Education Loan to Study Abroad: A 2027 Guide
Jasveer Arya
Published on April 6, 2026
An education loan to study abroad can cover tuition, living costs, travel and insurance. Under the Indian Banks' Association (IBA) model scheme, you start repaying only after your course ends plus one year. Loans of up to ₹7.5 lakh can be given without collateral under a government credit guarantee. Larger loans usually need property or deposits as security, or a lender that judges your university and course instead.
This guide covers how a student loan for study abroad works and what lenders ask for. It also explains the tax and remittance rules that change your real cost, and how to compare sanction letters before you sign. If you already have an offer, MetaApply MetaFinance team can help you compare education loan offers from several lenders in one go.
How an Education Loan to Study Abroad Works
Most Indian lenders follow, or start from, the IBA model education loan scheme. Private banks and NBFCs set their own terms, but the table shows the baseline you'll be measured against.
| Feature | IBA model scheme rule | What it means for you |
|---|---|---|
| Expenses covered | Tuition, exam and lab fees, travel, insurance, books, equipment, a computer and refundable deposits | Living costs abroad are usually covered too, up to the lender's ceiling |
| Margin (your share) | Nil up to ₹4 lakh; 15% above that for studies abroad | On a ₹40 lakh total cost, you fund about ₹5.4 lakh yourself |
| Collateral | None up to ₹7.5 lakh (merit quota, under CGFSEL); 100% tangible security above that | Most loans for the UK, US, Canada or Australia need collateral at public banks |
| Co-borrower | Parent or guardian, jointly with the student | Their income and credit history affect the sanction |
| Moratorium | Course period plus one year | Interest usually accrues during this period |
| Repayment | Up to 15 years after the moratorium | Longer tenure lowers the EMI but raises the total interest |
The ₹7.5 lakh collateral-free limit comes from the Credit Guarantee Fund Scheme for Education Loans (CGFSEL), run by the National Credit Guarantee Trustee Company. In September 2026 the scheme was extended to scheduled cooperative banks, adding to the commercial banks and regional rural banks already covered.
A common concern we hear from parents is whether they'll have to pledge the family home. For loans above ₹7.5 lakh at a public sector bank, some security is usually needed. That said, fixed deposits, insurance policies and property can all count, and several private lenders don't ask for collateral for certain universities.
Secured vs Unsecured: Choosing a Student Loan for Study Abroad
Your choice of lender usually comes down to three questions. How much do you need, what security can your family offer, and how quickly do you need the sanction letter?
Public sector banks
These usually offer lower interest rates on secured loans and follow the IBA framework closely. Processing can be slower, so apply as soon as you have an offer. They suit families who can offer property or deposits as collateral.
Private banks and NBFCs
They often sanction faster than public banks and may lend without collateral. That depends on your university, course and co-applicant's income. Rates are typically higher than secured public-sector loans, so compare the total repayment, not only the headline rate.
International lenders
Some overseas lenders assess the student's future earning potential rather than family assets. They lend only for a fixed list of universities and courses. Check whether your programme qualifies before relying on this route.
How to Get an Education Loan for Abroad Studies: Step by Step
- Get your admission offer and cost sheet. Lenders size the loan from the university's fee letter and your estimated living costs. Our guide to the cost of studying abroad shows the living-cost minimum each visa office sets.
- Check your eligibility early. Use MetaApply's loan eligibility checker to see roughly how much you can borrow before you visit a bank.
- Prepare documents. You'll need the offer letter, academic records, test scores (IELTS, GRE or GMAT), passport, KYC and income proof for the co-applicant. If you're offering security, add the collateral papers.
- Apply to two or three lenders. Compare the sanction letters side by side, not just the quoted rates.
- Use the sanction letter for your visa. Several visa offices, including Canada's, accept a bank education loan as proof of funds. See our note on Canada study visa processing time for the current funds requirement.
- Arrange disbursement. Tuition usually goes straight to the university, and living costs are released in instalments.
Tax and Remittance Rules That Lower Your Real Cost
Two rules make a loan-funded remittance cheaper than many families expect.
Interest deduction
The interest you pay on an education loan from a bank or approved institution is deductible for up to eight years, with no upper limit. This was Section 80E of the Income-tax Act, 1961, and is now Section 129 of the Income-tax Act, 2025. The deduction applies to the old tax regime only, and only the interest portion counts, not the principal.
TCS on foreign remittance
From 1 April 2025, tax collected at source (TCS) is nil on education remittances funded by a loan from a notified financial institution. Self-funded education remittances are TCS-free up to ₹10 lakh a year and attract 5% above that. Funding tuition through your loan account can therefore avoid TCS on large payments.
Common Mistakes When Comparing Education Loans
- Looking only at the interest rate. Processing fees, insurance add-ons and prepayment charges can change the total cost.
- Ignoring moratorium interest. Interest that builds up during your course may be added to the loan before EMIs start. Paying it while you study can reduce the total noticeably.
- Borrowing the full cost by default. Every lakh you borrow costs interest. Subtract the scholarships you've secured first. Our list of fully funded scholarships for Indian students is a good place to start.
- Missing the fine print on floating rates. A floating rate linked to a benchmark can rise during a 10 to 15 year repayment.
Is an Education Loan to Study Abroad Worth It?
Parents usually ask this before anything else. Work out the EMI before you sign. At an illustrative 10% interest rate, a ₹30 lakh loan repaid over 10 years costs about ₹39,645 a month, or roughly ₹47.6 lakh in total. This is an example, not a quote, and your rate will differ.
Set that EMI against realistic starting salaries for your course and country, and against the post-study work rights the visa allows. If the EMI would take more than a reasonable share of a graduate salary, borrow less. Choose a cheaper city or university, or close the gap with scholarships before you sign.
How MetaFinance Helps
MetaFinance is MetaApply's education finance service. It works with lenders including Axis Bank, ICICI Bank, IDFC First Bank, HDFC Credila, Avanse, Auxilo, Union Bank, Tata Capital, GyanDhan, Nomad Credit and Prodigy Finance. That lets you compare secured, unsecured and international options in one place, and line up a sanction letter in time for your visa.
Ready to Fund Your Degree Abroad?
MetaApply's counsellors and MetaFinance team help Indian students choose the right university, plan their budget and compare loan offers, all under one roof. The best education loan to study abroad is the one you've compared on total cost, so start the process as soon as your offer arrives.
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Frequently Asked Questions
Yes, up to ₹7.5 lakh under the government's CGFSEL guarantee at participating banks. For larger amounts, some private lenders and NBFCs lend without collateral for selected universities. Public sector banks usually ask for security.
It depends on your course cost, co-applicant income and any security. Under the IBA model scheme you contribute 15% of amounts above ₹4 lakh. Lenders set their own upper limits.
Under the IBA model scheme, after a moratorium of your course period plus one year, with up to 15 years to repay. Interest usually accrues during the moratorium.
Yes. Interest on an education loan from an approved lender is deductible for up to eight years with no upper limit, under the old tax regime.
No. From 1 April 2025, TCS is nil on education remittances financed by a loan from a notified financial institution. Self-funded remittances above ₹10 lakh a year attract 5%.