Student Loans for International Students: 10 Things to Know

If your child is planning to study abroad and attend college in the United States, they’ll be considered an international student. The average cost of tuition for an international student averages $22,000-$40,000 or more per year. Paying for college can be a major barrier for many students and their families. In fact, about 85% of students receive some sort of financial aid to cover the cost of attendance. However, in order to receive federal student loans, you need to be a U.S. citizen, a U.S. national, or a U.S. permanent resident. International student loans are one way to help international families pay for college education in the U.S.

Here are 10 things to know about international student loans:

1. Federal loans might not be an option

When it comes to funding your child's education, you’ll want to look into scholarships and grants first. Scholarships and grants can help offset the cost of education without requiring repayment. But if they don't cover all the costs, you may need to apply for student loans.

The U.S. Department of Education offers federal student loans. However, non-U.S. citizens typically don't qualify for them. There are some exceptions for “eligible non-citizens," including U.S. nationals and U.S. permanent residents, but those with a student visa aren’t eligible for federal student loans.

2. Private student loans could be an option

While your child may not be eligible for federal student loans, you could consider private student loans to help pay their college costs. Many lenders offer private student loans with both fixed and variable interest options. There are also different repayment terms, so you can choose the right option for your situation.

3. A creditworthy cosigner may be required for private student loans

In order to qualify for private student loans, your student will most likely need a cosigner. This is someone who’s a joint applicant on the private student loan and takes responsibility for repayment of the loan if the primary borrower misses any payments.

A cosigner should have a good credit score and will also need to be a U.S. citizen or a permanent resident who has lived in the U.S. for a minimum of two years. Family members or friends could act as cosigners. If you can't find an eligible cosigner, you may want to explore other types of student loans for international students which don’t require a cosigner. You should work with the financial aid office at your school to help you find these sources of loans.

4. Interest rates will vary based on credit approval

Private student loans come with fixed or variable interest rates. The interest rate you get will depend on the credit of the borrower and/or the cosigner.

Good credit can mean getting a better interest rate on a private student loan, which will save you money on interest. If you don't have good credit, you can look at specific private loan options for international students with bad credit or no credit or who can't get a cosigner. Additionally, you can consider building your credit with a secured credit card, making payments on time with your current debt obligations, and keeping your balances low.

5. A student visa is required to get approved

If your child will be studying in the U.S. as an international student, they’ll need an F-1 student visa to enroll in school half-time or more — and to apply and be approved for a student loan. Having a temporary U.S. address is likely a requirement for the loan application instead of using your permanent international address. Your child can consult with their local embassy on the process of getting a student visa.

6. Repayment terms and rates vary by lender

There are various private student education loan lenders who can provide educational funding for your child. Be aware that repayment terms and rates will vary by lender.

The repayment term refers to how long the borrower has to pay back the loan and determines the amount of the monthly payment. The longer the repayment term, the smaller the monthly student loan payment will be, and vice versa. Longer repayment terms also mean paying more in interest over time.

Available rates will also vary by lender and have a direct impact on how much interest will accrue. Some lenders offer a 0.25% interest rate reduction for signing up for auto-pay, through which monthly payments are automatically taken out of the borrower's bank account. There may be additional discounts for borrowers who have an existing relationship with the bank.

You’ll want to research various lenders and compare repayment terms and rates before applying for a private student loan.

7. Understand the maximum amount you can borrow

When it comes to private student loans, there are typically minimum and maximum amounts your child can borrow.

How much your child can borrow depends on the total cost of their education minus any additional aid they might receive. The financial aid office at your child's school can help determine the amount they'll need to borrow.

It's important to only borrow the amount needed to cover educational costs. Borrowing only the amount needed can keep your child’s debt to a minimum once they graduate and help to make their monthly student loan payments more manageable.

8. Loan approval may be used for proof of funds

In order to study in the U.S., your child will need to show proof of funds and financial ability. This can mean showing bank statements, scholarship awards, and other documents, depending on the school.

In some cases, students can use their loan approval as proof of funds in order to obtain a student visa and enroll in school. However, this is not always the case and will depend on the school as well as the consular officer.

9. International student loans must be used for qualified expenses

As with other types of aid options, international student loans can only be used to pay for qualified educational expenses. As an international student, your child may have unique funding needs. If you’re not sure what’s considered an education-related expense, work with your lender and financial aid office to confirm.

Your loan may cover:

• Tuition and fees
• Room and board (including fees for extended stay over holiday breaks)
• Books
• Living expenses, such as meal plans
• Insurance

Your loan may not cover:

• Spending money
• Off-campus housing
• Travel expenses

10. Refinancing an international student loan could save money on interest

After graduation, your child may be able to refinance student loans and get a better interest rate if they remain in the U.S. Your child will need to build a U.S. credit history and be in good standing. Refinancing allows borrowers to take out a new loan at a competitive interest rate and save money.

However, your child will need good credit to get approved for refinancing or may need a cosigner. Whether your child gets approved for refinancing as an international student will depend on the lender.

What to look for in an international student loan

Choosing a lender for an international student loan is similar to choosing a college. It’s important to do the research and decide what’s best for your child and their future. Be sure to compare lenders before making a commitment, paying special attention to:

Fixed vs. variable interest rates: Your interest rate is basically what it costs to borrow money, and lenders will offer either a fixed or variable rate. Unlike a fixed rate, a variable interest rate may start out lower, but can change over the life of the loan. A fixed rate will always stay the same.

Borrowing limits: International education lenders offer higher maximum loan amounts to qualified borrowers. However, the lender may have a cap on the amount you can borrow. Make sure the prospective lender can cover the amount you need to take out.

Repayment terms: Private lenders will usually offer three types of repayment terms. Take a look and see which options you’re comfortable with. It’s important to note that regardless of the option, interest will continue to accrue until the loan is paid off.

1. Interest-only payments: Payments are made only on the interest while the student is enrolled in school at least half time and for the six months after leaving school. After this period, full principal and interest payments begin.
2. Immediate repayment: Full principal and interest payments begin about 60 days after funds are disbursed.
3. Full deferment: No payments are made while the student is enrolled in school at least half time and for a grace period six months after their graduation date. After this period, full principal and interest payments begin.

Is a private international student loan the only option?

Private international student loan products are a smart way to fill the funding gap after you’ve exhausted other resources. However, since loans accrue interest over time, it may not be the most inexpensive way to fund your education. Before you start applying for private student loan programs, explore your grant and scholarship options. Not sure where to start? Take a look at the options below:

• Your prospective school’s financial aid office or website
• Student scholarships and grants your home country may offer
• Global organizations that offer scholarships and grants
• Contributions from your family

Ready to start your international education?

College is a big step, especially when you’re an international student. But by understanding your options for international student loans and what the requirements are to apply, you’ll be better prepared to make your dream of studying abroad a reality. If you have questions about applying for an international student loan, call a Student Loan Specialist at 1-888-411-0266, and we'll walk you through the process.

Citizens is here to help you navigate your student lending options for today and the future. Make sure to visit our Student Lending page — we’re on chat.*