The latest union budget 2025-26 includes several schemes and strategies that significantly affect the education sector in the country. Understanding the budget impact on education loans is important when you are planning on taking a student loan. The new budget has announced a reduction in TCS on foreign remittances through education loans. This significantly affects the students with foreign education loans. 

This article covers the key highlights of the Union Budget 2025-26 for education loans, along with the impact of the budget on education loans in India. We have also covered the challenges of the new budget for education loans.

Key Highlights of the Union Budget 2025-26 for Education Loans

  • The union budget 2025 allocation for the education sector has increased by 6.22% from the previous budget.
  • The Tax Collected at Source(TCS) has been reduced from 0.5% to 0% for education loans.
  • It plans to allocate 75,000 additional seats in medical colleges for medical education in the next 5 years.
  • The budget 2025-26 aims to revolutionise India’s education system by integrating AI and digitalisation in education.
  • The budget introduced a new scheme to enhance the digital form of learning for higher education.
  • It has allocated funds to provide financial support for research and development facilities in the country.

Impact of Budget on Education Loans 

Education loans bridge the financial gap between students and their dream of pursuing higher education at a well-recognised university. These loans provide financial support for both domestic and international studies. 

The recent Union Budget 2025 of India made several changes to the education sector. Students need to understand the impact of the budget on education loans before applying for one. The following are the major updates from the Union Budget 2025-26 for the education sector that help you understand the Budget impact on education loans in 2025:

Increased Budget Allocation for the Education Sector

The new budget has significantly increased the funding for the Ministry of Education this year. The budget allocation for the education sector has reached ₹1,28,650 crores, a 6.22% increase from the last year. The Ministry of Education aims to set up 50,000 Atal Thinkering Labs(ATL) in government schools over the next 5 years to foster innovation and creativity among students.  This increased government spending on the education sector significantly impacts higher education infrastructure, which affects student loan borrowing in the country.

Education Budget 2025: New TCS Rules for Education Loans

  • The TCS on foreign remittance in India refers to the tax collected on the money for transferring to another country. TCS will be charged on the amount transferred to another country that exceeds ₹7 lakhs. 
  • The TCS for transferring funds for abroad education from any source other than a student loan is 5%.
  • Earlier, the TCS on education loans was 0.5% of the amount transferred. However, according to recent changes to the education budget of India,  the TCS for an education loan taken for higher education was reduced to 0%. 
  • This means TCS will not be charged on funds transferred from education loans. This reduction of TCS significantly helps students save money when they take an education loan for studies abroad.

Students often struggle to get an education loan for studies abroad without the right guidance. WeMakeScholars is an organization dedicated to providing the best education loan support to students. When you apply for an education loan through us, our team of dedicated financial officers will help you get the best education loan. Request a callback today so that our team can help you fulfill your dream of studying in a foreign country

Expansion of medical education

Over 20 lakhs of students appeared for NEET this year; however, only 1.18 lakh medical seats are available in India. This is why the number of students taking an education loan to pursue a medical degree from a foreign country is steadily increasing. To reduce the number of medical students going abroad, the new education budget aims to add 10,000 additional seats in medical colleges and hospitals in the coming year, and add a total of 75000 medical seats over the next 5 years. 

Many students rely on education loans to pursue a medical degree, as they are often very expensive.  However, the budget 2025-26 decision to add more medical seats affects the borrowing pattern of medical students for both study in India and abroad education loans.

AI Integration and Digitalisation of Education

The education budget 2025-26 focuses on integrating AI and digitalisation of the education sector in India. A budget allocation of ₹500 crores has been announced to set up a Centre of Excellence in Artificial Intelligence for education. This AI Centre of Excellence in Artificial Intelligence focuses on the integration of AI in education to provide personalised learning to students. This can transform the education infrastructure in India.

Additionally, a new initiative, the Bharatiya Bhasha Pustak Scheme, was proposed in the Union Budget 2025-26. The scheme aims to promote the regional languages of India in education.  It provides a digital form of textbooks and study materials in regional languages for schools and higher education.

Budget Allocation for Research and Development

The budget 2025 included an allocation of ₹20,000 crores to provide financial support to Research, Development, and Innovation in science and technology. Under the PM Research Fellowship Scheme, the government plans to allocate 10,000 fellowships over the next 5 years. This provides financial support to PHD students in the field of technological research and development.

Challenges of Budget 2025-26 for Education Loans

Now that we have understood the Impact of the budget on education loans, let's learn the challenges of the budget 2025 for education loans:

Rising Cost of Education

With the rising cost of education, many students rely on education loans to fund their education. The new budget has included several schemes and strategies to enhance the education quality in India. However, it didn’t include any strategy to tackle the rising cost of education in the country.  

Education Loan Repayment 

This is another important aspect that the budget didn’t focus on. While there are several schemes to provide repayment support to students with education loans from economically weaker sections, these schemes do not cover all the students. The latest union budget didn’t include any measures to reduce the financial burden of education loan repayment on students.

Many students struggle to manage their finances when faced with issues during the repayment period. They don’t know how to resolve issues such as a sudden increase in the interest rate. WeMakeScholars is here to help you in such a situation. We have a dedicated post-sanction team to resolve issues faced after the loan is sanctioned for students who applied for a student loan through us. Get in touch with our team to get a stress-free education loan journey. And since WeMakeScholars is supported by the Ministry of IT, we offer our services for free to students.

Limited support for Abroad Education

The demand for abroad education has significantly increased in the last decade. And many students rely on education loans to fund their education abroad. Apart from the TCS elimination on education loans, the Union Budget 2025-26 doesn’t provide any other significant support to students with foreign education loans.

Conclusion

Understanding the impact of the union budget on education loans is essential for students while taking an education loan. The new budget has included several schemes and initiatives to improve the education quality in India. It aims to transform the education infrastructure of the country by integrating AI and digitisation in the education sector. The Union Budget 2025-26 significantly impacts students with education loans. 

In this article, we have covered the budget impact on education loans in 2025. We have also covered a few challenges of the education budget for education loans, such as limited foreign education support.