Banks and financial institutions employ the Marginal Cost of Funds-Based Lending Rate (MCLR) to calculate the interest rate.

It is calculated by considering various factors, such as

• Tenure premium

• Funds' marginal cost of capital

• Operational expenses

• Other expenses

Although the MCLR is the foundation for all foreign education, loan interest rates are set by lenders (Banks, NFBCs).

The interest rates on most government bank education loans are computed using the MCLR plus spread formula. This spread refers to banks' premiums on top of the baseline MCLR value.

Government banks' interest rates on international education loans range from 9% to 10%. The ultimate education loan amount sanctioned by government banks might go up to INR 1.5 crore because they issue education loans on the basis of collateral security.

Now, let's ‌look at the private bank interest rates on international education loans.

• Unsecured education loans are mostly provided by NBFCs and private banks in India.

• Because these loans do not need any collateral, the interest rate on an education loan without collateral is greater than the interest rate on a government bank education loan.

• The interest rate imposed by private banks and NBFCs on education loans varies based on several criteria.

• One of them is the country of study chosen by loan applicants.

For the following nations, below is a summary of the expected education loan interest rate charged by NBFCs and private banks:

• The United States: 11.5% to 12.75% 

• Canada: 12% to 13%

• Germany, the United Kingdom, France, Ireland, and other countries: 13% to 14.5%.

Overall, the interest rate for unsecured education loans from NBFCs and private banks can range from 11.5 percent to 14.9 percent. Foreign lenders are the next group of lenders to consider. Let's have a look at the interest rates they charge on student loans.

Foreign lenders have their own set of policies when it comes to school loans. The same may be said about their interest rates on overseas education loans. Foreign lenders' foreign education loan interest rates are based on something called LIBOR, or London InterBank Offered Rate. LIBOR values fluctuate approximately every two months, which impacts foreign lenders' final interest rates on overseas education loans. The rate of interest on a foreign education loan is also influenced by the difference in currency values.