Lana Oconnell
International student loans are a realistic way to finance your education in the US, Canada, and other countries. They are specialized private education loans available to international students who wish to study in the US and US citizens studying abroad. The loan amount typically covers the total cost of attendance, including tuition, room and board, books and supplies, personal expenses, and transportation. International students usually require a US cosigner with good credit who is either a permanent resident or a citizen. The cosigner is legally obligated to repay the loan if the borrower defaults. The interest rate on the loan depends on the creditworthiness of the borrower or the cosigner and is calculated using benchmarks like the Prime Rate or the SOFR (Secured Overnight Financing Rate). Repayment terms vary, with the larger the loan, the longer the repayment period.
| Characteristics | Values |
|---|---|
| Who is it for? | International students in the US and US citizens studying abroad |
| Who provides it? | Private lenders |
| Who needs a cosigner? | Non-US citizens and non-US permanent residents |
| Who can be a cosigner? | US citizens or permanent residents with good credit who have lived in the US for at least two years |
| What does it cover? | Tuition, room and board, books and supplies, personal expenses, and transportation |
| What are the interest rates? | Fixed or variable; the two most common indexes used for international student loans are the Prime Rate and Secured Overnight Financing Rate (SOFR) |
| What are the repayment terms? | The repayment period generally ranges from 10-25 years, but the larger the loan, the longer the repayment period |
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What You'll Learn
International student loans in the US
There are a few things to consider when taking out an international student loan in the US. Firstly, most international students must have a US cosigner to apply. This person is legally obligated to repay the loan if the borrower defaults and must be a permanent US resident with good credit. Secondly, the interest rate will depend on the benchmark rate chosen (Prime Rate or SOFR) and the creditworthiness of the borrower or their co-signer. The lowest interest rates are usually only available to the most creditworthy applicants and cosigners. Thirdly, repayment terms will depend on the lender and loan option chosen. The repayment period generally ranges from 10-25 years, but the larger the loan, the longer the repayment period.
There are a few options for standard repayment plans. The first is full deferral, where students can defer payment until 6 months after graduation, as long as they maintain full-time status. The second is interest-only, where international students pay only the interest while in school and can defer the principal until 45 days after graduation. It is important to carefully evaluate how much money you will need before applying for a loan, as well as researching scholarships, financial aid, and other sources of funding.
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$116.52 $120
Loan repayment options
When taking out an international student loan, it is important to consider how you will repay it. The repayment terms will depend on the lender and the loan option chosen. The repayment period generally ranges from 10 to 25 years, with larger loans having longer repayment periods. Here are some loan repayment options to consider:
- Full Deferral: This option allows students to defer loan payments until six months after graduation, as long as they maintain full-time status. The maximum deferral period is usually four years, which is the typical length of an undergraduate degree.
- Interest-Only Payments: With this option, international students only pay the interest on the loan while they are still in school. They can defer the principal amount until 45 days after graduation or when they drop their course load to part-time.
- Standard Repayment Plans: These plans typically offer fixed monthly payments over a set number of years. The monthly payment amount is determined by the total loan balance, the interest rate, and the length of the repayment period.
- Income-Driven Repayment Plans: These plans base the monthly payments on the borrower's income and family size. Payments may be lower if the borrower's income is low, but they may end up paying more in interest over time.
- Early Repayment: If possible, borrowers can choose to start making payments while still in school or immediately after graduation. This option can reduce the overall interest paid over the life of the loan.
It is important to carefully review the terms and conditions of the loan before making a decision. Additionally, most international students will need a US cosigner with good credit who has lived in the US for at least two years. The cosigner becomes legally responsible for the loan if the primary borrower is unable to make payments.
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Interest rates
The interest rate on an international student loan is computed using a benchmark rate plus a margin, which is contingent on the creditworthiness of the borrower or their co-signer. Two commonly used benchmarks for determining the interest rate for international students are the Prime Rate and the SOFR (Secured Overnight Financing Rate). SOFR, as a risk-free overnight funding rate, takes into account a wide range of market participants, making it a transparent and representative benchmark of the prevailing market conditions.
The interest rate you receive from a lender is influenced by factors such as your credit score, the length of the repayment period, and your income. A fixed interest rate remains constant throughout the repayment period, providing certainty about the cost of the loan. On the other hand, a variable interest rate can fluctuate over time, depending on various factors, and may result in higher or lower costs in the long run.
When considering interest rates, it's important to understand the concept of the annual percentage rate (APR). The APR represents the interest and fees paid on top of the borrowed amount each month. It encompasses not only the interest rate but also any additional fees that may impact the annual cost of the loan. A lower APR indicates a more affordable loan, as it translates to lower interest payments over the life of the loan.
Additionally, it's worth noting that federal student loans, which typically offer the most competitive interest rates, are usually not available to international students. International students in the US generally rely on private student loans, which may have higher interest rates, especially for borrowers without strong credit histories.
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Cosigners
International students often require a cosigner when applying for loans in the US. This is because most international students do not have a US credit history, which can make it difficult to get approved for a loan. A cosigner helps guarantee that the loan will be repaid if the borrower defaults.
International students can find cosigners in extended family members or friends. Most students first look to their family members to act as their cosigners. However, in some cases, they may not meet the requirements, and the student will need to look elsewhere.
While most lenders require a cosigner for international students, there are still a few options available for those without one. Students can use loan comparison tools to see if they are eligible for a loan without a cosigner and to compare interest rates and repayment terms. Graduate students in the US are more likely to be able to find a no-cosigner loan.
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Eligibility
International students planning to study in the US may be eligible for federal student loans if they meet specific criteria. This includes US nationals, permanent residents, or those with specific visas. For example, individuals with an Arrival-Departure Record showing refugee or asylum status, or those with T-nonimmigrant status. Citizens of the Federated States of Micronesia, the Republic of Marshall Islands, or the Republic of Palau are also eligible for certain types of federal aid.
International students who do not meet the criteria for federal student loans can explore private student loans. These loans are available to international students studying at colleges in the US and typically require a cosigner. The cosigner must be a US citizen or permanent resident with a good credit score and a two-year residency in the US. However, a growing number of universities and colleges offer no-cosigner loans to international students.
Students with Deferred Action for Childhood Arrivals (DACA) are generally not eligible for federal student loans. Still, they may qualify for other types of financial aid, such as state, school, or private funding.
It is important to note that eligibility for international student loans may vary depending on the lender and the specific loan program. Students should carefully review the eligibility criteria and compare different lenders before applying for a loan. Additionally, international students should consider the interest rates, borrowing limits, and repayment terms offered by different lenders to make an informed decision.
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Frequently asked questions
International student loans are specialised private education loans available to international students studying in the US and US citizens studying abroad.
International student loans can cover the total cost of attendance, including tuition, room and board, books and supplies, personal expenses, and transportation.
Most international students applying for loans must have a US cosigner. The cosigner must be a permanent US resident with good credit who has lived in the US for at least two years.
Interest rates for international student loans can be fixed or variable. The Prime Rate and Secured Overnight Financing Rate (SOFR) are commonly used as benchmarks for variable interest rates.
Repayment terms for international student loans vary depending on the lender and loan option chosen. Some lenders may offer full deferral, allowing students to defer payment until six months after graduation, while others may require interest-only payments while in school.
