Why This IIM Graduate Chose Not to Repay His Education Loan Quickly

An MBA graduate from IIM Bangalore shared on Reddit why he did not rush to pay off his education loan, even though he could. Instead, he analyzed his finances and found a smarter way to manage his money.

1. Tax Benefits on Loan Interest

One of the main reasons he avoided fast repayment was tax benefits. Under Section 80E of the Income Tax Act, borrowers can claim a full tax deduction on interest paid for up to 8 years. He explained:

“If you clear your loan in 2-3 years, you miss out on this big saving. Why not use the full window and reduce taxable income?”

2. Impact of Interest on Loan Amount

He gave an example of a borrower taking a ₹20 lakh loan at 9% interest. By the time repayment begins, the amount could grow to ₹25-27 lakh due to accumulated interest.

Additionally, in the early years of loan repayment, banks charge more interest than principal. This means repaying quickly doesn’t always save as much money as people think.

3. Balancing Loan Repayment with Savings

Instead of using all his money to clear the loan fast, he balanced repayment with savings and investments. He structured his finances in a way that:
✅ Kept tax benefits
✅ Maintained liquidity (access to cash)
✅ Allowed smart investments

Final Takeaway

He believes that being debt-free quickly sounds good, but being financially smart is better. Managing his money wisely turned out to be his best financial decision.

Why I Chose to Repay My MBA Loan in 8 Years Instead of 3!
byu/Impossible_South9795 inCATpreparation