Douglas Olsen
International students in the USA can get money back in the form of tax refunds, and there are also a number of other ways for them to receive financial aid. Most international students on an F-1 visa are considered non-resident aliens and are required to file a US tax return (form 1040-NR) for income from US sources. They can also claim a tax treaty benefit, which will allow them to fully or partially exempt their US-sourced income from federal and/or some state income taxes. International students can also apply for international student loans, which are available for undergraduate and graduate students. Additionally, they can seek financial aid from their home country's ministry or department of education, as well as their embassy and consulate in the US and back home, to see if there are government-backed scholarships available.
| Characteristics | Values |
|---|---|
| International students on F-1 or J-1 visas | Nonresident aliens |
| Tax form for nonresident aliens | 1040-NR |
| Tax treaty benefit | Exempt US-sourced income from federal and/or state income taxes |
| Social Security Number | Required for international students with a job |
| International student loans | Available for undergraduate and graduate students |
| Cosigner for international student loans | Required, must be a US citizen or permanent resident |
| Federal student loans | Only available to US citizens and permanent legal residents |
| Scholarships | Minimal aid available, mostly for graduate study |
| Grants | Available |
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What You'll Learn
International students in the USA can get tax refunds
International students in the USA on F-1, J-1, M-1, or Q visas can earn money through practical training. They are required to file a US tax return (Form 1040-NR) for income from US sources. This includes scholarships and fellowship grants, which are considered taxable income for nonresident aliens. However, international students may be eligible to deduct the portion of the scholarship or grant used for qualified educational expenses.
To claim a tax refund, international students must determine their residency status for tax purposes, which is different from their immigration status. They must also understand the tax treaty benefits available to them, as claiming these benefits can fully or partially exempt their US-sourced income from federal and state income taxes. The US has tax treaties with more than 65 countries, and these treaties typically include provisions for students.
When filing taxes, international students must use the mail to submit their tax returns to the Internal Revenue Service Center in Austin, Texas. They cannot file electronically. To prepare their tax documents, students can use services like Sprintax, which offers 24-hour support and helps students maximize their refunds. Alternatively, they can seek help from a certified public accountant (CPA).
If the amount of tax deducted from an international student's payments during the tax year is more than the tax shown on their 1040-NR, they will be due a refund. However, each state has its own tax system and regulations, so foreign students may need to file a state tax return and pay state income tax even when no federal return is due.
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International student loans are available
There are a few things to keep in mind when considering an international student loan. Firstly, international students in the USA typically must have a cosigner for student loans, and this cosigner must be a US citizen or permanent resident with a good credit score and an income of at least $30,000 per year. Secondly, it is important to consider the interest rate on the loan, as you will be responsible for paying back the original amount borrowed plus an additional amount charged by the lender (the interest). Variable-rate loans calculate interest based on an "index" plus a margin that will add an additional percentage depending on your cosigner's creditworthiness or other factors decided by the lender. The two most common indexes used for international student loans are the Prime Rate and the Secured Overnight Financing Rate (SOFR).
There are a variety of lenders that provide loans to international students, including Ascent Funding and MPOWER Financing. Ascent offers both undergraduate and graduate loans to international students, but they must be credit-based and cosigned. MPOWER Financing offers fixed-rate loans from US$2,001 to US$100,000 at competitive interest rates, and they do not require a cosigner or collateral. They also provide additional services such as visa guidance support and scholarships.
It is important to carefully consider your financial options and choose the loan that best suits your circumstances. International student loans can be a helpful way to finance your education in the United States, but it is crucial to understand the terms and conditions of the loan and your responsibilities in repaying it.
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Scholarships and grants for international students
Scholarships and grants are a great way for international students to fund their studies in the USA. However, international students are not eligible for funding intended specifically for US nationals, and most scholarships are reserved for graduate study. As such, scholarships for international students can be competitive.
There are a variety of scholarships and grants available for international students, offered by both private and public institutions. Some scholarships are funded by the US government, while others are funded by private organizations or specific institutions.
- The Fulbright Foreign Student Program is one of the most popular government-funded scholarships. It offers scholarships to graduate students, young professionals, and artists from around the world to study in the US for one year or more.
- 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 are applying for a development-related Master's program.
- The P.E.O. International Peace Scholarship awards scholarships to women from other countries pursuing graduate degrees in the USA.
- The Aga Khan Foundation International Scholarship provides scholarships to students from select developing countries who have no other source of financial help for their graduate studies. The scholarships are 50% grant and 50% loan.
- The #YouAreWelcomeHere Scholarship is offered by the University of Minnesota and is a renewable scholarship offering $15,000 per year.
- The Wesleyan Freeman Asian Scholarship Program offers scholarships for 11 exceptional Asian students to study at Wesleyan University in Connecticut, covering tuition and student fees.
- The Civil Society Leadership Awards offer full scholarships for Master's students from specific countries who are dedicated to fostering social change.
It is important to note that scholarships and grants may be considered taxable income when paid to non-resident aliens (international students). International students are generally required to file a US tax return (form 1040-NR) and report any scholarships or grants as income. However, there may be deductions and exemptions available, and some scholarships may be tax-exempt.
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Building credit as an international student
Building a credit score is essential for international students in the US, as it will help them take out loans, get a credit card, or rent an apartment. A credit score is a rating that a lender will use to assess how much of a financial risk you are. The higher your score, the more responsible you appear to be in the eyes of lenders.
International students will need to build a credit score from scratch in the US, and the best time to start is as soon as possible, as the length of your credit history is a primary factor in achieving a higher score. While it is possible to build a credit score without a Social Security Number (SSN), having one will make the process easier. If you have authorisation to work in the US, you will be issued an SSN.
One of the easiest ways to build credit is with a credit card. Using a credit card responsibly by paying off charges each month or week will allow you to have regular use of the card, which lenders like to see. You can also set up automatic payments for the minimum amount due each month, and then manually pay the difference. However, it can be difficult to find a company that will issue a credit card to an international student without a credit history or an SSN. Some credit cards are specifically designed for international students and only require passport information.
Another way to build credit is to take out a student loan. Prodigy Finance, for example, reports loan repayments to Experian in the US and TransUnion in the UK. Additionally, Experian now accepts rent reports, so you can register with their RentBureau to make your off-campus housing costs count towards your credit score.
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International wire transfers and their fees
International wire transfers are a fast and efficient way to send money to someone overseas. However, they can be costly, with fees typically ranging from $0 to $50. Outgoing international wire transfer fees average $44, but some banks may charge more depending on the amount being transferred and the type of account you have. For example, Chase Bank charges $50 USD to send an international wire in person, including wires to bank accounts outside the US in both US dollars or foreign currency. However, if you send the same transfer online, the fee is reduced to $40.
Some banks may also offer discounts or waive fees for certain types of transfers. For example, Citibank and Wells Fargo waive their outgoing transfer fees for online wires in a foreign currency, and PNC Bank offers a $5 discount for sending international wires online. Additionally, some banks may offer no fee or a lower fee for sending an international wire transfer using foreign currency. For instance, Chase Bank charges $40 for an international wire transfer in US dollars but only $5 if sent in foreign currency.
It's important to note that exchange rates can also impact the cost of an international wire transfer. Each provider will offer a slightly different exchange rate for currency conversions, so it's essential to research and compare rates before initiating a transfer. Some banks may also add a markup to the exchange rate to make a profit from your exchange, so be sure to review the terms and conditions carefully.
To avoid wire transfer fees, you may want to consider alternative payment methods such as international ACH transfers or peer-to-peer apps like Wise, which offer fast and affordable international money transfers. Additionally, if you regularly send money in a foreign currency, opening an account in that currency could help you avoid exchange rate charges, although not all banks offer multi-currency accounts.
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Frequently asked questions
Yes, international students can get a tax refund in the USA. Most international students on an F-1 visa are considered non-resident aliens and are required to file a US tax return (form 1040-NR) for income from US sources. If the amount of tax deducted from your payments during the tax year is more than the tax shown on your 1040-NR, you will be due a refund.
International student loans are available for undergraduate and graduate students. You can apply online and get approval within days. In most cases, a cosigner is required, and that cosigner must be a US citizen or permanent resident.
Yes, scholarships are available for international students in the USA. You can check with your home country's ministry or department of education, as well as your embassy and consulate in the US and back home, to see if there are government-backed scholarships available.
The rules concerning non-immigrant student employment are complex, and you should discuss eligibility with your International Student Adviser before accepting any work. Working cannot be your sole source of funding, and most jobs will provide spending money at best.
Some common money mistakes that international students make in the USA include not doing enough research on transferring money, paying university tuition by wire transfer, and buying full-price books.
