- The PM-Vidyalaxmi scheme, launched in November 2024, offers collateral-free and guarantor-free education loans for students admitted to India's top 860 NIRF-ranked institutions, with a 3 percent interest subvention during moratorium for families earning up to Rs 8 lakh on loans up to Rs 10 lakh
- SBI's Global Ed-Vantage funds study abroad for amounts above Rs 7.50 lakh, and Section 80E still allows an unlimited interest deduction for up to 8 years under the old tax regime.
With only a limited number of highly ranked institutions in India, many Indian students look to countries like the United States, Canada, the United Kingdom, Australia and parts of Europe for higher studies. The biggest hurdle is usually the high tuition and living cost. Education loans bridge that gap, and Indian students today can choose from bank loans, NBFC loans and the government-backed PM-Vidyalaxmi scheme.
What Are the Main Types of Education Loans to Study Abroad?
Indian students can choose between two broad categories of education loans to study abroad: secured loans, which require collateral such as property, fixed deposits or life insurance, and unsecured loans, which need no asset but usually require a co-applicant. Banks, NBFCs and the government-backed PM-Vidyalaxmi scheme all offer such financing options today.
Education loans fall into two broad categories: secured loans, backed by collateral, and unsecured loans, which need no asset. Understanding how each works, what it costs and who offers it helps you pick the option that matches your course, destination and budget.
What Is a Secured Education Loan?
A secured education loan requires the borrower to pledge collateral against the loan amount, such as a house, land, fixed deposit or life insurance policy. Lenders treat this asset as a backup for repayment, which lets them sanction larger sums, often up to Rs 1.5 crore or more, at lower interest rates than unsecured loans.
Most public sector banks lend up to Rs 4 lakh without any collateral and up to Rs 7.5 lakh against a guarantor, asking for tangible security only above that. State Bank of India's Global Ed-Vantage scheme funds full-time overseas study for amounts above Rs 7.50 lakh, going up to about Rs 3 crore, with collateral-free loans of up to Rs 50 lakh for students at select premier institutions. Its rate is floating and linked to SBI's external benchmark, with a 0.50 percent concession for women borrowers, and repayment can stretch to 15 years. The loan is sanctioned on an admission or conditional admission letter, even before the I-20 or visa.
Bank of Baroda's Baroda Scholar scheme, meant for study abroad, offers up to Rs 1.5 crore for premier institutions on its list and up to Rs 60 lakh for other institutions. Interest is now linked to the Baroda Repo Linked Lending Rate, or BRLLR, rather than the older MCLR, and girls studying at non-premier institutions get a 0.20 percent concession. There is no security requirement or processing charge for loans up to Rs 7.5 lakh, and the loan covers tuition, travel, insurance, books and other study costs.
| Secured Scheme (2026) | Maximum Loan | Interest Rate and Concession |
|---|---|---|
| SBI Global Ed-Vantage | Above Rs 7.5 lakh, up to about Rs 3 crore; collateral-free up to Rs 50 lakh at premier institutions | Floating, linked to SBI EBR; 0.50% concession for women |
| Bank of Baroda Baroda Scholar | Up to Rs 1.5 crore (premier); up to Rs 60 lakh (other) | BRLLR-based, repo-linked; 0.20% concession for girls at non-premier |
| IBA model scheme (most PSU banks) | No collateral up to Rs 4 lakh; collateral usually above Rs 7.5 lakh | Repo or EBLR-linked, varies by bank |
What Is an Unsecured Education Loan?
An unsecured education loan is granted without any collateral, so the borrower pledges no asset. Because studying abroad costs far more than the collateral-free bank limit, non-banking financial companies like Credila, Avanse, InCred and Auxilo, plus some private banks, dominate this space. They usually require a working co-applicant and charge higher interest than secured bank loans.
Because overseas study costs far exceed the collateral-free bank limit, non-banking financial companies such as Credila, Avanse, InCred and Auxilo, along with private banks like Axis Bank, dominate the unsecured segment. They lend without collateral but require a working co-applicant, usually an immediate family member with a steady monthly income. Larger unsecured amounts are often reserved for STEM and management courses at listed universities, and interest rates run noticeably higher than secured bank loans. Repayment tenures commonly extend to around 10 years, and for colleges outside a lender's list, repayment may begin immediately rather than after a moratorium period.
Top Scholarships for Indian StudentsRead →What Is the PM-Vidyalaxmi Scheme?
PM-Vidyalaxmi is a central government scheme launched in November 2024 that provides collateral-free, guarantor-free education loans to students admitted to India's top 860 NIRF-ranked institutions. It adds a 75 percent central credit guarantee on loans up to Rs 7.5 lakh and interest subvention for eligible families, easing access to higher-education finance for meritorious students.
- Covers students admitted to the top 860 higher-education institutions ranked in NIRF
- Collateral-free and guarantor-free loans through a special loan product
- 75 percent credit guarantee from the Government of India via NCGTC on loans up to Rs 7.5 lakh
- 3 percent interest subvention during moratorium for families earning up to Rs 8 lakh, on loans up to Rs 10 lakh
- Full interest subvention during moratorium for loans up to Rs 10 lakh where family income is up to Rs 4.5 lakh
- Entirely digital application through the official PM-Vidyalaxmi portal
PM-Vidyalaxmi mainly benefits students entering India's top-ranked institutions, so most students heading overseas still rely on bank and NBFC education loans. It is worth checking, however, since the interest subvention and credit guarantee can significantly cut borrowing costs for those who qualify.
Documents Required for a Student VisaRead →How Much of an Education Loan Can You Get Without Collateral?
Under the RBI-backed IBA model education loan scheme, banks cannot demand collateral or a third-party guarantee for loans up to Rs 4 lakh. Loans between Rs 4 lakh and Rs 7.5 lakh need a guarantor, and amounts above Rs 7.5 lakh usually require collateral, though many lenders and NBFCs now extend collateral-free funding much higher for premier institutions.
The collateral-free limits come from the Indian Banks' Association model education loan scheme, which most banks follow. Up to Rs 4 lakh, no security or third-party guarantee can be demanded. Between Rs 4 lakh and Rs 7.5 lakh a guarantor is required, and above Rs 7.5 lakh collateral is typically needed, though NBFCs and premier-institution schemes now stretch collateral-free funding well beyond that ceiling for eligible students.
What Tax Benefits Apply Under Section 80E?
Section 80E of the Income Tax Act lets you deduct the entire interest paid on an education loan from your taxable income, with no upper limit. The deduction is available for up to 8 years or until the interest is fully repaid, whichever comes first, and applies only under the old tax regime for loans from recognised institutions.
This deduction covers only the interest component of the loan, not the principal, and the loan must be taken from a recognised bank, financial institution or approved charitable organisation. It applies whether you study in India or abroad and can be claimed from the year you start repaying. Because it sits under the old tax regime, borrowers who opt for the new regime cannot claim it.
How Should You Choose the Right Education Loan?
Choosing the right education loan means comparing the total cost, not just the headline rate. Weigh the interest rate and whether it is repo-linked, the collateral demand, the moratorium period, processing fees and the girl-student concession. Public banks suit collateral-backed borrowers seeking lower rates, while NBFCs offer faster, collateral-free funding at a higher cost.
- Estimate your total cost of study, including tuition, living expenses and travel
- Check whether your institution is covered under PM-Vidyalaxmi or a lender's premier list
- Compare secured bank loans and unsecured NBFC loans on interest rate, collateral and moratorium
- Confirm the co-applicant's income meets the lender's requirement
- Factor in the Section 80E tax deduction when calculating the real cost of borrowing