Education Loan EMI: How the Moratorium Period Changes Your Payment
By the QuickYield Team · Published August 26, 2026 · 6 min read
Why is your education loan EMI based on more than what you borrowed? Because interest accrues during your moratorium period (study + grace period) and gets added to your principal before repayment even starts. Borrow ₹10,00,000 at 10.5%, with a 24-month moratorium, and you actually start repaying on ₹12,32,552 — not ₹10,00,000.
What the moratorium period actually is
Education loans give you a moratorium — typically your course duration plus a grace period of 6-12 months after — during which you don’t have to make EMI payments. But the loan doesn’t sit still: interest keeps accruing on the principal during this period, and that accrued interest is added to your loan balance once repayment begins. The result is that your actual EMI is calculated on a principal larger than what you originally borrowed.
Worked example: ₹10 lakh loan, 24-month moratorium
- Original loan amount: ₹10,00,000
- Interest rate: 10.5%
- Moratorium period: 24 months (course + grace)
- Principal after moratorium interest: ₹12,32,552
- EMI over an 8-year repayment: ₹19,031/month
For comparison, if there were somehow no moratorium interest at all, the EMI on the original ₹10,00,000 would be about ₹15,440/month — the moratorium period alone accounts for roughly ₹3,591 of the actual EMI, every month, for the entire 8-year repayment.
EMI by loan amount, same terms
At 10.5% interest, 24-month moratorium, 8-year repayment:
| Loan amount | Principal after moratorium | Monthly EMI |
|---|---|---|
| ₹5,00,000 (5 lakh) | ₹6,16,276 | ₹9,515 |
| ₹10,00,000 (10 lakh) | ₹12,32,552 | ₹19,031 |
| ₹20,00,000 (20 lakh) | ₹24,65,103 | ₹38,061 |
| ₹30,00,000 (30 lakh) | ₹36,97,655 | ₹57,092 |
Can you avoid the moratorium interest buildup?
Yes — some lenders allow you to pay just the interest during the moratorium period (a “simple interest” or partial-interest servicing option) instead of letting it compound onto the principal. If you or your family can afford small payments during the study period, this meaningfully reduces your final EMI, since it stops interest from being added to a growing principal. Check with your specific lender whether this option is available — it’s not automatic. Run your own loan amount, rate, and moratorium period through our Education Loan EMI Calculator.
Frequently asked questions
›Do I have to pay anything during the education loan moratorium period?
Not usually required, but many lenders allow optional interest-only payments during this period, which is worth doing if affordable since it prevents interest from compounding onto your principal.
›How long is a typical education loan moratorium period?
Usually your full course duration plus a grace period of 6-12 months after graduation, though this varies by lender and loan scheme.
›Does a longer moratorium always mean a worse deal?
Not necessarily — a longer moratorium gives you more breathing room before repayment starts, which matters if you need time to find a job, but it does increase the principal you’ll eventually repay interest on, so it’s a genuine trade-off, not a free benefit.
›Is education loan interest tax deductible?
Yes — under Section 80E, the entire interest paid on an education loan (no upper limit) is deductible from taxable income for up to 8 years from when repayment starts, though this only applies under the old tax regime.
Try it yourself
Open the Education Loan EMI Calculator →
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This article is for general information only and isn’t financial, tax, or legal advice. See our disclaimer.