For many people, an education loan is the first formal credit product they purchase. While the loan helps fund higher studies, experts say it can also shape a student’s long-term financial future through one key factor — their credit score.
A healthy credit score can later help young professionals secure cheaper home loans, better credit cards, easier vehicle financing and even favourable insurance terms. A poor score stays on credit reports for years, making borrowing expensive and difficult.
Industry experts say many students still underestimate how early financial habits influence their long-term creditworthiness.
“A strong credit score is quietly becoming one of the most important assets a young professional can build, often more powerful over the long term than the first salary itself,” said Prashant Bhonsle, founder and chief executive officer (CEO) at Kuhoo, an education loan platform.
Bhonsle said education loans, when managed responsibly, can help students establish a strong financial identity early in life. “Timely EMI payments, disciplined use of credit cards, avoiding unnecessary debt, and maintaining low credit utilisation are still the fundamentals,” he said, referring to equated monthly installments.
How students hurt credit scores
Experts say one of the biggest mistakes students make is mentally disconnecting from the loan during the moratorium.
“The biggest mistake is treating the education loan as future debt and disengaging from it during the course period,” said Varun Chopra, cofounder of Eduvanz, an education-focused non-banking financial company.
Most education loans offer a moratorium covering the course duration and a few months after graduation. However, interest continues to accumulate during this phase.
Yogesh Rawat, chief business officer for student lending international at Avanse Financial Services, said many borrowers wrongly assume the moratorium period means the loan is effectively paused.
“Interest still accrues during this time as this is not an interest-free period,” Rawat said. Ignoring partial or simple interest payments during the moratorium increases the future EMI burden significantly.
Experts also flagged another growing concern among young borrowers: Overusing easy credit immediately after graduation.
New graduates often take on credit cards, buy-now-pay-later products and personal loans without assessing repayment capacity, according to Kundan Shahi, founder of loan repayment platform Zavo.
“This leads to missed or delayed EMIs, which can significantly impact their credit score at a very early stage of their financial journey,” Shahi said.
Small payments can make a big difference
Experts stressed that even small repayments during the study period can improve both repayment behaviour and long-term credit health.
Rawat said students who begin paying partial interest during the moratorium period establish an early repayment track record, helping credit bureaus classify them as responsible borrowers.
“It trains them to budget effectively right from the start of their financial journey,” he said.
Shahi cited the example of a student who took an education loan of nearly Rs 25 lakh for overseas studies and started servicing the monthly interest during the moratorium period using part-time income and family support.
“As a result, when the repayment tenure officially began, the outstanding burden was lower and the borrower maintained a healthy credit score above 780,” Shahi said. The student later secured a car loan at better interest rates within two years of employment.
On the other hand, experts also highlighted how poor repayment discipline can create long-lasting financial stress.
Sunil Agithakaliya, chief operating officer at CRIF High Mark, said delinquent education loans often lead to future loan rejections and financial distress, particularly among students pursuing vocational courses who may still be in the early stages of their careers.
He shared an example where a student’s education loan application for foreign studies was initially rejected because the father, who was acting as guarantor, had an unresolved credit card default.
“The father contacted the credit bureau and got the card settled on priority so that the loan could get approved,” Agithakaliya said.
Credit shapes more than loans
Experts said a strong credit profile today influences far more than just loan approvals.
Agithakaliya noted that telecom companies use credit scores to determine limits for postpaid mobile connections, while insurers may also assess credit profiles while analysing policy terms.
A strong credit score can also unlock better interest rates, higher credit limits and premium financial products later in life.
“Good credit behaviour also enables access to better interest rates, higher credit limits, premium financial products, and faster approvals across institutions,” Chopra said.
Some employers, particularly in banking, financial services and fintech sectors, may also review credit behaviour during background verification processes, experts added.
Simranjeet Singh, CEO of SME and retail business at Anand Rathi Global Finance, said maintaining a healthy credit profile ultimately comes down to financial discipline within both the student and the family.
“My advice to the young guns would be to treat your education loan not as a burden but as your foundation to financial responsibility,” Singh said.
Experts recommend students should:
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Never miss EMI payments once repayment starts -
Consider paying partial interest during the moratorium period -
Avoid excessive credit card or BNPL spending immediately after graduation -
Maintain low credit utilisation -
Keep track of lender communication and repayment schedules -
Build an emergency fund for loan repayments -
Use automated payment reminders to avoid defaults
Bhonsle said students today make borrowing decisions with maturity.
“We are increasingly seeing students think like long-term financial planners rather than short-term borrowers,” he said.