Moratorium Period Education Loan - Meaning, & Benefits

Education Loan

Last updated: Aug 14, 2026

4 min read

by Team Axis Bank

Education costs are rising at nearly 11%–12% annually and could double every 6–7 years. Education loans help manage the rising cost.

Unlike a personal loan, an Axis Bank Education Loan offers a moratorium period.

Not familiar with the term? Read the blog to know what is the moratorium period in an education loan and how you can benefit from it.

What is moratorium period in education loan?

The word moratorium means a temporary pause. In an education loan, it is a period when you are not required to repay the loan EMIs. It usually covers the course duration plus 6–12 months after course completion.

During this time, interest continues to accrue on the outstanding loan amount. Depending on your lender and the repayment option you choose, this interest may either be paid during the moratorium or added to the principal once the period ends. The RBI has mandated all scheduled commercial banks to provide a moratorium period on education loans, as part of the IBA Model Education Loan Scheme.

Key features of the education loan moratorium period

Some key features of the moratorium period in education loans are

The moratorium period generally covers the entire course period, with an additional grace period after completion.
Interest accrual during this period is determined by the terms of your individual loan agreement.
Repayment options during the moratorium vary from full deferment to simple or partial interest payment.

Advantages of the moratorium period on education loan

Financial relief during studies: You do not need to repay the loan while studying.
Better repayment planning: You get time to secure a job before EMIs start.
Protected credit score: No EMI obligation means no impact on credit score.
Relief for co-applicants: Your parents or co-borrowers do not have the financial burden to repay during your studies.
Extension flexibility: Some lenders may extend the moratorium in special cases.
Better job opportunities: You can take your time finding a suitable job before repayment begins.

Difference between the education loan moratorium period and the grace period

Aspect	Moratorium period	Grace period
Meaning	A period when you do not have to repay the education loan.	A short extra time is given to make a payment after the due date.
When it applies	During the course and for some months after completion.	After an EMI due date, if payment is delayed.
Duration	Usually 6–12 months after the course completion	Usually around 10-15 days.
EMI payments	No EMIs required during this period.	EMI is due but can be paid within the grace period without penalty.

How is interest calculated during the moratorium period?

The way the interest rates are calculated during the moratorium period of your education loan depends on the type of loan. Broadly, there are two approaches lenders follow:

Interest payments during the moratorium: Some lenders may require borrowers to pay interest during the moratorium. This prevents the interest from being added to the principal.
Accumulated interest added to principal: The interest accrues during the moratorium period and is added to the principal amount upon its end. While this means no payments during the moratorium period, it results in a higher total repayment amount over time.

Repayment options during the moratorium period

Full moratorium: You do not make any payments during this period, and the accumulated interest is added to the principal amount.
Simple interest payment: You pay only simple interest during the study period, so it is not added to the principal.
Partial interest payment: You pay a portion of the interest during the moratorium, with the remaining interest added to the principal.

What happens after the education loan moratorium period ends?

After the education loan moratorium period ends, you are required to start repaying the loan through regular EMIs as per the terms mentioned in your loan agreement.

How to make the best use of your education loan moratorium?

The moratorium period gives you time to prepare for future loan repayments. Using this time wisely can help reduce your financial pressure later on in life.

Plan your finances early: Estimate your future income and prepare a repayment budget.
Use available tax benefits: Explore government subsidies and tax deductions on education loan interest available under Section 80E of the old tax regime.
Build a strong credit record: Paying interest during the moratorium period, if possible, can help maintain a good credit score.

Conclusion

The moratorium period offered gives a breathing space for pursuing higher education stress-free but using that time wisely is key. Planning repayments early and understanding how interest builds up can help you stay financially prepared once EMIs begin. You can explore Axis Bank Higher Education Loans with a flexible moratorium period to better plan your EMIs.

Frequently Asked Questions

1. Can students make payments during the moratorium period?

Yes, you can choose to pay the interest or a portion of the loan during the moratorium period if you wish to reduce your future repayment burden.

2. Is interest charged during the moratorium period on an education loan?

Yes, interest generally accrues on the loan amount during the moratorium period, but it depends on your loan agreement. How it is handled depends on your loan terms, either paid during the period or added to the principal.

3. Does an education loan moratorium affect CIBIL score?

No, a formally approved moratorium period does not affect your CIBIL score, since no EMI payments are required and lenders report the loan status as deferred rather than missed.

4. What happens to EMI after the moratorium period ends?

Once the moratorium period ends, you must start repaying the loan through regular EMIs as per your loan agreement.

5. What are RBI guidelines on the education loan moratorium?

The RBI requires scheduled commercial banks to provide a moratorium period covering the entire course duration plus an additional 6 months to 1 year after course completion. Borrowers may choose to pay simple or partial interest during this period.

6. How can I calculate EMI after the moratorium period?

You can calculate EMI after the moratorium period using the formula EMI = [P × R × (1+R)^N] / [(1+R)^N − 1], where P is the principal, including accrued interest, R is the monthly interest rate, and N is the repayment tenure in months

Disclaimer: This article is intended solely for informational purposes. The views expressed in this article are personal. Axis Bank and/or the author shall not be liable for any direct or indirect loss or liability incurred by the reader arising from reliance on the content herein. Readers are advised to consult a qualified financial advisor before making any financial decisions. Axis Bank does not endorse or guarantee the accuracy of any third-party content or links included in this article.