International students studying in the USA are eligible to apply for international student loans and specialized private education loans.
International students willing to pursue higher studies in the United States might require a study loan in USA to cover both the tuition fees and living expenses for the duration of their studies. Overseas students studying in the USA are eligible to apply for international student loans and specialized private education loans.
International student loans are a flexible option to finance your education in the USA. The loan amounts sanctioned can pay for the entire education with extended repayment terms and reasonable interest rates. International students do not have to stress about the repayment as the study loan in the USA can be repaid after graduation. More details about an education loan to study in the USA along with the eligibility criteria, application process, interest rates, and repayment options are discussed.
Table of Contents
- How to get a Study Loan in the USA?
- How to Apply for an Education Loan to Study in the USA?
- Eligibility Criteria for a Study Loan in the USA
- Documents Required for Education Loan in the USA
- Indian Banks Offering Education Loan to Study in the USA
- Education Loan to Study in the USA from NBFCs
- Role of a Guarantor
- Capability Certificate
- Expenses Covered under an Education Loan to Study in the USA
- Things to Remember before Applying for an Education Loan to Study in the USA
How to get a Study Loan in the USA?
International students looking for an education loan to study in the USA can do so with or without a cosigner. A cosigner should be a permanent resident of America with good credit and should have lived in the USA for the past two years. There are also study loans in the USA for international students who are not able to find a cosigner. More details about getting a study loan in the USA are described below:
Study Loan in the USA With a Cosigner
As international students do not have a reliable credit history in the US, most loan-providing organizations and lenders require them to have a US co-signer. Certain education loan providers do not ask for a cosigner from students who have high career potential, attend a well-renowned university, and are planning to complete their graduate studies within the next two years.
A cosigner in the USA refers to a second party who is legally responsible for the loan repayment if the international student is unable to do so. The cosigners have a huge responsibility of paying back the total loan amount along with the interest. It is mandatory for all international students willing to avail themselves of loan facilities to provide the details of their cosigner. Given below are some of the guidelines to be followed by international students while looking for a cosigner in the USA:
- International students should look for a close friend or relative who is a US citizen or permanent resident and has lived in the USA for at least 2 years
- The cosigner should have a stable job and steady income and also a good background history
- Education loan providers in the USA take into account the total debts (including mortgage, credit card debt, and car payments) of the cosigner and checks if they have the affordability to cover the necessary expenses as the cosigners are responsible for repaying the loan amount in case the borrower fails to do so.
Study Loan in the USA Without a Cosigner
International students who are not able to find an appropriate cosigner have other education loan options in the USA for supporting their studies. Students should have a good credit score along with an established credit history to avail themselves of these study loans in the USA. Listed below are some of the other study loans in the USA for international students without a cosigner:
- Federal Loan
- Direct Subsidized Loan
- Direct Unsubsidized Loan
- MPOWER Private Student Loan
- Prodigy Private Student Loan
- Ascent Private Student Loan
How to Apply for an Education Loan to Study in the USA?
Most of the colleges and universities in the USA start their application process in October. So international students are advised to begin the process of loan evaluation, loan sanction, and also procure the solvency letters that act as a ‘proof of fund’ to the respective universities. Loan disbursement can be done after the student receives the confirmation of admission from the university.
As the entire process for applying for an education loan for study in the USA is time-consuming, international students are advised to start early. Students should submit their respective applications to the chosen university in the USA and wait for confirmation. One should consider factors such as the interest rate, processing fee, processing time, loan margin, expenses covered, and repayment terms while looking for a study loan in the USA.
Education Loan Repayment Rules
The repayment of the study loan in the USA is usually paid in equal monthly installments (EMIs) for a period of 15 years for all categories of loans. The repayment amount mainly depends on the loan option chosen by the applicant. This is one of the important factors to be considered while applying for overseas education loans since most international students cannot work while studying in the USA.
Once an international student secures a study loan in the USA through a lender, he/ she is expected to repay the principal amount in addition to the interest rate charged by the lender on the loan amount. The interest amount for the loan amount depends on several factors such as the amount of the loan, time period, the reliability of the cosigner, and more.
Education Loan Repayment Period
The repayment period for an educational loan in the USA ranges between 10-25 years. This mainly varies based on the amount of the loan. The larger the loan amount, the longer is the loan repayment period. The different education loan repayment options for international students are:
- Full deferral: Applicants can defer the payment of the loan amount until 6 months after graduation provided he/ she maintains the full-time status. Students can defer the payment of the loan for up to 4 years which is the typical length of a degree program
- Interest-only: International students can only pay the interest amount while pursuing their studies for up to 4 consecutive years. The repayment of the principal amount can be deferred until 45 days after graduation, or when the student changes their course load to part-time
- Immediate repayment: Applicants are required to begin the repayment of both the principal loan amount and interest immediately after the loan has been dispersed.
Eligibility Criteria for a Study Loan in the USA
The specific eligibility criteria for international students willing to avail of a study loan in the USA may vary for different education providers. Given below are the general eligibility criteria to be considered for an educational loan to study in the USA:
- The applicant should be an eligible citizen of India and should be over 18 years of age
- The student should have an excellent academic background and also should have secured admission at a recognized university/ educational institution in the USA
- He/ she should be seeking admission to a professional or technical course of studies as banks general grant loans to students pursuing job-oriented courses
- The candidate should be able to produce relevant documents as proof to avail of a study loan in the USA.
Documents Required for Education Loan in the USA
The applicants applying for an international student loan in the USA are required to provide a set of relevant documents along with the loan application form. Education loan providers in the USA need to verify that the applicant is genuine and has secured admission in an established educational institution. The document requirement varies as per the banks’ own rules and regulations. Given below are the documents required for an education loan in the USA:
- Personal identification proof such as Aadhar Card, Voter ID, Passport, or PAN Card
- Residence proof of both the applicant and the co-borrower such as Driving License, Aadhar Card, Telephone/ Electricity Bill
- Income tax returns of the co-borrower
- Proof of income of the co-borrower
- Age proof- Birth Certificate
- Official academic records including mark sheets and certificates of Class 10, 12, graduation, and postgraduation
- Valid passport copy
- Proof of admission to the US university- Letter of Acceptance, Conditional Admission Letter, or Offer Letter
- Duly filled loan application form
- The estimated cost of study as per the I-20 form
- Statement of cost of attendance
- Details of the assets and liabilities of parents/ guarantors
- Scores of standardized examinations such as GRE, GMAT, SAT, ACT, TOEFL, IELTS, PTE, etc
- 2 recent passport size photographs
Indian Banks Offering Education Loan to Study in the USA
Most Indian students planning to pursue higher education in the USA are in need of financial assistance of some form. Scholarships and other awards are the first choice of financial assistance for academically excellent students. Other students may look for a study loan in the USA to fulfill their dreams. Some of the popular banks in India offering an education loan to study in the USA are listed below:
- HDFC Bank Education Loan for Foreign Education
- State Bank of India Student Loan Scheme
- Oriental Bank of Commerce Education Loan for Study in India and Abroad
- SBI Global ED-VANTAGE Scheme
- Bank of Baroda Scholar Loan
- Corp Vidya Scheme
- PNB Udaan
- SYNDVIDYA Scheme
- BOI Star Education Loan
- Allahabad Bank Education Loan Scheme
Education Loan to Study in the USA from NBFCs
The first thing that comes to the mind of international students looking for a study loan in the USA is banks. However, in current times, public sector banks are becoming more stringent in their loan offerings especially in the education loan category. Here, the Non-Banking Financial Company (NBFC) comes into the picture and provides Indian students in need of financial assistance an education loan to study in the USA. Some of the popular study loans in the USA offered by NBFCs are listed below:
- HDFC Credila
- DHFL Avanse
- Incred
- Auxilo
- International Student Loan Program (ISLP)
- Global Student Loan Corporation (GSLC)
Role of a Guarantor
A guarantor bears a huge responsibility since, if the borrower is unable to repay the loan, they are legally obliged to make payments. Normally, a bank will require a guarantee from a third party only if the loan amount is greater than INR 4 lacs. When a borrower is not able to repay a loan regardless of the circumstance, the guarantor is responsible for repaying the entire amount to the banks.
Capability Certificate
Several universities require students to submit a bank statement from their sponsors detailing the sponsors' financial capacity. It ensures that the sponsors have the financial capability to pay the student's expenses. This certificate is issued by banks after reviewing the sponsors' financial and supporting documents.
Expenses Covered under an Education Loan to Study in the USA
International education loans, generally, cover the entire cost of a student’s education abroad. This largely depends on the chosen institution and the program's cost of attendance. Listed below are some of the expenses covered under a study loan in the USA for international students:
- Tuition fee for each academic period- semester/ trimester/ yearly
- Mandatory fees such as student center fees, student activity fees, recreation fees, residence hall activity fees, new student fees, etc
- Cost of accommodation that includes the on-campus university housing charges and the standard price of regular meals
- Insurance premium of the student, if applicable
- Cost of a laptop, if required for the chosen course
- The expenses for books and supplies which include lab costs, laptop or computer expenses, etc
- Miscellaneous expenses that cover the cost of study tours, project work, or thesis
- Transportation charges for airfare, parking permit, monthly bus/ train pass, etc.
Things to Remember before Applying for an Education Loan to Study in the USA
Higher education in the USA can be expensive and international students may need education loans to be able to afford the expenses and other costs. Both private and public sector banks offer education loans to study in the USA. Students are granted a particular loan amount which should be repaid in a certain time period along with the interest rate. A study loan in the USA covers different costs such as tuition fees, hostel fees, library fees, registration fees, transportation fees, and more. Some of the things to remember before applying for an education loan to study in the USA are described below:
- The applicant should, firstly, choose the institution carefully that is approved by the respective bank. Most of the banks have a pre-approved list of universities based on several factors such as job placement, rating, infrastructure, reputation, among other things. Students should have a fair idea about the blacklisted universities before applying as this may cause a hindrance for the education loan to be sanctioned
- One should be aware of the interest rate for an education loan in India which ranges between 8.50% and 15.20%. Certain banks reduce the interest rate if the loan interests are repaid on time and may also offer concession rates to women applicants
- The applicant should also know the processing fee charged by the particular bank that is offered an education loan for study in the USA. This is generally fixed between 1% to 2% of the entire loan amount
- The students should be completely aware of the whole process of applying for and repaying the loan amount from a bank or any other source before applying for any university in the USA. One should be aware of the total amount of the course, documents required, financial aids available, and interest to be paid for the applied loan amount
- Applicants should be prepared for a final interview regarding the loan which is conducted by the bank or the institute. The bank verifies the applicants’ documents and other identities with fee structure and also the applicants’ capability to repay the loan amount on time
- The candidate should have all the supporting documents ready at the time of applying for an education loan for study in the USA. Passport, visa, and other identification documents must be kept ready for any kind of verification
- All details related to the loan and its application such as the processing time, interest rates, expenses covered, loan margin, repayment terms, etc should be known by the student
- One should also be aware of the bank details that grant the study loan in the USA. Each bank has its own policies and in most cases, the banks pay the loan amount directly to the applicant or to the educational institution
- The applicants who are sure of securing a steady job after completion of the course can opt for loans with a shorter loan period. These loans charge a higher EMI but are cheaper as compared to loans with higher loan periods as they result in higher interest
- Students should have enough information on the loan margin offered by the respective bank. Usually, banks do not offer 100% of the loan amount to the students to fund their education. Most public sector banks issue around 90% of the loan amount and the remaining 10% should be arranged by the applicant
- The candidate should be aware of the moratorium period during which he/ she need not make any repayment to the bank. This period varies from bank to bank and may last up to a certain period of time after the completion of the course. These periods are the holiday periods during the course plus one year after completion of the course or six months after landing a job. Although students are not required to repay the loan amount during this period, the interest rate keeps accumulating for the said period. Students can pay the EMIs to lessen their financial burden in the future.
Collateral Rules for an Education Loan
Collateral security for an education loan is any movable or immovable property that can be offered to a bank as a security for a loan. Most Indian banks require students to provide collateral as security to reduce the risk involved in paying off the credit. Collateral security can be anything such as a fixed deposit or a non-agricultural property.
As all students do not secure a job soon after graduation, the banks do not have a guarantee of the future income and profile which is why collateral is important. The banks consider multiple financial and demographic factors while doing the risk assessment. Thus all students have a different profile that needs to be fulfilled accordingly and banks offer the best collateral options to the students based on their individual requirements and profile. Various things that are considered collateral are listed below:
- Any liquid asset such as shares, bonds, FD
- Any immovable property like house, or any commercial property, or land
- Non-agricultural land
- Mutual fund units, gold, life insurance policy, government securities, shares, bonds, bank deposits, debentures, or bank deposits
Education Loan Without Collateral
Education loan to study in the USA is a boon to international students who are unable to arrange funds through other sources like scholarships, awards, etc. Students can avail themselves of a loan amount of up to INR 4 lakhs without collateral. For loan amounts up to INR 7.5 lakhs, the parents or guardians of the applicant are made joint borrowers and a third party guarantee is obtained. For loan amounts exceeding INR 7.5 lakhs, collateral security such as property or any other asset is mandatory.
In the case that an applicant wants to avail themselves of an education loan to study in the USA with an immoveable property as collateral, the bank representative verifies the property and prepares a report if the property can be mortgaged or not. The loan amount is approved after the bank representative evaluates the property of the candidate.
