Experts highlight the need to consider the full spectrum of costs, potential return on investment, and repayment strategies when choosing education loans, moving beyond tuition fees to avoid financial pitfalls.
Choosing an education loan should involve far more than a glance at tuition fees. Financial advisers quoted by Zee Business say students and parents need to weigh the full cost of study, the likely return from the course and the ability to service the debt after graduation. The central question, they argue, is whether the qualification is likely to improve earning power enough to justify the borrowing.
Vikas Puri, senior partner at Complete Circle Capital, said the value of the course matters as much as the price tag. His view is that students should treat the loan as an investment decision, not simply a way to secure admission. In practical terms, that means asking whether the course is relevant to the job market and whether future income is likely to cover repayments without strain.
The loan amount should also account for expenses beyond classroom fees. Puri said items such as hostel charges, laptop purchases, books, insurance, visa fees and flights can add 20% to 30% to the overall bill, particularly for students moving to another city or studying overseas. Experts quoted in the report also warned against accepting the largest loan a lender offers if it is more than is actually needed, because every extra rupee borrowed adds to the interest burden later.
Prathiba Girish, founder of Finwise, said banks often look closely at the student’s post-course earning potential when deciding whether to approve a loan and on what terms. She noted that graduates from premier institutions such as IITs and IIMs may find borrowing easier because stronger placement records improve repayment prospects. But she added that education loans are not limited to top-tier campuses; lenders still assess whether the borrower is likely to repay.
The repayment timeline is another area where borrowers can make costly mistakes. Puri said the moratorium period is not interest-free, and unpaid interest can be added to the principal if it is not serviced during the study period. Girish also advised students to stay in touch with banks or non-banking lenders if they do not find work immediately after finishing their course, rather than missing payments and damaging their credit history.
Borrowers should compare multiple lenders before signing, focusing on interest rates, processing fees, prepayment terms and other conditions. Girish also pointed out that the interest on education loans may qualify for tax relief under Section 80E of India’s Income Tax Act. By contrast, the US Internal Revenue Service treats eligible education expenses more narrowly for certain tax purposes, covering tuition and required fees but excluding items such as room and board, insurance and transport. That difference underlines a broader lesson: the exact cost of borrowing depends not just on the loan, but on how the rules define the expenses it is meant to cover.
Disclaimer: This article is intended to inform and educate, not to recommend or endorse any financial product, investment or strategy. Please consider your own financial circumstances and seek professional advice where appropriate before making financial decisions.
