Education loan moratorium period
The moratorium is the period during your course, plus a grace period after it, when you do not repay principal. It is widely understood as a payment holiday and it is not: interest accrues throughout, and what happens to that interest is the single most expensive decision in the whole loan.
Paid against capitalised
| Simple interest paid during the course | Interest capitalised | |
|---|---|---|
| During the course | You pay the interest monthly | You pay nothing |
| What happens to it | It is settled as it arises | It is added to the principal |
| After the course | You repay the original principal | You repay a larger principal |
| Long-run cost | Lower | Higher — you pay interest on the interest |
On a long course with a large loan, the difference between these two runs to lakhs. Many lenders offer a rate concession for servicing interest during the course as well, so the gap widens further.
If the family can afford it, pay it
- The monthly amount during the course is a fraction of the eventual EMI.
- It stops the principal growing before repayment even starts.
- It often earns a rate concession on top.
Ask the lender explicitly which applies and what the concession is for servicing interest. It is not always volunteered, and on a forty-lakh loan it is the largest saving available to you after the choice of lender.
How long the moratorium runs
Typically the course duration plus six months to a year. The exact grace period is on each lender page, read from our lender records — and it matters, because repayment starting before you have found work is a real risk in a slow graduate market.
Moratorium period — FAQs
2 questions
Principal, no. Interest accrues either way — the question is whether you pay it as it arises or have it added to the loan.
No. That is the most common and most expensive misunderstanding about education loans.
Not sure which lender fits? A counsellor compares what you would actually be offered across all twelve — free, and with no application.
Sources
Checked against these sources on 1 October 2026.