Types of Education Loan: Complete Student Loan Guide

Education loans have become a vital financial resource for students in India and worldwide. With rising tuition fees and living costs, banks, NBFCs, and fintech lenders now offer a range of education loans to cater to the diverse needs of students. These loans vary based on collateral requirements, study location, course type, and lender category.

Understanding the types of education loans helps students and parents choose the right product with the best balance of coverage, repayment flexibility, and interest rates.

Types of Education Loans

By Collateral Requirement

Education loans are first divided based on whether you pledge security or not. Secured education loans require collateral such as property, fixed deposits, or LIC policies, and because the lender's risk is lower, they come with bigger loan amounts, lower interest rates and longer repayment tenures.

1) Secured Education Loan

What it is:
A loan backed by collateral like residential property, a fixed deposit with a lien, a LIC policy, or approved government securities.

Who it suits:
Families that can pledge an asset and want larger sanctions, lower interest, and longer repayment.

Typical range:
Amount: ₹40 lakh to ₹1.5 crore, depending on collateral value and course
Interest: 8 to 11 per cent per annum
Tenure: 10 to 15 years
Processing time: 3 to 5 weeks due to legal and valuation checks

Key features:

• Higher approval odds and bigger ticket size for costly overseas programs
• Lower rates than unsecured loans because the risk is lower for the lender
• Co-applicant still needed, but reliance on their income is reduced

Eligibility highlights:

• Valid, marketable collateral owned by the student or parents
• Confirmed admission to a recognised course
• Standard KYC, academic records, and co-applicant income proofs

Pros:

• Lower EMI for the same amount due to a lower rate and longer tenure
• Can cover the full cost for high-expense destinations

Cons:

• Property/legal work adds time and effort
• The asset is at risk if repayments stop

Practical tips:

• Start documentation early
• Ensure property papers are clean and taxes are paid
• Ask for female student concessions where available

2) Unsecured Education Loan

What it is:
A loan without collateral, sanctioned primarily on the co-applicant's income strength, credit score, and the student's admission profile.

Who it suits:
Students without assets who need quick approval and moderate to high amounts.

Typical range:
Amount: ₹7.5 lakh in PSUs to ₹40–60 lakh in private banks or NBFCs
Interest: 9 to 15 per cent per annum
Tenure: 5 to 10 years (sometimes up to 12–15 years)
Processing time: 7 to 15 working days

Key features:

• Faster processing due to no collateral checks
• Heavily dependent on co-applicant CIBIL 700+ and steady income
• Better terms for top universities and job-oriented courses

Eligibility highlights:

• Confirmed admission
• Strong co-applicant income documentation and banking history

Pros:

• No asset risk
• Quicker sanction

Cons:

• Higher interest and shorter tenure increase the EMI burden
• Strict on the co-applicant profile

Practical tips:

• Improve CIBIL and reduce existing EMIs before applying
• Consider partial prepayments after placement to cut interest

By Study Location

Education loans can also be classified based on whether you study in India or abroad. Domestic education loans are designed for students pursuing courses in recognised Indian universities and typically cover tuition, examination fees, and hostel charges, with amounts ranging from ₹7.5 lakh to ₹50 lakh at interest rates of 8–11% per annum.

1) Domestic Education Loan

What it is:
Loan for studies in India across UG, PG, diploma, and professional programs.

Coverage:
Tuition, exam and lab fees, hostel or rent, books, equipment, and insurance. PSUs sometimes cap living costs.

Typical range:
Amount: ₹7.5 lakh to ₹50 lakh
Interest: 8 to 11 per cent per annum
Tenure: 5 to 10 years

Best for:
Students in NIRF-listed or recognised Indian institutions, where the total cost is moderate.

Pros:

• Affordable rates via PSUs
• Simple forex-free disbursal

Cons:

• Lower ticket sizes than overseas loans
• Margin money may apply in PSUs

Tips:

• Use institute tie-ups where available for faster processing
• Ask for concessions for premier Indian institutes or female applicants

2) Overseas Education Loan

What it is:
Loan for higher studies abroad that can include tuition, living, airfare, visa, laptops, and insurance.

Typical range:
Amount: ₹20 lakh to ₹1.5 crore
Interest: 9 to 15 per cent per annum
Tenure: 7 to 15 years

Best for:
Students heading to the US, UK, Canada, Australia, Germany, Ireland, and similar destinations with high total costs.

Pros:

• Larger sanctions and broader coverage
• NBFCs often cover nearly 100 per cent of costs

Cons:

• Usually requires collateral for the highest amounts
• Currency and visa timing can affect disbursals

Tips:

• Share detailed cost sheets from the university for accurate coverage
• Time disbursals to fee deadlines and visa windows

By Course Type

Education loans also differ depending on the level of study. Undergraduate loans fund bachelor's programs in India or abroad, typically up to ₹40 lakh, with tenures ranging from 5 to 10 years. Postgraduate loans are larger, often reaching up to ₹1.5 crore, as master's and MBA programs abroad typically involve higher tuition and living costs; these loans also have longer repayment windows of 7–15 years.

1) Undergraduate Education Loan

What it is:
Funding for bachelor-level programs in India or abroad.

Typical range:
Amount: ₹7.5 lakh to ₹40 lakh
Interest: 8 to 12 per cent per annum
Tenure: 5 to 10 years

Key notes:

• First-time borrowers, limited credit footprints
• Collateral can improve the rate and ticket size

Best for:
Engineering, MBBS, BBA, BCom, Law, and other recognised UG programs.

2) Postgraduate Education Loan

What it is:
Funding for master's and higher research programs like MBA, MS, MTech, MD, and PhD.

Typical range:
Amount: ₹20 lakh to ₹1.5 crore
Interest: 9 to 13 per cent per annum
Tenure: 7 to 15 years

Key notes:

• Higher amounts due to global PG fees and living costs
• Stronger employability improves approval odds

Best for:
MBA, MS, STEM master's, medicine, and other job-oriented advanced degrees.

3) Vocational or Skill Development Loan

What it is:
Smaller ticket loans for short-term vocational, IT, or certificate programs.

Typical range:
Amount: ₹50,000 to ₹1.5 lakh
Interest: 8 to 11 per cent per annum
Tenure: 3 to 7 years

Key notes:

• Often aligned to the Skill Loan Scheme
• Minimal paperwork and quick disbursals

Best for:
Students or working professionals upskilling for immediate employability.

By Lender Category

Education loans can also be grouped by the type of lender offering them. Public sector banks (PSUs), such as SBI and Bank of Baroda, offer the most affordable rates but typically have stricter documentation requirements and longer processing times.

1) Public Sector Bank Loan

What it is:
Loans from PSUs, such as SBI, Bank of Baroda, and Union Bank, follow IBA model norms.

Typical range:
Unsecured up to ₹7.5 lakh
Secured up to ₹1.5 crore
Interest: 8 to 10.5 per cent per annum
Processing: 2 to 5 weeks

Pros:

• Lowest rates for many profiles
• Female student concessions are common
• Transparent policies

Cons:

• More paperwork and slower processing
• Conservative on unsecured high amounts

Best for:
Domestic study, low to mid-budget overseas programs with collateral.

Tips:

• Prepare the full property paper set early
• Check the branch experience with education loans

2) Private Bank Loan

What it is:
Loans from private banks are known for their faster decision-making processes and digital journeys.

Typical range:
Unsecured ₹20 to ₹40 lakh
Secured ₹40 lakh to ₹1 crore
Interest: 9 to 11 per cent per annum
Processing: 7 to 15 working days

Pros:

• Quick processing and flexible structures
• Higher unsecured limits than PSUs

Cons:

• Slightly higher rates than PSUs
• Strict on the co-applicant's income for unsecured loans

Best for:
Students requiring quick sanctions or higher amounts for reputable institutions.

Tips:

• Ask for institute-based pricing if admitted to a top school
• Use salary account relationships for better terms

3) NBFC Education Loan

What it is:
Non-bank lenders focused on education financing, especially for overseas study.

Typical range:
Unsecured ₹20 to ₹60 lakh
Secured ₹50 lakh to ₹1.5 crore
Interest: 10 to 13 per cent per annum
Processing: 7 to 12 working days

Pros:

• Broadest coverage, including full living costs
• Flexible on profiles and Tier-2 or Tier-3 universities

Cons:

• Rates are usually higher than PSUs
• Interest during the moratorium may be required or capitalised

Best for:
Students requiring full-cost coverage or expedited approvals may encounter hesitation from banks.

Tips:

• Compare moratorium rules and interest servicing options
• Check prepayment clauses and processing fees

4) International FinTech Lenders

What it is:
Global lenders offering education finance in foreign currency, often without Indian co-applicants for select universities.

Typical range:
Amount: roughly ₹20 to ₹50 lakh equivalent
Interest: 11 to 15 per cent per annum, linked to global benchmarks
Processing: 2 to 4 weeks

Pros:

• No co-applicant in select cases
• Disbursal directly to the university in USD or local currency

Cons:

• Exchange rate exposure and foreign T&C complexity
• May not cover 100 per cent of living costs

Best for:
Admits to top global universities where specialised products are available.

Tips:

• Understand the forex exposure and the total cost of credit
• Compare with Indian secured options before deciding

Common Building Blocks Across All Types

Moratorium
Typically, the course duration is 6 to 12 months longer. Banks may require simple interest during this period. Some lenders allow a full moratorium with interest capitalisation.

Tax benefit
Section 80E allows a deduction of interest repaid for up to 8 assessment years. Principal has no deduction under 80E.

Documents
KYC, academic records, admission letter, fee structure, co-applicant income proofs, and bank statements. For secured loans, add property papers or FD/LIC bonds.

Approval drivers
University and course reputation, co-applicant CIBIL and income, collateral quality and value, and total cost of education.

Quick Selector: Which Loan Type Should You Pick?

Conclusion

Choosing the right type of education loan depends entirely on your academic path, financial background, and repayment comfort.

If you have collateral and want the lowest EMI burden, a secured loan is the safest choice. Without assets, an unsecured loan backed by a strong co-applicant can still fund your dream university. For those studying in India, domestic PSU loans are affordable, while students heading abroad may need the broader coverage of overseas loans from NBFCs or secured PSUs. Short-term training can be financed through vocational loans, and those who value speed and flexibility may prefer private banks or NBFCs.