Lana Oconnell
International students seeking to study in the US have a variety of loan options available to them, including international student loans, specialised private education loans, and country-specific loans. These loans can help cover the total cost of attendance, including tuition, accommodation, books, and other personal expenses. To apply for a loan, students must carefully evaluate their financial requirements and explore other financial aid options such as scholarships and grants. While federal student loans are not available to international students, they may be eligible for federal aid if they meet specific criteria, such as having a green card or certain arrival-departure records. Most international students will need a US co-signer with good credit for their loan applications, but there are also no co-signer loan options available at select colleges and universities. The loan repayment options and interest rates will vary depending on the lender and loan type, so it is essential for students to carefully consider their choices before committing to a loan.
| Characteristics | Values |
|---|---|
| Who can apply? | Non-US citizens, eligible noncitizens, undocumented students, and international students. |
| Requirements | A US co-signer with good credit who has lived in the US for the past two years. |
| Alternatives to co-signer | Some loans do not require a co-signer, but they may have higher interest rates. |
| Interest rate benchmarks | Prime Rate and SOFR (Secured Overnight Financing Rate). |
| Interest rate calculation | Based on an index plus a margin that depends on the creditworthiness of the co-signer or other factors decided by the lender. |
| Loan amounts | Up to the school's total cost of attendance, including tuition, room and board, books, supplies, personal expenses, and transportation. |
| Repayment options | Full Deferral, Interest Only, fixed monthly payments, or a combination of these. |
| Repayment period | Generally ranges from 10-25 years, depending on the loan amount. |
| Other options | Scholarships, financial aid from schools, family funds, and government funding. |
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What You'll Learn
Understanding interest rates and repayment options
Interest rates can be fixed or variable. A fixed interest rate remains the same throughout the life of the loan, while a variable interest rate may start lower but can fluctuate over time. The interest rate offered to you will depend on your creditworthiness and that of your cosigner, if you have one. Lenders consider the chosen benchmark (Prime Rate or SOFR) and add an extra percentage depending on the borrower's creditworthiness.
Repayment options vary depending on the lender and the loan option chosen. Some common repayment plan options include:
- Immediate repayment – Payments on both interest and principal are due immediately once the loan is dispersed.
- Deferment – Students can defer payment of both interest and principal until six months after graduation, as long as they maintain full-time status. This deferment period typically lasts for up to four years, the usual length of a degree.
- Interest-only payments – Students only pay the interest while enrolled in school and for a grace period after graduation (usually six months), and then begin repaying the principal.
It's important to understand these repayment options and the associated terms of your loan to ensure you can afford the expenses. Most international students are unable to work while studying in the US, so repayment plans must be carefully considered. The repayment period generally ranges from 10 to 25 years, and the larger the loan, the longer the repayment period. Additionally, keep in mind that interest will continue to accrue until the loan is paid off.
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Finding a cosigner
Almost all lenders in the US will require an international student to have a cosigner. This is because international students often have a limited financial history, or none at all, making it difficult for lenders to evaluate their ability to pay. A cosigner is someone who guarantees that they will pay back the loan if the borrower cannot. This means that the cosigner must be creditworthy, with a good credit score, a steady income, a stable job, and a social security number. They must also be a US citizen or permanent resident who has lived in the US for the past two years.
Most students first look to family members to act as their cosigner. However, if no family members meet the requirements, it is possible to find a friend or extended family member who is willing to cosign. The cosigner does not have to be a relative, but they must meet the general requirements.
It is important to remember that the cosigner is taking on a significant responsibility. If the borrower cannot pay back the loan, the cosigner is legally responsible for the debt, including any interest. Therefore, it is crucial to choose a cosigner who can afford to cover these expenses.
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Comparing loan options
Interest Rates
The interest rate is a crucial factor in determining the overall cost of the loan. The interest rate is the additional amount charged by the lender on top of the principal amount borrowed. The two most common benchmarks for determining the interest rate for international student loans are the Prime Rate and the SOFR (Secured Overnight Financing Rate). The Prime Rate is influenced by the federal funds rate established by the US Federal Reserve and serves as a basis for lending rates in the market. On the other hand, SOFR is an overnight rate based on transactions secured by US Treasury securities and administered by the Federal Reserve Bank of New York. SOFR is considered more reliable and accurate than the previous LIBOR benchmark as it does not rely on estimates or surveys.
Repayment Options
Repayment terms and options can vary depending on the lender and loan option chosen. This is an important consideration, especially since most international students cannot work while studying in the US. Some common repayment plan options include full deferral, where students can defer payment until six months after graduation, and interest-only plans, where students pay only the interest while in school and defer the principal until after graduation. It is also essential to understand the monthly payment amounts, when payments begin, and the length of the repayment period, which can range from 10 to 25 years.
Loan Limits
The loan limit refers to the maximum amount of money that can be borrowed from a lender during a specific period. Different lenders have varying loan limits and allowances for covered expenses, so it is crucial to choose a lender whose loan limit meets your financial needs. For example, MPOWER, a lender that supports students at many US and Canadian schools, offers loans specifically designed for international students, with a minimum of US$2,001 and a maximum of US$50,000 per academic period and a lifetime borrowing limit of US$100,000.
Cosigner Requirements
Most international students applying for loans in the US will need a cosigner. A cosigner is legally obligated to repay the loan if the borrower fails to do so. The cosigner must be a permanent US resident with good credit and has lived in the US for at least the past two years. If finding a cosigner is challenging, some lenders offer no-cosigner loans.
School Eligibility
Before applying for a loan, it is essential to check whether your intended school is eligible under the lender's program. Different lenders work with different schools, so it is crucial to research and choose a lender that partners with your intended school or degree program.
By carefully considering these factors and using loan comparison tools available online, international students can make informed decisions about their loan options and secure the necessary funding for their education in the US.
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Exploring other financial aid options
International students are not eligible for federal loans or work-study programs in the US. However, there are still several financial aid options available to international students.
Firstly, you can apply for scholarships. Many universities offer scholarships, but there are also private scholarships. Scholarships are highly competitive, but your chances are good if you have impressive achievements and know how to make a strong application. There are scholarships for specific fields of study, sports, hobbies, volunteerism, heritage, and more. You can also apply for grants, which are another form of financial aid that you don't have to pay back.
Secondly, you can consider taking out a private loan. Several private lenders in the US offer loans to international students, but they usually require a creditworthy co-signer who is a US citizen or permanent resident. You can use a loan comparison tool to see if you're eligible to apply for a loan without a co-signer.
Thirdly, you can look into cheaper universities in the US, as public colleges tend to charge lower tuition rates than private universities. You could also consider a smaller college, which might have similarly impressive academic programs but at a lower cost.
Finally, you can research whether you are eligible for any specialized loan programs. For example, DACA recipients and other undocumented students can receive scholarships and state aid to pay for college.
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Applying for scholarships
Research and Compare
Begin by researching the various scholarship options available to international students. Most colleges offer scholarship programs specifically for international students, so checking your school's financial aid website is a great place to start. You can also use online resources such as InternationalStudent.com, which provides a free, comprehensive list of scholarships, grants, and awards available to international students. Additionally, look into scholarship search services, but be aware that some may charge a fee for access to their database. When comparing scholarships, pay attention to the eligibility criteria, application requirements, and the application process, as these can vary significantly.
Contact the Award Administrator
Once you have identified a scholarship that you think you may be eligible for, reach out to the award administrator. The contact information for the host institution or organization offering the award should be available on their website or through scholarship search platforms like InternationalStudent.com. Get in touch with them directly to ask any questions you may have about the scholarship and to clarify the application process.
Prepare Your Application
The application process for scholarships can vary. Some may require you to fill out an application form, while others may ask for additional materials such as an essay, a specific grade point average, a certain TOEFL score, or proof of financial need. Make sure you carefully review the requirements and eligibility criteria, and take the time to prepare and gather all the necessary documents. Remember to also watch out for scholarship scams that target international students.
Apply Directly to the Host Organization
After completing your research and preparing your application, it's time to apply. In most cases, you will apply directly to the host institution or organization that is offering the scholarship. Follow their specific instructions for submitting your application, and make sure to meet any deadlines they have outlined.
Explore Other Options
In addition to scholarships, there are other financial aid options to consider, such as loans, grants, and work-study programs. International student loans, for example, are specialized private education loans available to international students studying in the US and can help fill any remaining funding gaps.
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Frequently asked questions
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. Students can compare loan options and apply online.
Most international students applying for loans in the US need a US cosigner. The cosigner must be a permanent US resident with good credit who has lived in the US for the past two years. The cosigner is legally obligated to repay the loan if the borrower defaults. Some lenders offer loans without a cosigner, but these are rare and generally have higher interest rates.
The interest rate for international student loans is computed using a benchmark rate (usually the Prime Rate or SOFR) plus a margin, which is contingent on the creditworthiness of the borrower or their co-signer. The benchmark rate is influenced by the federal funds rate, which is established by the US Federal Reserve.
Repayment options vary depending on the loan option chosen. The repayment period generally ranges from 10-25 years, with larger loans having longer repayment periods. Some common repayment plan options include full deferral (defer payment until 6 months after graduation) and interest-only (only pay interest while in school).
