The reforms made by the government under the GST 2.0, which have been implemented from 22nd September 2025, have brought about many changes across goods and services, including the education sector. Students who want to avail of the education loans in India are still wondering: Will their loan EMIs go down? What is the GST’s effect on student loan costs? This blog will break down how education loan EMI GST, GST 2.0 education loan India, GST impact on the higher education loan, especially with respect to the loan processing fees, ancillary charges and educational services.
What’s the status of education loans & GST
Here are some of the key factors about the education loan and GST in India. Considering both pre-and post-GST 2.0:
- The principal amount of an education loan and the interest charged by the banks and other financial institutions are not subject to GST. GST is applied only to certain services and the fees associated with the loan.
- The processing fees, sanction fees, administration fees, etc., however, do attract GST, usually at the standard rate of 18%.
- The NBFCs and the private banks generally charge a processing fee of about 1%-2% of the loan amount plus GST. However, when applying for an educational loan in government banks, their fees are lower.
What changed under GST 2.0 for the education sector
GST 2.0 brought broader changes in the GST slab rationalisation, simplification, and also specific changes for educational goods and services:
- Under GST 2.0, there are several educational stationery items like the notebooks, pencils, erasers, maps, globes, etc., which were previously taxed at 12% or 5% have been moved to 0%. This means that they have been exempted from the tax slab.
- Education or tuition fees for recognised schools, colleges, and universities remain GST-exempt. Formal, recognised education continues to be treated as a merit good.
- Vocational training programs, which are recognised by the National Skill Development Corporation (NSDC), are again exempt from GST under GST 2.0.
- However, coaching classes, private tuition, test prep, and certain online courses continue to attract 18% GST.
How these changes affect education loan costs and EMI
As the core loan amount and the interest rates are not taxed, GST reforms do not directly reduce the EMI of an educational loan. However, there is an indirect impact via fees. Here’s a breakdown of how:
| Component | Situation Before GST 2.0 | Situation Under GST 2.0 | Effect on Cost to Student |
| Loan processing fees | Private bank/NBFC might charge 1-2% + 18% GST; govt bank charges lower, sometimes NIL or minimal fees. | Same structure, since GST 2.0 hasn’t changed the rule that processing fees attract GST. Reduction of GST on stationery, etc., may reduce related costs. | Slight increase in upfront cost (due to GST on fee), but unchanged by reforms. Students may benefit from ancillary savings (supplies). |
| Interest + Principal repayments (EMI) | Not taxed; EMI computed based on principal + interest + tenure. | Remains not taxed. | No change in EMI from tax component; EMI unchanged except as influenced by fees or loan terms. |
| Educational supplies (books, stationery) | Items like notebooks and pencils were taxed at 12% or 5% earlier. | Many moved to 0% (tax-free) under GST 2.0. | Reduces ancillary costs for students/families, lowering out-of-pocket expenditure, though not part of the loan EMI. |
| Coaching / online courses/test prep | Subject to GST at 18%. | Still under 18% GST. No change under GST 2.0 with respect to these services. | Costs for these services remain relatively high; any loan covering these will not benefit from the GST side. |
Example: How “Loan EMI after GST reform” looks in practice
Taking a loan of ₹5,00,000 for 5 years at 10% interest, here’s how the costs look:
| Item | Before GST 2.0 | After GST 2.0 |
| Processing Fee (1.5% + 18% GST) | ₹8,850 | ₹8,850 (no change) |
| Books & Stationery (per year) | ₹2,000 | ₹1,600 (GST-free items) |
| Monthly EMI | ₹10,620 | ₹10,620 (no change) |
Simple Explanation:
- Your EMI stays the same because GST is not applied to the loan amount or interest.
- The real savings come from cheaper books and stationery, which are now tax-free under GST 2.0
Broader implications of GST reforms on student finance
- The students and their families will definitely benefit from lower costs for books, stationery and school supplies. Over the years to come, this benefit will add up especially for those who come from a lower-income background.
- Coaching and preparatory classes remain a cost burden because even after the GST 2.0 implementation, there will still be an 18% GST in place. Therefore, there will be no changes from the GST 2.0 in this sector.
- The institutions providing education have some changes under the GST 2.0. There is a reduction in GST on supplies, which is simpler compliance under the two-slab structure (5% and 18%) for the non-exempt items. However, there is a change in the cost of outsourced or ancillary services like transport, catering and maintenance, etc., which attract GST.
Conclusion
To have a comprehensive summary, the GST 2.0 education loan India changes bring relief to many, but do not directly reduce the EMI for the education loan because the EMIs on the education loan depend on the principal amount, interest rate and its tenure. None of which are taxed under GST. What changes under GST 2.0 are mentioned below:
- The Ancillary and associated costs, which include the processing fees and stationery supplies, are now charged at 0% GST, which lowers the out-of-pocket expense.
- The students and their families, along with the schools that provide stationery items, will benefit from cheaper stationery, notebooks, maps, and course materials where GST was reduced or removed.
- However, the educational services like coaching, tuitions, online test prep, etc, still attract 18% GST. So there is a financial burden that remains.
Therefore, for students who are planning a higher education and want to take educational loans, it is wise to compute the total cost, using an EMI calculator, factoring out the processing fees and GST on supplies, to get a complete picture of what you will really pay. As a student, if you want to apply for an educational loan for higher education, then GoFinance is the financier you are looking for.
