Student Loan Interest Rates in India 2025 – The Ultimate Guide for Students and Parents

Education is one of the most valuable investments in today’s world. Whether it’s pursuing an MBA at the Indian Institute of Management, studying medicine at AIIMS, or going abroad for a Master’s in Data Science or Engineering, the cost of education has increased significantly over the years. For many families, arranging such large sums of money upfront is not possible. This is where student loans step in as a financial lifeline, helping students chase their academic dreams without immediate financial stress. However, the real challenge lies in choosing the right education loan because interest rates vary widely across banks and financial institutions. A difference of even 1% in the interest rate can mean paying or saving lakhs of rupees over the course of the loan.

In this article, we will take a deep dive into student loan interest rates in India in 2025, compare the offerings of leading banks such as the State Bank of India (SBI), Axis Bank, Bank of Baroda, Punjab National Bank, HDFC, and ICICI Bank, and also explore the key factors that affect loan rates, repayment terms, subsidies available, and practical tips for students and parents before applying.

Understanding Student Loan Interest Rates

A student loan interest rate is the percentage charged on the loan amount borrowed from the bank or lender. For example, if you borrow ₹10 lakh at an interest rate of 9%, you will pay an additional ₹90,000 annually, spread across the tenure, along with the principal. The rate determines the overall cost of the loan and directly affects the Equated Monthly Installment (EMI) you will be required to pay once repayment begins.

There are two types of interest rate structures in student loans. The first is the fixed rate, where the interest remains constant throughout the tenure of the loan. This gives borrowers predictability but often starts at a slightly higher rate. The second is the floating rate, which is linked to benchmarks such as the repo rate or the bank’s Marginal Cost of Funds based Lending Rate (MCLR). This means your loan interest can go up or down depending on market conditions. In 2025, most public and private banks in India are offering floating interest rate education loans, with revisions every 3 to 6 months.

Current Student Loan Interest Rates in 2025

As of 2025, education loan interest rates in India range between 4% and 14% per annum, depending on the bank, the type of loan, and whether collateral is offered Public sector banks generally provide lower interest rates compared to private banks, especially for students admitted to top-tier institutions in India or abroad. Let’s look at the leading banks in detail.

State Bank of India (SBI)

SBI is the largest provider of education loans in India and has a wide range of schemes catering to both domestic and international students. The bank links its education loans to the External Benchmark Rate (EBR), which currently stands at 8.15%

• SBI Student Loan Scheme: For loans up to ₹7.5 lakh without collateral, the interest rate is 10.15%, while for loans above ₹7.5 lakh with collateral, the rate is 9.15%. There is also a 0.50% concession for female students, making it more affordable for women pursuing higher education.

• SBI Scholar Loan Scheme: Specially designed for students admitted to India’s top institutions such as IITs, IIMs, and AIIMS. The rates here are highly competitive, ranging from 7.15% to 7.90%, which are among the lowest in the market.

• SBI Global Ed-Vantage Scheme: For students going abroad, SBI offers loans between ₹7.5 lakh and ₹3 crore at 8.65% to 9.15%, provided collateral is given.

• Shaurya Education Loan: For wards of defense and paramilitary personnel, rates are in the range of 9.15% to 10.15%.

The biggest advantage of SBI loans is that they offer flexible tenures and are recognized worldwide, making them ideal for students planning overseas education.

Axis Bank

Axis Bank is a strong contender in the private banking sector when it comes to student loans. The bank offers loans covering up to 100% of educational expenses, including tuition fees, hostel charges, books, and even travel costs. The loans are generally linked to the repo rate plus a margin, and the MCLR for education loans currently stands at around 9% per annum.

The interest rate is reset every three to six months, which means it can fluctuate based on RBI’s monetary policy. While Axis Bank offers relatively quick processing and disbursement, it does charge processing fees of up to 2% of the loan amount plus GST, which can make the loan slightly more expensive compared to public sector banks. However, the speed, convenience, and flexible repayment options make it a preferred choice for many students.

Bank of Baroda

Bank of Baroda (BoB) has multiple student loan schemes under its umbrella, each catering to different levels of education.

• Baroda Vidya: For schooling expenses, with rates starting at 7.10%.

• Baroda Gyan: For higher education in India, with loans up to ₹1.25 crore and tenures ranging between 10 to 15 years.

• Baroda Scholar: For international courses such as MBA, MCA, MS, and other job-oriented programs, with loans up to ₹1.5 crore.

• Loans for Premier Institutions: Students admitted to IIMs, IITs, ISB, and other premier institutions can get collateral-free loans up to ₹80 lakh.

Bank of Baroda offers one of the longest repayment tenures (up to 15 years), which makes EMIs more manageable for students just starting their careers.

Punjab National Bank (PNB)

PNB offers one of the lowest starting rates for student loans in India, with interest rates ranging from 4.00% to 11.85% However, loans for studying abroad usually come with additional costs, such as a 1% processing fee with a minimum of ₹10,000. For domestic education loans, processing charges are often nil.

PNB’s Pravasi Shiksha Loan and Kaushal Loan are well-known schemes, offering different benefits for students studying abroad and those pursuing skill-development courses within India.

HDFC Bank and ICICI Bank

Private sector giants HDFC and ICICI also provide student loans but at relatively higher rates compared to PSU banks.

• HDFC Bank: Interest rates start at 10.50% onwards. For loans above ₹7.5 lakh, a 1% processing fee is charged.

• ICICI Bank: Rates range between 9.70% and 14%, depending on the institution, collateral, and the applicant’s profile

Both banks are popular because of their faster disbursement process and simplified online application systems. Students who prioritize speed and flexibility often opt for them, even if the rates are slightly higher.

actors Affecting Student Loan Interest Rates

Several factors influence how much interest a student ends up paying on their education loan. First is the loan amount itself. Smaller loans without collateral (up to ₹7.5 lakh) generally attract higher rates compared to larger secured loans. The presence of collateral is another major factor—loans backed by property, fixed deposits, or other security usually enjoy lower interest.

The institution of study also plays a role. Banks often maintain a list of premier institutions such as IITs, IIMs, and AIIMS, for which they offer lower rates under schemes like SBI Scholar Loan. Gender concessions also exist, with most banks offering a 0.50% lower rate for female students. Another important factor is the credit score of the co-applicant, usually the parent or guardian, since students often do not have a credit history. A strong co-applicant profile can lead to a more favorable interest rate.

Repayment Rules and Moratorium Period

One of the student-friendly features of education loans is the moratorium period, which is the time during which repayment is not required. Most banks allow students to start repayment either after completing the course or a few months after getting a job, usually 6 to 12 months. This gives students time to settle into their careers before starting EMI payments.

The typical repayment tenure for education loans ranges between 5 to 15 years, depending on the loan amount and the bank. Longer tenures mean smaller EMIs but higher total interest costs, whereas shorter tenures increase EMIs but reduce overall interest paid. Importantly, most banks in India do not levy a prepayment penalty, which means students can repay early whenever they have surplus funds and save on interest.

Government Subsidy Schemes

The Government of India has introduced several schemes to make education loans affordable for students from economically weaker sections. The Central Interest Subsidy Scheme provides a full waiver of interest during the moratorium period for students with family incomes below a certain threshold. Loans applied through the Vidya Lakshmi Portal can also qualify for subsidies, depending on eligibility.

Such schemes play a critical role in reducing the financial burden on students from underprivileged backgrounds and should be checked thoroughly before finalizing a loan. business

Why Comparing Student Loan Rates Matters

Let’s take an example. Suppose a student borrows ₹20 lakh for studying abroad. At an interest rate of 9% for 10 years, the EMI will be around ₹25,300 per month, and the total repayment will come to approximately ₹30.4 lakh. However, if the interest rate is reduced by just 1% to 8%, the total repayment drops by nearly ₹1.5 lakh over the tenure. This clearly shows that even a small difference in rates can translate into significant savings.

Final Thoughts

Education loans are not just financial products; they are enablers of dreams and careers. With interest rates ranging between 4% and 14% in 2025, choosing the right bank and scheme can make a huge difference in affordability. For students aiming at top-tier institutions, banks like SBI and Bank of Baroda provide some of the most competitive rates. Axis Bank and other private lenders stand out for their convenience and faster processing, though at slightly higher costs.

Before signing any loan agreement, students and parents must compare different banks, check repayment flexibility, understand subsidy schemes, and calculate EMI affordability. A well-planned education loan ensures that financial constraints never stand in the way of academic and career ambitions.