-year course, 6 months’ grace, simple interest, repaid over 10 years
Interest before repayment, then the EMI
- P
- the total loan
- k
- the number of equal instalments it is paid out in, one at the start of each course year (1 if paid at once)
- M
- months from the first payout to the first EMI: 12 × course years + grace months
- r
- the monthly rate: annual rate ÷ 12 ÷ 100
- B
- the balance when repayment starts; n is the repayment tenure in months. EMIs in today’s money are discounted to the first payout at inflation as a monthly rate.
Worked example
$10,00,000 at 10%, paid out in two yearly parts of $5,00,000 for a 2-year course, 6 months' grace, simple interest, repaid over 10 years
EMIs start after M = 12 × 2 + 6 = 30 months; r = 10 ÷ 1200
First part: 5,00,000 × r × 30 months = $1,25,000; second part, paid out at month 12: 5,00,000 × r × 18 = $75,000
Balance when repayment starts = 10,00,000 + 2,00,000 = $12,00,000
EMI on 12,00,000 over 120 months at 10% = $15,858 (against $13,215 on the 10,00,000 borrowed)
Total interest $9,02,971, of which study and grace add $3,17,162
The same loan under each way of handling interest during study
| Interest during study | Balance at repayment | EMI | Total interest |
|---|---|---|---|
| Simple interest, added when repayment starts | $12,00,000 | $15,858 | $9,02,971 |
| Interest capitalised monthly | $12,21,904 | $16,148 | $9,37,706 |
| Interest paid during study | $10,00,000 | $13,215 | $7,85,809 |
How interest builds up before the first EMI
An education loan is unusual because you do not repay it while you study. Interest still runs from the day each part of the loan is paid out, through the course and through a grace period afterwards — together, the moratorium or repayment holiday. When repayment begins, the interest that has built up is added to the loan and the EMI is worked out on the larger balance.
How that interest is counted matters. Indian bank schemes commonly charge simple interest during the moratorium: interest on the amount paid out, but no interest on the interest. The Model Education Loan Scheme as published by Bank of Maharashtra says “simple interest during moratorium period, there after compounded monthly”, and SBI’s Global Ed-Vantage scheme charges simple interest during the course and moratorium and adds it to the principal before EMIs start. Other lenders, and loans in other countries, may compound monthly, which costs more; the table shows by how much. The page offers both, because practice varies — read the interest clause in your sanction letter.
The cheapest option, if you can manage it, is to pay the interest as it falls due during study. The balance then stays at what you borrowed, and some banks cut the rate slightly for students who do this. In India a Government of India interest subsidy scheme also pays the moratorium interest for eligible students from lower-income families; ask your bank whether you qualify.
The chart follows what you owe from the first payout to the last EMI. It climbs during study as new parts of the loan arrive and interest builds, peaks when repayment starts, then falls; the amber line is what you have paid. In the example the loan is cleared in year 13. A year-end figure is taken before the next year’s payout. The today’s-money figure discounts every EMI back to the first payout: the $19,02,971 of EMIs is worth about $14,24,794 at 4% inflation. For a plain EMI with no moratorium, use the EMI calculator. This is arithmetic on the figures you enter, not financial advice.
Frequently asked questions
Is interest charged during the moratorium on an education loan?
Yes. Interest runs from each payout through the course and the grace period. Indian bank schemes commonly charge simple interest in this period and add it to the loan when repayment starts.
What is the difference between simple and capitalised interest during study?
Simple interest is charged only on the money paid out. Capitalised interest is added to the balance each month, so it earns interest too. On the example, simple interest gives a balance of $12,00,000 at repayment and monthly capitalisation $12,21,904.
Should I pay the interest while I study?
If you can, it keeps the EMI at the level on the amount you borrowed — $13,215 rather than $15,858 in the example — and some banks offer a small rate concession for it.
When does the first EMI fall due?
After the course and the grace period. Indian bank schemes commonly allow 6 or 12 months after the course; your sanction letter states it.
Related calculators
References
- Bank of Maharashtra. Model Education Loan Scheme (web page, consulted September 2026): “Simple interest during moratorium period, there after compounded monthly”; repayment holiday of course period plus one year; up to 180 EMIs; 1% concession possible if interest is serviced during study.
- State Bank of India. Global Ed-Vantage scheme (web page, consulted September 2026): simple interest charged during the course period plus moratorium; accrued interest added to the principal, then EMIs; moratorium of six months after course completion.
- Bank of Baroda. Central Scheme of Interest Subsidy for Education Loans (web page, consulted September 2026): the Government of India scheme that pays the moratorium-period interest for eligible students.
- Brealey RA, Myers SC, Allen F. Principles of Corporate Finance. McGraw-Hill. The present value of an annuity, from which the level-payment loan formula and its inverse for the number of payments follow.
- Central-bank inflation targets used as default inflation by currency: Reserve Bank of India (4% CPI, flexible inflation targeting framework); U.S. Federal Reserve (2% PCE); European Central Bank (2%); Bank of England (2% CPI); Bank of Canada (2%); Reserve Bank of Australia (2–3%); Bangko Sentral ng Pilipinas (3% ± 1). Actual inflation often runs above target.