You should always carefully evaluate how much money you will need to study in the USA. Then you will need to research and apply for scholarships, financial aid from your school, and find money from any other source, including family funds. After exhausting these avenues, most international students still have a funding gap, and that’s where international student loans come in.
What is an International Student Loan
Federal student loans are popular with US students studying in the US, but they are not available to international students. Instead, international students are eligible for international student loans, specialized private education loans available to international students studying in the US.
International Student Loans are now a very realistic way to finance your education in the US. Loans are very flexible, and can offer loan amounts high enough to pay for your entire education, but with extended repayment terms and reasonable interest rates, so you can afford the repayment after you graduate.
Most international students applying for loans must have a US cosigner in order to apply. A cosigner is legally obligated to repay the loan if the borrower fails to pay. 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 often a close friend or relative who can assist in getting credit, since most international students cannot receive credit on their own. If you’re not able to find a cosigner see if there are no cosigner loans available to you.
Interest is the amount charged by the lender in addition to the amount of money that you borrowed. The interest rate is calculated based on an index plus a margin that will add an additional percentage interest rate depending on your co-signer’s creditworthiness. The two most common indexes used for international students are the Prime Rate and LIBOR Rate.
- Prime Interest Rate – This index is determined by the federal funds rate which is set by the US Federal Reserve.
- LIBOR – The LIBOR (London Interbank Offered Rate) is based on the British Bankers’ Association and is used on the London interbank market. The rate is an average of the world’s most creditworthy bank’s interbank deposit rates for overnight and one year terms.
When evaluating the loan, the lender will clarify which index the plan uses. Then, there will be an additional margin that will be added based on the borrower’s individual criteria, including the co-signer’s credit history. Based on their creditworthiness, an additional interest rate will be added to the index. This will be the total interest you owe. When your application is approved, your specific margin will be disclosed to you, at which point you can accept or refuse the loan.
Repayment will vary depending on the loan option you choose. Since most international students are not able to work while they study in the US, repayment must be considered as an extremely important feature in your loan. You will need to consider how much the monthly payments will be, when payments will begin, and how long you will be able to defer paying back the loan. The repayment period generally ranges from 10-25 years, but the larger the loan, the longer the repayment period. The standard repayment plan options are:
- Full Deferral – Students are able to defer payment until 6 months after graduation as long as full-time status is maintained. Students can defer payments for a maximum of four years, which is the typical length of a degree.
- Interest Only – International students only pay the interest while in school, up to four consecutive years, and can defer the principal until 45 days after graduation, or when the student drops their course load to part-time.
- Immediate Repayment – Payments on both interest and principal are due immediately once the loan has been dispersed.
Frequently Asking Questions
Who is eligible to apply for international student loans?
Students who are not US citizens or non-citizen permanent residents and who are attending an eligible US college or university may apply for international student loans.
What can international student loans be used for?
International student loans can be used for education-related expenses such as tuition, books, fees, insurance, and room and board.
What is the maximum loan amount I can apply for?
You can apply for up to the total cost of education, minus other aid, as determined by your school. In order to determine your maximum loan amount, you will need to contact your school’s financial aid office. After you apply and receive credit approval for you and your co-signer, your school must certify the amount of the loan.
When used responsibly as part of an overall education funding plan, international student loans can help to put a US education within reach, regardless of your financial circumstances. We offer two main loan resources dedicated to providing funding for international students: International Student Loan and Study Abroad Loans – please visit them for more information.