Education Loan Moratorium Period: Course Duration Plus 6–12 Months Repayment

An Education Loan helps students pursue higher studies without creating immediate financial pressure. In an Education Loan, you generally get a "moratorium period" - a time frame that allows you to delay repayment until your education is completed.

Understanding how the moratorium works and what it means for your loan can help you manage finances effectively, plan ahead, and avoid the stress of immediate repayments. Read on!

What is an Education Loan Moratorium Period?

A moratorium period typically includes the duration of the education course plus an additional 6–12 months after course completion (depending on the lender). Borrowers are not required to make loan payments until the end of their moratorium period. During this time, you will not incur penalties for late payment and will have temporary relief from financial burdens.

However, this moratorium does not mean no interest accrues during the moratorium period. Also, most Education Loans automatically include a moratorium period in their terms. You only need to submit a formal request if you wish to extend the moratorium beyond the standard period.

How Interest Works During the Moratorium Period

While repayments are deferred, interest continues to apply during the moratorium period.

Interest During the Moratorium Period

Interest accrued during the moratorium period will continue to accrue on the Education Loan. Most banks charge simple interest during this period, which is later added to the loan balance if the loan remains unpaid.

Accrued Interest and Outstanding Loan Amount

Interest accrued during a moratorium will be treated as additional principal on the borrower's Education Loan. Therefore, when the moratorium has ended, and the accrued interest is not repaid separately, it will be added to the principal balance. The total loan due will be higher than originally projected, resulting in higher monthly payments (EMI).

Repayment of Education Loan After the Moratorium Period Ends

Once the moratorium period ends, borrowers must prepare to repay their Education Loan in structured instalments.

When Loan EMI Payments Begin

EMI payments often begin as soon as the moratorium period ends. Both your loan agreement and the loan account statement specify the date of the first EMI. Borrowers can choose to pay interest during the moratorium to reduce the burden later.

Principal Repayments and Loan Tenure

After the moratorium, borrowers must repay both principal and interest over the remainder of the loan term. You can use a moratorium EMI calculator to determine the exact EMI amount during and after the moratorium. Timely repayments help reduce the outstanding loan amount and build financial discipline.

Consequences of Missing Payments

If EMIs are missed, the lender may pursue legal action in addition to late fees and penalties. Long-term financial problems and a bad credit history might result from repeated defaults. Therefore, maintaining timely payments is essential to preventing severe consequences.

Benefits and Challenges of the Moratorium Period

The moratorium period offers financial relief; however, it also comes with long-term implications. Here are the benefits and challenges.

Benefits of the Moratorium Period

• Provides financial support by allowing students to focus on academics.

• Reduces pressure to make immediate payments.

• Helps manage living expenses during studies and early career years.

Challenges of the Moratorium Period

• Deferred interest increases the overall cost of borrowing.

• Higher EMIs after the moratorium can strain finances.

• Borrowers must weigh short‑term relief against long‑term impact.

Is the Moratorium Period Beneficial for Every Borrower?

A moratorium period is beneficial for most borrowers. However, students with part‑time income or scholarships may benefit from paying interest during studies to reduce future debt.

Education Loan Interest Subsidy and Government Support

Some borrowers may receive support to reduce the interest burden during the moratorium period.

Interest Subsidy Schemes for Eligible Students

The Central Scheme for Interest Subsidy (CSIS) provides relief to students from economically weaker sections (annual parental income ≤ ₹4.5 lakh). Under CSIS, the government pays the interest during the moratorium period.

How to Apply for the Interest Subsidy

To find out if you qualify for an interest subsidy programme, please check with your bank, lender, or official portal of the PM Vidyalaxmi scheme. A financial advisor can help you understand the application processes and documentation required for these subsidy programmes.

Read Also: Comprehensive Guide to Education Loan Repayment for Indian Students

To Conclude

A moratorium on Education Loan eases the transition from student life to working life. Knowing how accrued interest, repayment tenure, and credit work together enables you to plan better and avoid financial stress. With careful planning and timely repayments, education loans can be managed efficiently without long-term financial strain.

Looking for funds to manage your higher studies? If so, apply for an Education Loan at Poonawalla Fincorp and cover all your education expenses hassle-free.

Read Also: How to Get an Education Loan Without Collateral and a Co-Applicant?

FAQs

What is the 12-month moratorium period?

It means you have up to 12 months after course completion before you are required to start repaying EMIs.

How to get the lowest interest on an Education Loan?

You may benefit from the CSIS subsidy scheme, which covers interest during the moratorium for eligible students.

Do I have to pay interest during the moratorium period?

Yes, interest is charged during the moratorium period unless an interest subsidy program covers it.

How much Education Loan can I be eligible for?

The loan eligibility will vary based on your income, other financial obligations, and the lender’s criteria. You can use a moratorium calculator or speak to the lender to estimate your borrowing limit.

What is the rule of loan repayment?

Loan repayment must follow the schedule mentioned in the loan agreement. EMIs should be paid on time to avoid penalties and a negative impact on credit score.

What is the difference between a moratorium period and a grace period in an education loan?

A moratorium lasts several months to years, while a grace period is short (days to weeks). Grace periods are rare in education loans, but common in consumer loans.