Janice Lozano
International students can get loans to pay for their education in the US, although the options available differ from those for US citizens. International students are not eligible for federal student loans or financial aid from the US Department of Education. Instead, international students can apply for private student loans from banks, credit unions, or online lenders. These loans are designed specifically for international students and can provide the necessary funds to cover their education. However, it is important to carefully evaluate the costs and understand that these loans need to be repaid, usually with interest.
| Characteristics | Values |
|---|---|
| International student loans | Available through banks, credit unions, or online lenders |
| Federal student loans | Not available to international students |
| Private student loans | Available to international students |
| Cosigner | Usually required, but not always |
| Interest rates | Vary by lender; fixed or variable |
| Repayment terms | Vary by lender; generally 5–25 years |
| Grace period | Some lenders offer a grace period before repayment begins |
| Monthly payments | Determined by the loan amount and interest rate |
| Deferral options | Some lenders allow deferral until 6 months after graduation |
| Interest-only payments | Some lenders offer interest-only payments while in school |
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What You'll Learn
International student loans: eligibility and requirements
International students can get loans to pay for their education in the US. However, they are not eligible for federal student loans or financial aid from the US Department of Education. Instead, international students can borrow private student loans from banks, credit unions, or online lenders. These loans are specifically designed for international students and can provide the necessary funds to cover their education costs.
Eligibility and Requirements:
When applying for an international student loan, it is important to carefully evaluate the amount of money required to study in the respective country. International students should first exhaust all other options, such as scholarships, financial aid from their school, and personal or family funds, before considering taking out a loan.
Most lenders require international students to have a cosigner who lives in the country where they are studying. The cosigner assumes joint responsibility for repaying the loan and needs to have a good credit score and a steady source of income. In rare cases, an international student may qualify for a loan without a cosigner if they have high career potential or are close to graduating.
Additionally, it is crucial to compare different lenders and loan offers. Each lender sets its own eligibility requirements, interest rates, fees, and repayment terms. Some lenders may offer more favourable terms, such as lower interest rates, fixed interest rates, or the option to postpone payments until after graduation. It is beneficial to read customer reviews and assess the lender's customer service responsiveness.
Before accepting a loan offer, it is essential to understand your financial needs and ensure that the monthly repayment amount is affordable. It is also worth noting that some loans may accrue interest while the student is still in school, increasing the overall cost of the loan. Therefore, making small payments during studies can help reduce interest charges and prevent the loan balance from escalating.
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Interest rates and repayment options
The interest rate is a percentage of the borrowed money that needs to be paid back in addition to the original loan amount. The two main types of interest rates are "fixed" and "variable". Fixed rates remain the same over the life of the loan, while variable rates can fluctuate based on external factors such as inflation or economic policies. A fixed interest rate is generally considered more competitive as it provides certainty about monthly payments. When deciding on a loan, it is important to understand the difference between interest rates and monthly payments to avoid over-borrowing and additional interest payments.
The interest rate for international students is determined by the chosen benchmark (Prime Rate or SOFR) plus an extra percentage based on the creditworthiness of the borrower or their co-signer. A fixed interest rate that won't increase over time is generally recommended. For graduate students, MPOWER offers a fixed interest rate of 12.99% (13.98% APR) with a potential discount of 0.25% through automatic withdrawal, resulting in a rate of 12.74% (13.72% APR). For undergraduate students, MPOWER offers a fixed interest rate of 13.99% (15.01% APR) with the same discount option, reducing the rate to 13.74% (14.75% APR).
Repayment options vary depending on the loan and lender. Some common options include full repayment, deferred repayment, interest-only repayment, and fixed monthly repayment plans. The repayment period typically ranges from 10 to 25 years, with larger loans having longer repayment periods. Students can often defer payments until 6 months after graduation or for a maximum of four years, which is the standard length of a degree. It is important to carefully evaluate the monthly payments and repayment timeline to ensure the loan can be afforded.
When comparing lenders, it is crucial to consider factors such as interest rates, fees, and repayment terms. Some lenders may offer smoother online applications or faster approval and funding times. Additionally, it is worth noting that federal student loans are not available to international students, so they must turn to private loans from banks or private lenders.
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Cosigners and their role
International students often require a cosigner to secure a loan for their education. This is because lending to international students is considered high risk due to their lack of credit history and collateral. A cosigner helps lower the lender's risk by sharing the legal responsibility of repaying the loan with the borrower. This individual, typically a family member or close relative, should have a good credit history and a stable financial background.
The role of a cosigner goes beyond just signing the loan agreement. They share equal responsibility for the loan with the primary borrower, including covering any missed payments or even the entire loan if necessary. The cosigner's credit score will be impacted if the student defaults, and their credit report will reflect the loan. Therefore, it is important for prospective cosigners to understand the full extent of their legal responsibility, including the potential consequences of any missed payments by the borrower.
To secure a loan, a cosigner must meet certain eligibility criteria. They must be a U.S. citizen or permanent resident with a financial history in the country. They should also have good credit, typically a score of 670 or above, and demonstrate reliability through their ability to repay the loan if the borrower cannot.
While not all lenders require a cosigner, those that do offer security and peace of mind to the lender, increasing the chances of loan approval and securing favourable terms. However, it is important to carefully evaluate the need for a loan and consider all available options before approaching potential cosigners.
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Private lenders and refinancing
Private Lenders:
Private lenders, such as MPOWER Financing, offer international student loans that don't require a co-signer or collateral. This is especially beneficial for international students who may not have a co-signer in the U.S. By borrowing independently, students can build their credit history in the U.S. and relieve their families from providing collateral. It's important to compare different private lenders, as they set their own criteria, interest rates, fees, and repayment terms.
Refinancing:
International students can also consider refinancing options to save money or lower their monthly payments. However, refinancing often requires building credit history, which can be challenging for international students. One way to build credit is by applying for a credit card, which typically requires a permanent address, taxpayer ID, income, and a bank account. Once a line of credit is established, making timely and full payments can help build creditworthiness.
Some lenders, such as Citizens Bank, offer refinancing options with competitive APRs and flexible repayment plans. SoFi, for example, offers low APRs and a maximum repayment term of 240 months. Prodigy Finance is another private lender that specializes in refinancing for international working graduates in the U.S.
When evaluating refinancing options, it's essential to consider factors such as interest rates (fixed vs. variable), origination and late fees, customer service, and repayment terms. Additionally, international students should be mindful of their noncitizen status and any specific requirements or restrictions that may apply.
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Scholarships, grants and other funding options
Scholarships, grants, and other funding options are available for international students. These include merit-based scholarships, need-based scholarships, and private scholarships.
Merit-based scholarships are awarded based on special skills, talents, or abilities. Universities may offer scholarships based on TOEFL scores, academic records, artistic ability, musical ability, or athletic ability. Merit-based scholarships are usually very competitive, and students need to demonstrate exceptional ability in the area required.
Need-based scholarships are granted to students who can demonstrate financial need at a predetermined level. Academic departments within the university may have funds allocated to assist international students with exceptional financial need and/or talent.
There are also private scholarship providers, such as the Aga Khan Foundation International Scholarship, which provides scholarships to students from select developing countries with no other source of financial aid for their graduate studies. The scholarships are 50% grant and 50% loan. The Joint Japan/World Bank Graduate Scholarship Program provides comprehensive financial coverage, including tuition, a monthly stipend, airfare, health insurance, and travel allowance, to students from developing countries who have supported their home country's development and are applying for a development-related Master's program. MPOWER Financing also offers scholarships for international and DACA students through its Global Citizen Scholarship Program, which has broad eligibility criteria and is offered throughout the year.
In addition to scholarships, international students can also apply for grants. FastWeb, for example, provides access to 1.5 million scholarships worth $3.4 billion. Students can create a profile and track their applications on the website.
Other funding options for international students include international student loans, which are specialized private education loans available to international students studying in the US. These loans can offer high loan amounts with extended repayment terms and reasonable interest rates. However, it is important to carefully evaluate the interest rates, fees, and repayment terms offered by different lenders before taking out a loan.
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Frequently asked questions
International students can borrow money from a bank or other private lender, but they are not eligible for federal student loans or financial aid from the U.S. Department of Education. These private loans are available to international students studying in the U.S. and are designed specifically for international students.
The requirements vary depending on the lender. Some lenders require a cosigner who lives in the U.S. and has a good credit score and a steady source of income. In rare cases, an international student may be able to qualify for a loan without a cosigner if they have high career potential or are close to graduating. It is important to compare the requirements and interest rates of different lenders before applying for a loan.
The interest rates for international student loans vary depending on the lender and the benchmark used to calculate the rate. Two common benchmarks are the Prime Rate and the SOFR (Secured Overnight Financing Rate). The lender will consider the chosen benchmark and add an extra percentage based on the creditworthiness of the borrower or their cosigner. It is important to compare interest rates and repayment terms before choosing a lender.
