ou 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 additional amount charged by a lender on top of the principal amount that has been borrowed. The interest rate is computed using a benchmark rate plus a margin, with the margin being contingent on the creditworthiness of the borrower or their co-signer. Two widespread benchmarks utilized for determining the interest rate for international students include the Prime Rate and the SOFR (Secured Overnight Financing Rate).
Prime Interest Rate – This benchmark is influenced by the federal funds rate, which is established by the US Federal Reserve. It serves as a basis for lending rates in the market and is often utilized in the calculation of interest for loans provided to individual borrowers and businesses.
SOFR – The SOFR (Secured Overnight Financing Rate) is an interest rate benchmark that is administered by the Federal Reserve Bank of New York. This benchmark is based on the transactions in the Treasury repurchase market, where banks and investors borrow or loan Treasuries overnight. As a risk-free, overnight funding rate, SOFR includes data from a wide range of market participants, making it more transparent and representative of the prevailing market conditions. It has been adopted as an alternative to the LIBOR benchmark, which has faced certain controversies in the past.
When determining the interest rate for an international student, the lender considers the chosen benchmark (Prime Rate or SOFR) and adds an extra percentage depending on the creditworthiness of the borrower or their co-signer. This ensures that the final interest rate accurately reflects the risk associated with lending to a particular individual, and it also takes into account the prevailing economic environment represented by the benchmark.
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.