5 Ways Financing Education Benefits Commerce Students

Earlier, parents used their savings or assets (like gold, land, or fixed deposits) to pay for their child’s education. But now, many families prefer financing education. This is because education loans offer many benefits that make funding higher studies more affordable.

It is for this reason the education loan sector in India has grown significantly in recent years. According to the Reserve Bank of India (RBI), bank loans for education have increased by 23% to Rs. 1.17 lakh crore as of January 2024. This marks a 15% increase in the last 12 months.

Want to know how taking an education loan is better than using personal savings or diluting assets? In this article, let’s check out the five major benefits of financing education for commerce students.

1. Benefit from low interest rates

An education loan has a lower interest rate compared to other unsecured loans like personal loans. This is because it is linked to the repo rate, which is currently 6.25% p.a. Usually, banks add an extra percentage (spread) to this rate, but this can be negotiated if you:

• Provide collateral (such as property)

or

• Secure admission to a top-ranked commerce institution.

Additionally, some banks offer concessions for female borrowers and students from economically weaker sections (EWS). Many lenders also provide a repayment holiday (moratorium period). This allows students to start repaying only after completing their studies.

Since education loans are classified as priority sector lending, some financial institutions also offer better terms (especially for courses with high employability).

2. Enjoy tax benefits

As per Section 129 of the Income Tax Bill 2025 (previously Sec 80E of the Income Tax Act, 1961), the interest paid on an education loan taken for higher studies is allowed as a deduction.

The entire interest amount you pay on your education loan can be deducted from your taxable income. There is no upper limit on this deduction, and you can claim it for up to 8 years. However, the loan must be taken from a financial institution or approved charitable organisation. If borrowed from friends or family, this benefit is not available.

Moreover, as a commerce student, if you pay for foreign education without a loan, you must pay 5% TCS on amounts exceeding Rs. 7 lakh. But, if you take an education loan, the TCS is only 0.5% for amounts above Rs. 7 lakh. This further makes financing education a more tax-efficient option.

3. No collateral required

For financing education up to a certain limit, most banks do not ask for any security (collateral). This makes it easier for you to get a loan without pledging assets like property or gold.

Also, these loans come with a moratorium period. This means you don’t have to start repaying the loan immediately. Banks usually give 6 months to 1 year after course completion before EMIs begin.

Since there is no need to start repaying immediately, you can focus on your studies without worrying about finances. This helps in better academic performance and career planning.

4. Build your credit score for the future

Taking an education loan isn’t just about funding your studies. It is also your first step toward building a strong credit score. When you borrow and repay the loan on time, it:

• Creates a positive financial record
• Proves your creditworthiness
• Shows you are financially disciplined

A good credit score helps you secure future loans (such as a home loan, car loan, or personal loan) at lower interest rates and favourable terms.

Additionally, by managing EMIs responsibly, you develop financial discipline early in life. You learn how to budget your earnings and avoid unnecessary debt. This experience makes you a responsible borrower and significantly lowers your chances of default.

5. Cover your multiple expenses

An education loan is not just for tuition fees. It covers many other costs that you as a commerce student might face, such as:

• Hostel or mess fees
• Purchase of books or laptops from online marketplaces or offline stores
• Laboratory and uniform costs
• Travel expenses (if studying abroad)

Furthermore, some banks also pay refundable deposits that colleges ask for (usually up to 10% of the tuition fee). This ensures that you and your family don’t have to worry about multiple education-related expenses.

Conclusion

Financing education (preferably through an education loan) is a smart choice for commerce students like you. It allows you to pursue higher studies without putting financial pressure on your family.

The low interest rates make it more affordable than personal loans, and tax benefits further reduce overall costs. Additionally, education loans cover multiple expenses, such as tuition fees, hostel charges, and travel costs.

Moreover, many banks and NBFCs offer loans without collateral for a certain limit. Also, the moratorium period ensures you do not have to start repaying immediately. This reduces your financial burden and allows you to focus better on your studies.