Repayment of your education loan is a responsibility you sign in while applying for it. The repayment responsibility is the driving force that lets many study harder and secure a well-paying job.
In fact, an education loan repayment plan is advantageous to learn financial management and budgeting at the very beginning of your professional career. The first step of your repayment plan comes with its manual, the education loan repayment schedule, which you will receive from your lender.
What is the repayment schedule for education loans?
Education loan repayment schedule refers to paying back your education loan in pre-planned Equated Monthly Installments (EMIs) as instructed by the lender, with accrued interest. The repayment process is organized using a loan repayment schedule, which outlines the payment structure through EMIs. Usually, banks revise the repayment schedule with the help of an amortization table.
Amortization table: An amortization table refers to a detailed schedule showing timed payments made towards a loan. It details the portion paid towards the principal amount and interest.
Education loan repayment for different lenders
- Public and private banks: For public and private-sector banks in India, the repayment of education loans starts only after the moratorium period. These loan options are also eligible for a tax rebate under Section 80 E of the Income Tax Act. 10 – 15 years is the average repayment period for education loan options from banks.
- NBFCs: Non-Banking Financial Companies offer a repayment period of 10 – 20 years for education loan options. Students may be asked to pay Simple or Partial Simple Interest in the moratorium period.
- International lenders: International lenders offer a moratorium period of 10 – 20 years, with the interest repayment starting in the moratorium period. However, students can request to start their payment only after the moratorium period.
What is the repayment period for education loans?
The education loan repayment period refers to the time allotted to a student borrower to repay the entire loan debt with interest. Typically, it is counted after the moratorium period, which is course years plus 6 – 12 months. However, many lenders counter the course years to the repayment period.
- The repayment period for an education loan ranges from 5 – 20 years, depending on your lender, type of education loan, collateral value, or co-applicant income.
- You may also pay the debt in advance (pre-payment), but sometimes with a small penalty.
Also, starting your education loan repayment while studying is possible if the lender agrees to it. Doing so will reduce your financial burden, and your EMI will be directly paid to the principal amount after some installments.
How to calculate your education loan repayment?
Calculating your monthly EMI is important to plan your repayment after your studies. Generally, your education loan sanction letter provides information regarding repayment instructions, showing the EMI and total number of repayments.
Here’s an EMI calculator formula to estimate your monthly EMI for an education loan:
EMI amount = [P x R x (1+R)^N]/[(1+R)^N-1]
However, note that the exact EMI may vary depending on your lender, type of interest (fixed or variable), and other factors. Refer to official documents or contact your lender for clarity regarding your repayment amount per month.
Why an education loan repayment schedule is important?
An education loan repayment schedule is crucial for the following reasons:
- Manage repayment: An education loan repayment schedule enables students to manage the repayment of education loans while pursuing their long-term aspirations. Prompt payments contribute to establishing a solid and secure financial future.
- Communication with the lender: Often, your lender will be in charge of an education loan repayment schedule. Following the schedule is mandatory to comply with the loan terms for a smooth repayment process.
- Financial planning: An education loan repayment schedule helps you plan your finances better while earning. As you are aware of when and how much is deducted every month, you will learn financial management and effective budgeting.
- Understand the repayment structure: An education loan repayment schedule breaks down each payment into principal and interest components, helping borrowers understand how much of each payment goes towards reducing the loan amount and covering interest charges.
- Tracking your repayment: The visibility of your repayment with the help of a repayment schedule lets you track the payments. It helps you not to miss any payments and identify the missed payments.
- Know the interest change: As your repayment goes on, you will notice a reduced interest rate. A repayment schedule is a transparent way of understanding changes in your education loan interest rates.
Thus, an education loan repayment schedule plays a crucial role in the repayment process and in establishing a transparent lender-borrower relationship. We advise you to review the loan guidelines before accepting your education loan sanction letter to ensure your repayment schedule is clearly mentioned.
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Frequently Asked Questions
How to repay my education loan online?
It is easy to pay your education loan EMI online. The payment is possible with the help of Internet Banking or through a UPI-enabled mobile banking app.
Where can I find an education loan EMI calculator?
You may visit the lender to get an accurate education loan EMI estimate. Alternatively, you can use the equation to calculate the education loan EMI:
EMI amount = [P x R x (1+R)^N]/[(1+R)^N-1]
What is the optimum education loan repayment schedule?
Education loan repayment schedules can be 5 – 20 years long for different lenders. An optimum education loan repayment schedule is 10 years.
How can I find my education loan repayment schedule?
You can find your education loan repayment schedule with the lender. Often, it is provided on the education loan sanction letter.
What is a repayment schedule known as?
An education loan repayment schedule is also called the amortization schedule. It shows the complete EMI plan of your education loan.
What if I am not able to make payment on time?
Note that you must repay the EMI timely. Failure to do so will result in accruing interest and additional charges.
Can I transfer my existing loan to another lender?
You can transfer an education loan from one bank to another if the lender agrees to it. The terms and conditions might change for secured and unsecured loan transfers.
