How to Reduce Student Loan Interest
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Personal Finance
- Swati Tripathi
- 2022-12-10
- 03 min read
#education loan
#student loan

For a strong career foundation, and to realize the larger-than-life dream, why is higher education the first step?

Why does everyone want to enroll with universities which raise eyebrows? What’s different?

The crowd. The opportunities. Every pass-out has a well-established career, based on a strong network he found in that uni. Even dropouts mint money. Again, because of the opportunities and connections such universities offer.

It’s an attractive life – a global crowd, an independent life, and a course of your choice, with the best minds in the field teaching you. But to get into a well-established university is a matter of privilege. You either come from a strong financial background, enough to afford it, or have good backing.

But then, why should quality education be a privilege? To answer exactly this, banks offer student loans at quite lucrative interest rates. And with the hefty fees these unis charge, borrowing is a given.

What ensues is the worry of the burden falling on your shoulders after you complete the course.

Here are some simple and genius ways you can save yourself from paying heavy interest amounts.

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To understand that, you need to first understand how interest works.

Interest is the cost you have to pay for borrowing a sum for a specific duration.

Multiple factors influence the calculation of the interest you end up paying. The duration of your borrowing is the most important one.

So the key is to pay the interest on time. If you don’t, the outstanding interest is added to the borrowed principal. This would mean paying interest on an increased amount in the following months.

A minor delay on rare occasions say for a month or two is often forgiven. It doesn’t add up to a big burden. But if your interest dues accumulate for a longer period, it starts trapping you.

The longer the period of your loan, the higher the interest. So, the idea is to repay the loan as soon as you can.

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Where do you start?

A student loan comes with a moratorium period of one to one and a half years. In this period, you do not have to pay the interest, but the bank does charge you for it. The interest is added to your total loan amount.

If you can afford to, take as little advantage of the moratorium and pay off whatever you can.

This will reduce the amount of interest outstanding at the end of the tenure. Plus, you can reduce the burden building in the future by slashing the amount that accrues over the moratorium period.

Another genius approach to further reduce your education loan interest is to pay more than the scheduled EMI. (Equal Monthly Instalments)

If you are to pay ₹5,000 as an EMI, pay ₹6,000 instead. Where you are already shelling out ₹5,000 from your pocket, another thousand bucks won’t pinch you as much. But this will save you from paying a higher amount down the line. Save more on other controllable expenses so that you can manage your debt.

As soon as you settle in the university, look for a part-time job that would pay for your lifestyle needs as well as your loan repayments.

Even if you do have your parents’ support in your finances, earning that extra pocket money will not harm you. It’ll only free you of the loan quicker than expected.

Now comes the question – why should I remove the loan sooner? I have to pay the same amount sooner or later. Then why push the repayment earlier?

Because a longer duration means having to pay more. When you pay off the loan sooner, you can waive off a significant amount of debt and redirect it toward other purposes:

Focus on other financial goals. A reduced interest can kickstart your journey to financial stability quicker and much smoother.

Reduce the mental burden. Why put off the burden for later when you can take care of it now? 

As you grow, the responsibilities and expenses to manage those only keep increasing. So if you can make space to manage everything smoothly, why not?

You don’t have to take responsibility alone. Employers today are happy to support their human resources too. You can also work around a remuneration that pays off your interest, partially or fully, as a perk with your salary.

Even if you don’t find a job soon, you don’t have to wait. Got a good device, a strong connection, and a skill you can capitalize on? You’re ready to side hustle!

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The last word

While there are multiple ways to reduce your student loan interest, the #1 way to save yourself from unnecessary burden is to only borrow what’s needed. Just because you have the sanction doesn’t mean you have to use it all.

Be wise while repaying and wiser in your borrowing decisions.


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