Study in USA – The United States of America ranks among the top destinations for higher education. Over 83 US universities rank in the top 500 QS Rankings 2019. At any time, close to 200,000 Indian students are studying in USA at various academic institutions. But, studying in USA is not that cost effective. The university costs and living expenses in USA amount close to US$ 50000 per year, in some cases more so. Students in India often rely on education loans to study in USA, apart from scholarship programs and self-finance options.
International Admissions to universities in US, UK, Australia, Ireland, etc. always amount to three major concerns; admission applications, student loans, and visa/immigration. If getting an admission in a US university is a tough job, then getting a loan to study in USA in no easier task. Many students miss the opportunity of attending their due intake sessions (admission deadlines) because of the time taken to secure an education loan. In this article, we provide you with complete information about the eligibility criteria to get an education loan for studies in USA, the interest rates and repayment norms.
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Study in USA – Cost of Living and Education Loan Coverage
All the applicants applying for a US Student visa need to show proof of their ability to afford school in the United States to complete their application. These include the cost of studying in USA for Indian students like tuition fees, living expenses, research costs and miscellaneous expenses. Indian students in USA, depending on their institution, have to arrange funds close to US$25,000 to US$90,000 per year according to their visa acceptance letter. Generally, education loans to study in USA cover 60% to 95% of these costs.
Students who are able to secure scholarships to study abroad are able to cover complete or partial tuition expenses. Study abroad loans, generally, require students to present collateral/security for education loan to cover for the risk of the amount. In addition to this, some loan providers require applicants to pay margin money as well. All-inclusive students have to arrange close to US$10000-US$25000 for expenses beyond education loan and any fellowship or scholarship to study in USA for Indian students. Nowadays, education loans to study in USA provide additional features to cover this financial burden.
Education Loan to Study in USA – Main Details
To get a student loan to study in USA, Indians must go through the process of admission, immigration and loan application simultaneously. Students generally start applying for loans at least 4-5 months before their due session intake. But it is wise to start your loan application with the study abroad admission application. Depending on the services of various student loan companies and banks, applicants may secure loans before or after they get admission. Three types of loan providers may provide funds to students for studying in USA – Banks, NBFCs and any Private International Student Loans Company. Federal Loans for international students is also an option available for Indian applicants. The details of the key processes and best practices of the education loan are mentioned below.
Study in USA – Education Loan Eligibility
The loan amount limit, interest rates, repayment terms and concessions on education loan to study in USA depend on the USA institution where the student wishes to study. Depending on the university rating (AAAA+ to A) and course rating (professional to vocational), loans cover from 50% to 95% of the academic expenses. Other expenses depend on the strength of the security or collateral provided by the applicant. Some peculiar features of student loan eligibility for studies in USA are:-
- Only Indian citizens can get students loans from Banks-NBFCs to study in USA
- Non-resident and PIOs may get loans from any international private student loans company
- Co-applicants or co-signers are necessary for any student loan application for studies in USA
- Students need the formal I-20 (Certificate of Eligibility for Non-immigrant (F-1) Student Status-For Academic and Language Students) provided by Admission Office of the respective USA based university; to apply for the loan
- Students are not eligible to take loans for part-time exchange programs, sabbaticals or on-job training programs
Study in USA – Education Loan Amount
Generally, a scholarship to study in USA for Indian students does not cover all expenses. Thus, most of the aspirants opt for international student loans. The quantum of education loan for studies in USA is decided upon one’s academic institution and course. Each bank has its own list of premier institutions and rated institutions for study abroad loan calculations. Students can secure study abroad loans for almost all universities in USA, but the loan amount, interest rate and collateral requirements change with the reputation of the institution. Here are some of the peculiar features which decide how much loan one can get to study in USA.
- Education Loan amount generally includes the tuition and academic fees of USA universities.
- Lenders cover 50% to 95% of this sum depending on the applicant’s merit (academic and financial).
- It also includes a fixed amount (distributed annually or paid in lump-sum) for living expenses.
- Living expenses may also be capped at some percentage of academic fees (5% to 20%).
- Expenses for travelling, books, GMAT, GRE, SAT, LSAT and other international admission exams to students (2% to 5% of the loan amount)
- Most banks provide education loan from ₹20,00,000 (20 Lakhs) up to ₹1.25 crore.
- NBFCs provide loans from ₹10,00,000 (10 lakhs) to ₹2.25 crores.
- International Private Loans Company may provide education loan sum up to US$250,000.
Study in USA – Education Loan to Study Abroad Interest Rate
If a student is taking the education loan to study at a US Institution from an Indian banking institution (Bank or NBFC), they pay interest on Indian rates. Other lenders use global interest rates called LIBOR to calculate EMIs of international student loans. Indian Banks generally provide a secured loan (with collateral) at lower interest rates. Similarly, NBFCs provide unsecured loans (without collateral) at higher interest rates. LIBOR is an additional rate of interest for inter-bank funds’ transfer, which Indian students in USA have to pay for getting their education loan. All the details of Study Abroad Education Loan for USA regarding interest rates are mentioned below.
- Interest rate of education loan to study in USA range from 8% to 19% in India
- Interest rates depend on the submission of collateral/security for education loan
- NBFC education loans allow negotiations on interest rates as well
- Current average interest rate (APR) for USA student loan is between 13.00% to 16% on each dollar
Study in USA – Education Loan Collateral and Security
Collateral or security is a personal asset which student mortgage to get an education loan. The interest rate of education loan to study in USA depends directly on the collateral availability. Providing 100% collateral can help students in reducing interest by up to 200 basis points (2%). Student loan without collateral to study in USA is also provided by some NBFCs at high-interest rates. To get an international private loan, students don’t need collateral but they need a co-signer security. Co-signer means a U.S. based tax paying citizen who will become co-borrower of the student loan and shall be liable to repay the loan in case of default from the loan applicant. Here are more details about student loan security requirements for studies in USA.
- For international private student loans, a U.S. based co-signer is necessary (exceptions applicable)
- Collaterals like immovable assets are valued at 60% to 80% of their actual value while calculating loan amount. This is the amount up to which an applicant may get a loan against their collateral.
- Movable assets, however, are calculated at 80% to 100% of their amount for such loans
READ MORE ABOUT COST OF STUDYING IN USA FOR INDIAN STUDENTS HERE.
Student Loan for USA studies- Repayment Norms
Student loan refinances and student loan consolidation are two most popular terms in USA Education Loan industry. To repay an education loan for study abroad in USA, students can choose from a wide range of options. Students can also merge their multiple loans under one loan at a reduced rate of interest in USA. They may also refinance their education loan from another provider for a concession on interest rates. Some more details about repayment conditions for a study in USA education loan are as follows.
- Prepayment of education loan taken from a US International Private Lender is free
- Students often have to pay margin money for every education loan installment in India
- Students who study in USA with a scholarship may also adjust their margin payments with the scholarship fund
- Repaying constant EMIs in USA for education loan taken from a private lender is also rewarded with interest rate concessions
- Indians cannot consolidate or refinance education loans across continents for their repayment convenience but they can refinance between institutions from the same country
Study in USA – Special Loans for Indians (Federal Student Aid and DACA Student Loans)
Free Application for Federal Student Aid or FAFSA is the application form which students in USA use to get government aid for education. Certain Indian students are also eligible for such federal loans for studies in USA. Students who fall under the category of ‘Eligible Non-Citizens’ may get these student aids. Eligible non-citizens are those Indians who have a Green Card. Technically, these sections include Indians with a US Permanent Resident Card I-551 or a Conditional Green Card I-551C.
DACA students are those students from India who are victims or descendants of victims of illegal human migration, staying in USA. They may also apply for government education loans in USA applicable for Indian students.
Indian students in USA who are not in both these categories may still apply for federal loans provided by individual states of USA or respective universities.
Student Loan to Study in USA – How to Apply?
Students willing to study in USA for higher education must start their education loan application at least 7-8 months before their intake session. They may also choose to start their loan application with their admission application. Here is a short step-wise guideline to apply for a USA student loan.
- Research and apply for a Study Abroad Loan to various lending institutions with your basic KYC, financial and academic documents.
- Get an admission letter (conditional or unconditional) from the admission office of respective US University, college, or institution.
- Get an I-20 from US immigration office or admission of office of the university.
- Submit your co-applicant documents, co-signer documents, security and collateral documents, as applicable.
- If you are going to study in USA with scholarship, then gather your award certificates and submit them as well.
- Get a loan sanction letter and submit it to the USA University admission office and immigration office.
- Secure the final acceptance letter and NOC from admissions and immigration office.
- Submit the final acceptance letter with education loan lending institution and arrange for disbursement schedule.
As the process of loan application is a close-ended repetitive process of interaction between institutions, students may also choose to go with the advice of the experts of study in USA education loan. These organisations help in submitting loan applications to various banks with one application form. They also help students to negotiate for better interest rates and get extra benefits like in-flight expenses or loan insurance. Buddy4Study Edu Loans is one such service which students may use to their benefit. Best of Luck!