1. Interest on education loan is tax free. For example, if you are paying 12% on your education loan, your effective interst rate is:
(12% * (1-30%(your marginal tax bracket)) = 8.4%).
This shows that your borrowing cost is just 8.4% and you can earn more than this on tax free bonds/FDs these days.
2. Cash in hand is always the best friend (liquidity).
3. It acts as a FREE insurance policy, if anything were to happen to you, your education loan will be written off. But, bank won't make a refund in case you had prepaid your loan.
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