The way parents think about investing in their children’s future has changed as a result of the significant rise in education costs in India over the past decade. It starts at school, especially in big cities, where tuition costs continue to rise by 7 to 15 percent annually. In some elite schools, tuition can cost as much as 1.68 crore rupees by the time a child graduates. According to 1 Finance Research, the highest average tuition cost for an elite school is 76.2 lakh rupees for grades K-12. And higher education isn’t any easier on the pocket. The widening affordability gap is clearly demonstrated by today’s higher education costs. For example, a 5-year MBBS degree at a government college costs around ₹1.9 lakh. But in a private college? The same degree can be obtained for as much as 82 lakh, which is nearly 42 times more money. It goes beyond just medicine. Courses like B.Tech or B.Pharm follow the same trend, where private colleges charge three to four times more than government institutions, putting an ever-growing financial strain on families across the country.
On top of rising tuition fees, families also have to pay more each year for things like books, coaching classes, and transport—these costs often go up by 7–9% every year.
With education now seen as both essential and a big long-term investment, families have been forced to rethink their finances.
Household education spending has increased by 4.6 times, from 1.8 lakh crore in FY12 to 8.43 lakh crore in FY24 as a result. Individually, the average expenditure has also increased, rising from approximately 1,500 yen to 6,100 yen by 2026. While some can afford it, many can’t.
As a result, they resort to borrowing money. Here’s the most telling evidence:
According to RBI data, between March 2019 and March 2025, there has been a 95.83% increase in outstanding education loans in absolute terms.
According to ministry of finance, in the financial year 2023-24, Public Sector Banks in India disbursed education loans to 7,36,580 students, up from 6,29,594 in 2022-23, marking a 17% annual growth in the number of loan accounts;
A difficult story is told by the sharp increase in education loans: for many Indian parents, borrowing is a lifeline. Loans have become less of a last resort and more of a necessity as tuition for schools and colleges rise at a rate that exceeds family budgets. It’s becoming more common to see parents rely on borrowing money to bridge the gap between their dreams and affordability. Comparing the situation with educational loans in the United States and the United Kingdom to India The boom in education loans in India mirrors troubling patterns observed in advanced economies. In the US, student debt has crossed $1.8 trillion, while in the UK it has exceeded £200 billion, with mounting repayment complexities and significant economic consequences.
In India, households already spend nearly 33% of their income on EMIs. Adding education loan repayments to this burden could amplify socioeconomic stress over the coming decades.
As in the West, heavy debt burdens can delay milestones such as homeownership and retirement, while also deepening inequality. Without timely reforms or stronger financial aid structures, India risks facing similar long-term challenges.
The early warning signs are already visible. By 2024, the education loan category under personal loans recorded the highest NPAs (in SCB) , underscoring both repayment challenges and systemic risks.
A critical difference, however, lies in who bears the debt burden. In the US and UK, repayment is primarily the responsibility of students. In contrast, in India, education loans often become household liabilities, as parents usually take responsibility for repayment.
This is a reflection of the family-centered culture of India, where parents put their children’s education and success ahead of their own, even if it means putting them in financial trouble in the long run.
Key things you need to keep in mind while taking an education loan
Before committing to an education loan, it’s genuinely wise for parents and students to first consult a financial advisor. A professional brings expertise and an unbiased perspective to evaluate how taking a loan will affect your household finances and create a repayment strategy aligned with career prospects.
Consider the following steps for financial security and tranquility: Plan early: Find lenders and the necessary documents about a year before you apply, but only after you have been accepted to make sure you get the right loan amount and that the process goes smoothly. Check the limits of collateral-free loans: banks typically offer 15 to 20 lakh for Indian studies and 20 to 50 lakh for international studies without collateral. Make a list of your preferred institutions and check their specific loan limits with different lenders to optimise your borrowing capacity
Use the Vidya Lakshmi Portal effectively: This government initiative is a game-changer that allows you to compare 84 different loan schemes from 38 participating banks through a single application. The portal enables you to apply to up to three banks simultaneously, saving significant time and paperwork. Register early on www.vidyalakshmi.co.in, and take advantage of the portal’s tracking system to monitor your application status in real-time.
Understand loan terms: Aim for interest rates between 8–12%, with a repayment period of 10–15 years for manageable EMIs.
Manage EMI burden: Keep monthly EMIs under 20–25% of household income to avoid undue financial stress.
Maximise tax benefits: Deduct the full interest paid under Section 80E for up to 8 years—no upper limit on the deduction.
loan for education in India The application process for domestic education loans for Indian studies is typically straightforward and family-friendly. Most major banks and NBFCs now offer collateral-free loans for up to ₹15–20 lakh, which means you won’t need to pledge property or other assets for a typical undergraduate or postgraduate degree at a recognised Indian institution.
These loans usually come with attractive interest rates—often between 8% and 12%, depending on your profile and the lender—plus flexible repayment periods that stretch from 10 to 15 years, keeping monthly payments manageable. Admissions to accredited colleges and universities are approved and processed quickly, and the required documentation is clear and simplified. One of the biggest benefits for parents is the tax deduction on interest payments under Section 80E, available for the first 8 years of loan repayment—there’s no upper limit, so every rupee of interest qualifies for relief, making this a smart way to ease the financial load.
All things considered, a domestic education loan is a practical, cost-effective solution for most students aiming for reputable institutions in India, balancing flexibility and affordability while offering meaningful relief through tax benefits.
Education loan to study abroad
According to the Ministry of External Affairs, more than 1.8 million Indian students are currently studying abroad. That’s a dramatic rise and, as the Crisil industry report for 2024 points out, overseas education loans now make up 57% of all education loans taken by Indian families as of December 2023.
When you’re thinking about a foreign education loan, you’re looking at much higher tuition and living costs compared to studying in India.
The good news is many banks now offer collateral-free loans of up to ₹50 lakh for top international universities, making global dreams far more accessible. But keep in mind, these loans often come with extra strings attached, such as a co-signer, proof of admission, and paperwork tied to your visa or your course expenses.
Interest rates for studying abroad can be a bit higher than for domestic loans and there’s always the added uncertainty of currency fluctuations, which can impact how much you actually end up paying.
On the flip side, some banks and NBFCs have started tailoring their loan products specifically for overseas courses at prestigious programs, which can open doors through easier eligibility and application processes.
Still, it’s absolutely essential to take a hard look at the full cost—including tuition, travel, insurance, and that all-important exchange rate—before taking the plunge on a foreign education loan. Thoughtful preparation here will keep surprises to a minimum and set you up for the richest experience possible abroad.
Bank vs. NBFC:
Which one should you choose for an education loan?
If you’re exploring education loans in India, it’s helpful to know how banks and NBFCs each approach student financing. Banks often come with lower interest rates and thorough eligibility checks, while NBFCs are known for quicker approvals and more flexible coverage—even for courses outside the usual lists.
