International Student Loans: What Are Your Options?

International students can get loans to pay for college in the US, but the process can be complex. Most international students need a US co-signer with good credit to apply for a loan. However, some lenders offer loans that do not require a co-signer, and scholarships, grants, and payment plans are also available. The type of loan, interest rate, and repayment terms will depend on the student's non-citizen status, credit history, and financial need.

International student loans in the USA

International student loans are a realistic way to finance your education in the US. These loans are flexible and can often cover the entire cost of your education, with reasonable interest rates and extended repayment terms.

Eligibility

Most international students applying for loans in the US must have a US co-signer. The co-signer is legally obligated to repay the loan if the borrower defaults. The co-signer must be a permanent US resident with good credit and must have lived in the US for at least the past two years. This is because most international students cannot get credit on their own. However, some lenders do offer no-co-signer loans for international students attending select colleges and universities.

Interest Rates

The interest rate for an international student loan is determined by a benchmark rate (Prime Rate or SOFR) plus an extra percentage based on the creditworthiness of the borrower or their co-signer. This ensures that the final interest rate reflects the risk associated with lending to a particular individual and takes into account the prevailing economic environment.

Repayment

Repayment terms vary depending on the loan option chosen. As most international students cannot work while studying in the US, repayment must be considered very carefully. The repayment period generally ranges from 10 to 25 years, and the larger the loan, the longer the repayment period. Students are often able to defer payment until six months after graduation, as long as they maintain full-time status.

What the Loan Covers

International student loans can be used for education-related expenses such as tuition, books, fees, insurance, room and board, travel, and living expenses.

Interest rates and repayment plans

International students seeking loans often require a co-signer who is a US citizen or permanent resident with a strong credit history and has lived in the US for at least two years. The co-signer is legally obligated to repay the loan if the borrower defaults. However, some lenders, such as Ascent and Earnest, offer loans to international students without a co-signer if specific criteria are met.

Repayment plans can vary depending on the lender. Some common options include:

• Full payment: Full interest and principal payments, resulting in the most savings over the loan term.
• Fixed: Fixed monthly payments, such as $25, before beginning full payments.
• Interest-only: Monthly payments cover only the interest accrued during the study period, with full payments starting after graduation.
• Deferred: Postponing any payments until after graduation, with a standard grace period of six months, and some lenders offering up to nine months.

The repayment period can range from 10 to 25 years, and the larger the loan, the longer the repayment period. It is important to note that interest rates may fluctuate, impacting the monthly payments. Therefore, international students should have a solid financial plan and carefully consider the consequences of taking out a loan to avoid defaulting and negatively affecting their credit score.

Cosigners and eligibility requirements

As an international student, you may need to turn to private lenders that specialize in student loans for international students. Most international students applying for loans must have a US cosigner. A cosigner is a person who is legally bound on a loan application to pay the outstanding debt in case the applicant is unable to pay. The cosigner must be a US citizen or permanent resident with good credit who has lived in the US for the past two years. The cosigner is often a close friend or relative who can assist in getting credit, since most international students cannot receive credit on their own.

If you are an international student applying to or enrolled at select schools in the US and Canada, and you meet the lender's criteria, you may be eligible for a no-cosigner loan. For example, Earnest offers international student loans without a cosigner if you meet some specific criteria. However, most international students will need a co-signer who is a US citizen or permanent resident and meets borrower eligibility requirements.

The interest rate for an international student loan is computed using a benchmark rate (Prime Rate or SOFR) plus a margin, with the margin being contingent on the creditworthiness of the borrower or their co-signer. This ensures that the final interest rate reflects the risk associated with lending to a particular individual.

Private lenders and specialised loans

If you're an international student in the UK, you may find it challenging to get accepted for a loan compared to UK residents. However, there are still options available to you. While you won't be eligible for a loan from the UK government, some specialist lenders may be more flexible.

Private Lenders

Private loans are made and backed by banks, credit unions, or state-based organisations, and they set their own terms and conditions. Private student loans are credit-based, so a lender will consider your history of borrowing money and paying it back. The amount of money you can borrow from a private lender varies, and it's important to understand the loan limits, interest rates, fees, and loan terms.

You can apply for private loans directly from each lender's website, and it's recommended to do this after you've decided on your school and determined your total financial need. The application process is generally quick and easy, and you may receive a credit result in about 10-15 minutes.

Before applying for a private loan, it's advisable to research the lender's eligibility criteria carefully. Lenders may require you to provide proof of a permanent address, a UK bank account, and a visa. They typically like to see at least 2-3 years' worth of UK address history.

Specialised Loans

Some specialist lenders, like Lendwise, accept international students provided they meet certain criteria. With Lendwise, you can borrow between £5,000 and £100,000, to be repaid over an agreed period of up to 10 years after graduation for full-time courses.

Additionally, some universities create their own student loan schemes for talented students from low-income backgrounds, which may include non-EU students. Contact the university you're interested in to inquire about their student loan schemes and eligibility requirements.

It's important to thoroughly understand the terms and conditions of any loan before committing. Private loans often come with repayment time limits and interest, and some companies may require you to work for them after graduation.

Scholarships, grants and other alternatives

While taking out a loan is an option for international students, scholarships and grants are also available. These are often highly competitive and rarely cover all expenses, but they can provide valuable financial support for your studies.

Scholarships

Merit-based scholarships are awarded based on special skills, talents, or abilities. This could include TOEFL scores, academic record, artistic ability, musical ability, or athletic ability. Need-based scholarships, on the other hand, are granted to students who can demonstrate financial need. Academic departments within universities may have funds to assist international students with exceptional needs or talents. It is recommended to consult with your university and major department to explore these opportunities. Websites like College Board, EduPASS, FastWeb, and International Education Financial Aid (IEFA) offer searchable databases of scholarships, grants, and other financial aid opportunities for international students.

Grants

Grants are typically need-based financial awards that do not need to be repaid. While federal grants in the United States often require citizenship or permanent resident status, there are some cases in which international students may qualify. It is worth checking with your university and local community for grant opportunities. Websites like IEFA and EducationUSA provide information on grants and other financial aid for international students.

Other Alternatives

On-campus employment is another option to consider. Many schools in the United States offer opportunities for international students to intern or work on campus. However, the type of work and the number of hours per week may be limited.

Additionally, some international students may be eligible for no-cosigner loans. These loans do not require a US co-signer and can provide funding for international students who meet the lender's criteria.

Frequently asked questions