The Future of Student Loans: Navigating Debt Burdens, Forgiveness Debates, and Repayment Strategies

Are education loans helping dreams or building lifelong debt? That’s a question every Indian student and their parents are asking today. College is expensive. Overseas education? Even more. Yet, dreams don’t come cheap.

Student loans seem like a blessing, but many realise the trap only after the degree is done. The stress is real for delayed jobs, high EMIs, and interest piling up. In Gujarat alone, education loan disbursals touched ₹2,078 crore in 

FY 2025. And yet, growth in borrowers fell to just 2.7%. Fewer students are borrowing now. Why?

There’s more than one reason. Let’s break it down step by step because the only way to win this game is to understand every move.

What’s Causing the Weight of Student Debt to Rise?

India's middle class is ambitious. Parents want children to become engineers, doctors, or MBAs. Private colleges see this hunger and hike their fees yearly. At the same time, living costs shoot up in metros and abroad. A normal engineering degree can cost up to ₹6,00,000, including food and rent. 

An MBA from a reputed B-school? ₹13,00,000 or more.

So, students turn to loans. But here’s the twist — interest rates are high. Public banks charge 8.5% to 10%. Private banks charge more. EMI starts six months after graduation, sometimes even before a job begins.

Let’s see some common cases:

Even if you land a ₹6,00,000 yearly job, paying a ₹18,700 EMI is hard. Add rent, food, and bills; there's barely money left. This is why so many students delay EMIs or default. Loans are growing, but salaries are not keeping up.

Now, banks hesitate to lend. Some demand collateral. Some reject low-credit applicants. This system is broken.

Loan Waiver Promises, Government Schemes, and the Truth

Every few years, there’s news of student loan forgiveness or interest subsidies. States like Bihar and Gujarat have tried schemes. The central government runs the Vidya Lakshmi Portal, connecting students with banks. It’s good — in theory.

Here are some known government offerings:

But the truth is, the process is slow. Paperwork is heavy. Many banks don't accept online applications. Girls, SC/ST, and BPL students face fewer obstacles, but even they struggle with documentation and follow-ups.

Politicians talk about waivers, but these rarely reach students. Unlike farm loans, education loans seldom get written off. There’s no large-scale forgiveness. Students are still paying EMIs years after graduation.

Fundamental Repayment Strategies: What Works?

Now let’s talk solutions. A student with a ₹10,00,000 loan at 10% interest over 7 years pays around ₹16,600 monthly. That’s steep.

But if they increase the EMI to ₹20,000, the loan will be finished in about 5.5 years. That saves over ₹1,00,000 in interest. Small changes can reduce your burden.

Here are practical methods:

1. Prepayment

Pay more when you can. Tax refunds, Diwali bonuses, and freelance income — throw that into the loan. No prepayment penalty for education loans.

2. EMI Restructure

If you lose your job or your salary drops, request an EMI extension or interest-only period from your bank. This will help you avoid default.

3. Side Income

Take online tuitions, write content, manage social media — side gigs are everywhere. Even ₹5,000/month extra helps.

4. Income-Based Plans

Some Indian banks offer adjusted EMI based on your salary. But you need to make a request in advance.

Here’s a comparison of repayment strategies:

If you wait for the perfect job, you may lose more money in interest than you think.

Why Smart Borrowing is More Important Than Big Borrowing?

Before applying for any loan, ask whether I need the full amount?

Don’t borrow for luxury. If your family can afford hostels, mess food, or even books, reduce the loan amount.

Even ₹1,00,000 less can save you around ₹40,000 in interest over 7 years. Every rupee you don’t borrow is a rupee you don’t repay.

Use this table for reference:

Larger loans don’t always mean better life. Sometimes they just mean longer stress.

Conclusion

The Indian education loan system needs deep repair. Digital portals must work. Subsidies should reach students faster. Banks must treat education as investment, not risk.

Students too must change approach. Compare banks. Negotiate interest. Borrow less. Pay early. Don’t wait for government relief. It’s not coming.

Use EMI calculators. Discuss repayment with family. Track your credit score. Build side income early. These things matter more than a college name.

If we don’t fix how we fund education, India’s youth may carry debt longer than degrees.

FAQs

1. How can I reduce interest on my education loan in India?
Choose public sector banks. Opt for schemes with subsidy. Start prepayment during moratorium. Choose floating interest rates if available.

2. What is the best repayment method for overseas education loan?
Start paying EMI during the course if possible. Avoid loan extension. Convert INR earnings to EMI via forex cards to save conversion charges.

3. Can I apply for multiple education loans from different banks?
Yes, but most banks will ask for your existing loan details and credit score. Double loans are tricky without high repayment capacity.

4. What happens if I don’t repay my student loan?
Bank will start recovery process. Your CIBIL score will drop. You won’t get future loans easily. After 90 days, the loan becomes NPA.

5. Is interest subsidy available for all students?
No. Only students from economically weaker sections, SC/ST, or under certain state schemes get subsidy. Most students pay full interest.

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LoansJagat Team

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