Education loan moratorium can hike Rs7.5 lakh loan to over Rs 10lakh even before EMI repayment starts: Be careful
While some parents choose to pay the interest amount regularly during the study period, many other parents are unable to do so, and they primarily depend on a moratorium given with the education loan. A moratorium period allows them to push the repayment period by a few years, so that the student can get a job after completing the course and repay the loan herself or himself. While the moratorium period can ease the repayment burden for students and parents during the study period, it may come at the cost of a higher repayment burden for students if the education loans are not subsidised by the government.
We tell you how the moratorium works, how it impacts your finances and how you should decide the best course of action.
How a moratorium period works in education loans
Moratorium is typically a holiday period during which you are not required to make any repayment on your loan. “A full moratorium or payment holiday is offered in education loans implying that the loan repayments start after the study period,” says Nilanjan Chattoraj, Head-Credit & Product-Education Loans, InCred Finance.
While most PSU banks offer education loans in India under the IBA Model Education Scheme, most private lenders offer their own scheme. «The moratorium period in the Model Education Loan Scheme typically covers the entire duration of your studies plus an additional grace period of 6 months or 1 year after completing your course, whichever is earlier. During this period, you are not obligated to make any principal repayments,»
