International Students: Eligibility For Federal Student Loans

International students often face challenges when it comes to financing their education in the United States, as they are generally not eligible for federal student loans or state aid. To bridge the funding gap, international students typically rely on personal finances or turn to private student loans, which can be expensive due to higher interest rates. However, there are alternative options to reduce the financial burden, such as scholarships, institutional grants, and school discounts. Additionally, certain categories of non-citizens, such as permanent residents or refugees, may qualify for federal financial aid, but they must complete the Free Application for Federal Student Aid (FAFSA). International students often require a cosigner, preferably a US permanent resident with good credit, to secure more favourable loan terms.

Can an international student qualify for federal student loans?

International students' eligibility for federal student loans in the US

International students studying in the US have several options to finance their education. However, federal student loans are generally not available to international students. These loans are typically reserved for US citizens and eligible non-citizens.

Eligibility for Federal Student Loans

To be eligible for federal student loans, an individual must meet one of the following criteria:

• US nationals, including natives of American Samoa or Swains Island
• US permanent residents with a "green card"
• Individuals with a specific Arrival-Departure Record from US Citizenship and Immigration Services, including those with refugee or asylum status, Cuban-Haitian Entrants, Conditional Entrants (issued before April 1, 1980), or parolee status
• Holders of a T-nonimmigrant status or those whose parents have this status
• "Battered immigrant-qualified aliens" or children of someone designated as such
• Citizens of the Federated States of Micronesia, the Republic of Marshall Islands, or the Republic of Palau (eligible for specific federal aid)

Options for International Students

International students who do not meet the above criteria for federal student loans have alternative financing options:

• International Student Loans: These are specialized private education loans available to international students studying in the US. They offer flexibility, with loan amounts that can cover the entire cost of education, extended repayment terms, and reasonable interest rates.
• Private Lenders: Several private lenders offer student loans specifically for international students, such as College Ave, Earnest, MPOWER Financing, and Ascent. These lenders provide tailored solutions depending on the student's needs.
• Co-signer Loans: International students can also consider co-signer loans, where a permanent US resident with good credit co-signs the loan. This option may provide access to more competitive interest rates.
• Scholarships and Institutional Aid: Before taking on debt, international students should explore scholarships, institutional aid, and school discounts. These options do not require repayment and can significantly reduce the overall cost of education.
• Merit-based Aid: Some colleges offer merit-based aid to international students, such as the Howard University Freshman Scholarships.
• Need-based Aid: While need-blind colleges are limited, some schools may offer need-based aid to international students, usually in the form of grants or work-study programs.

International students' eligibility for private student loans

International students are not eligible for federal student loans in the US. However, they can apply for international student loans, which are specialised private education loans. These loans are flexible and can often cover the entire cost of education.

International students seeking private student loans in the US typically require a cosigner, who must be a permanent US resident with good credit. The cosigner is often a close friend or relative who can assist in getting credit, as international students usually cannot receive credit on their own. If a cosigner is not available, there are no-cosigner loan options, but these are limited.

The interest rate on these loans is computed using a benchmark rate (Prime Rate or SOFR) plus an extra percentage based on the creditworthiness of the borrower or their co-signer. The repayment period can range from 10 to 25 years, with options to defer payment until after graduation or to pay only the interest while in school.

Before taking out private student loans, international students should explore other options, such as scholarships, financial aid from their school, family funds, or aid from their country's embassy or the US state in which they are studying.

Interest rates and repayment plans for international students

International students are not eligible for federal student loans. However, they can apply for international student loans, which are specialised private education loans. These loans are flexible and can offer loan amounts high enough to pay for the entire education, but with extended repayment terms and reasonable interest rates.

Interest Rates

The interest rate for international students is determined by the lender, who considers a chosen benchmark (Prime Rate or SOFR) and adds an extra percentage based on the creditworthiness of the borrower or their co-signer. The SOFR (Secured Overnight Financing Rate) is an interest rate benchmark administered by the Federal Reserve Bank of New York. It is based on transactions in the Treasury repurchase market, where banks and investors borrow or loan Treasuries overnight. The Prime Interest Rate is influenced by the federal funds rate, which is established by the US Federal Reserve.

Repayment Plans

Repayment plans vary depending on the loan option chosen. Students need to consider how much the monthly payments will be, when payments will begin, and how long they can defer paying back the loan. The repayment period typically ranges from 10 to 25 years, with larger loans having longer repayment periods.

There are several standard repayment plan options:

• Full Deferral: Students can defer payment until six months after graduation, as long as they maintain full-time status. The maximum deferral period is four years, which is the typical length of a degree.
• Interest Only: Students pay only the interest while in school, up to four consecutive years, and can defer the principal until 45 days after graduation or when they drop to part-time.
• Immediate Repayment: Payments on both interest and principal are due immediately once the loan is disbursed.
• Fixed: Fixed payment plans allow for a fixed amount to be paid monthly, for example, $25, before beginning full payments.
• Deferred: The lender offers a deferred payment plan, where payments can be postponed until after graduation.

The impact of visa status on loan eligibility

International students on specific visas may be eligible for federal student loans. This includes US nationals, such as natives of American Samoa or Swains Island, and US permanent residents with a "green card". Additionally, those with an Arrival-Departure Record from US Citizenship and Immigration Services showing refugee or asylum status, Cuban-Haitian Entrant, Conditional Entrant (issued before April 1, 1980), or parolee status may also qualify for federal aid.

For the majority of international students, however, visa status limits their access to federal loans, forcing them to explore alternative financing options. Private student loans are a common solution, but they come with higher interest rates and often require a co-signer who is a permanent US resident with good credit. International students may also seek scholarships, institutional aid, and school discounts to reduce their reliance on loans.

The eligibility criteria for international student loans from private lenders vary. While some lenders may require a co-signer, others offer loans specifically for international students without this requirement. These loans can cover the total cost of education, including tuition, books, fees, insurance, and room and board. However, international student loans are typically more expensive than traditional loans due to higher interest rates and additional fees, such as origination and currency exchange fees.

In summary, the impact of visa status on loan eligibility for international students in the US is significant. While those with specific visa statuses may qualify for federal aid, most international students must rely on private loans, scholarships, and institutional aid to finance their education. The challenge of securing funding underscores the financial barriers faced by international students pursuing educational opportunities in the United States.

Alternative funding options for international students

International students cannot apply for federal student loans or state student aid in the US. However, there are alternative funding options available to them, including:

Scholarships

Scholarships are a popular option for international students seeking to study in the US. These can be offered by the US university or college itself, or by external organisations and companies. Scholarships can be merit-based or need-based. Need-based scholarships are awarded based on financial need, while merit-based scholarships are granted based on special skills, talents, or abilities. For example, a university may offer scholarships based on TOEFL scores, academic record, artistic ability, musical ability, or athletic ability.

International scholarships are specifically designed to help students fund education programmes overseas. These scholarships can also open doors to unique cultural experiences and valuable networking opportunities. There are also scholarship funds that serve undergraduate international students, such as private, corporate, nonprofit, and government scholarship funds.

Grants

Grants are another option for international students. These can be subject-based, based on your country of origin, hardship funds, or provided by charities or official bodies.

Bursaries

Bursaries are a form of financial aid offered by universities and colleges for international students. This type of financial aid is given to students based on need rather than merit or accomplishments.

Loans

International students can take out private loans, although financial experts advise against taking on too much debt. Those who can get a creditworthy US citizen or permanent resident to co-sign may be eligible for a private alternative student loan. The co-signer must be a US permanent resident with good credit who has lived in the US for the past two years.

Institutional financial aid

Many US colleges and universities offer limited financial aid for international students through their financial aid offices. This is more common for graduate students than for undergraduates. Private institutions sometimes discount or reduce tuition costs, while both private and public institutions may waive application fees in some situations.

Funding from your home country

Your own home country could be a source of funding. For example, your home country's government may provide scholarships or grants for studying overseas, or there may be organisations or companies from your home country that provide funding.

Frequently asked questions