Borrowing money through a private, legal lender is the best way to afford school without involving the mafia. Numerous companies lend to U.S. citizens, but those that lend to international students are fewer and further between.
Most lenders require international students to get a loan with a co-signer who is a U.S. citizen or permanent resident. This gives the lender security in case the borrower can’t afford to pay back the loan or leaves the USA. Unfortunately, it also limits who is able to get a loan, as some potential borrowers may not have family or friends in the USA who are willing or financially able to act as a co-signer.
Even when you do find a lender willing to provide student loans for international students, it’s important to consider the loan rates, since they’ll affect you for the next many years. Private student loans are usually credit based, as opposed to federal student loans using FAFSA, and provide either variable interest-rate loans or fixed interest-rate loans. Variable-interest loans, which are also known as floating-rate loans, provide loan terms that change depending two factors: The benchmark is usually based on the London Interbank Offered Rate (LIBOR) or another federal rate, while the fixed spread evaluates a borrower’s likeliness of repaying the loan. Variable-interest loans are risky, since, unlike diamonds, the rate isn’t forever; even if a low LIBOR at the start gives you a low-interest rate, if LIBOR increases, so does your interest rate. By contrast, fixed-interest rate loans remain the same throughout the course of the loan, but of course this can also be risky, because if a borrower starts with a high rate then that rate will remain high throughout the tenure of the loan.
As you start doing the math, you should also take into account other terms of the loan that might affect when you pay and how much you pay. Is there a grace period before you have to start repaying the loan? Are there penalties for prepayment or paying back the loan early? Are there late fees? What’s the actual process for paying every month? Can the terms of the loans be changed? And when will you be able to afford doing fun things again?
Refinancing your loan
What happens if your interest-rate is so high that you’re having trouble paying back the loan? You can refinance.
Refinancing gets you a new loan with a lower interest rate and/or lower monthly payments, or lets you switch the type of loan you have. To be clear, borrowers who are able to get their loan refinanced will end up repaying their loan for a longer period of time than the terms of their original loan, but will end up paying less money overall so it’s still a good plan.
Where to get a loan
Below is a list of some of our favorite private lenders. Whether you apply to one of these or to another company you find yourself, don’t forget to look closely at the terms of a loan before you sign anything. If you’re going to be paying someone back for years, you might as well be comfortable with how you do it.
Discover Student Loans is run by Discover Bank, and it provides student loans to international students who attend an eligible school in the USA. Loan terms and conditions require a co-signer but do not charge any fees or require payments while students are still in school. Plus, loan amounts from Discover can cover up to 100 percent of education costs, so some lucky borrowers will be able to cover their total cost and won’t have to research additional sources of financial aid.
MPOWER Financing provides loans to international students studying in the USA or Canada based on their future income potential and without requiring a co-signer or checking for a good credit history. It offers fixed-rate interest rates to students in any field of study as long students are accepted or enrolled in one of the 350 schools supported by the company and are in their last two years of study. Other benefits include a six-month grace period after graduation to start repayment of loans, and a 1.50% discount on the interest rate if borrowers meet certain requirements. It also provides career support services.
Prodigy Finance offers variable-rate loans to students in business, engineering, law, public policy, and medical programs who attend school in a country that is not their home country. Instead of requiring a co-signer, Prodigy provides loan and repayment terms based on its predictive credit model, which assesses more than 150 variables that determine how much each applicant can afford after graduating.
Students getting an international education in the USA are eligible to get a loan from Sallie Mae as long as they have a co-signer. Though Sallie Mae doesn’t provide personalized interest rates until an application is completed, they do advertise discounts when borrowers choose in-school repayment and paying by auto debit. There are no origination or pre-payment fees, and borrowers may be able to pay only interest for the first year after graduation.
International student loans abound at Wells Fargo, which provides loan products for both undergraduate and graduate students at an eligible school. Borrowers aren’t required to start payments until six months after graduation but are able to do so without penalties while still enrolled. Wells Fargo also doesn’t charge application or origination fees, but it does require a co-signer for international students who apply for a loan. Graduate students must also have an established credit history in the USA to be eligible.