No, you will not have to repay your education loan with margin money. The interest is charged only on the disbursed amount and not on the whole sanctioned amount.
There is a difference between loan amount that is sanctioned and the loan amount that is disbursed.
For example, you require INR 40 lakhs for your abroad education. The bank sanctions INR 35 lakhs for your loan. Margin money will be calculated on this amount. Let’s say it is 10%. The amount you will have to arrange will be INR 3.5 lakhs.
During the course of your abroad education, you request the bank to disburse only INR 30 lakhs, then the effective margin money will also reduce to INR 3 lakhs.
Margin money is not a part of the repayment process and the interest will only be charged on the amount that the bank disburses.