What is an International Student Loan - Repayment

u 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.

Co-Signers

All international students applying for loans must have a US co-signer in order to apply. A co-signer is legally obligated to repay the loan if the borrower fails to pay. The co-signer must be a permanent US resident with good credit who has lived in the US for the past two years. The co-signer is often a close friend or relative who can assist in getting credit, since most international students cannot receive credit on their own.

Interest

Interest is the amount charged by the lender in addition to the amount of money that you borrowed. The interest rate is calculated based on an index plus a margin that will add an additional percentage interest rate depending on your co-signer’s creditworthiness. The two most common indexes used for international students are the Prime Rate and LIBOR Rate.

• Prime Interest Rate – This index is determined by the federal funds rate which is set by the US Federal Reserve.
• LIBOR – The LIBOR (London Interbank Offered Rate) is based on the British Bankers’ Association and is used on the London interbank market. The rate is an average of the world’s most creditworthy bank’s interbank deposit rates for overnight and one year terms.

When evaluating the loan, the lender will clarify which index the plan uses. Then, there will be an additional margin that will be added based on the borrower’s individual criteria, including the co-signer’s credit history. Based on their creditworthiness, an additional interest rate will be added to the index. This will be the total interest you owe. When your application is approved, your specific margin will be disclosed to you, at which point you can accept or refuse the loan.

Repayment

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.

Govt launches portal for easy student loans

If you are a student looking for an education loan, there’s an easy way out. Now, you need not go through the ordeal of visiting one bank after another to get a loan. Just log on to www.vidyalakshmi.co.in and apply to multiple banks by filling just one form.

The portal has been launched in line with an announcement made by finance minister Arun Jaitley in his February budget speech. After applying for a loan on the portal, students can track the status of their applications, and avail various loan schemes being offered.

The portal has been developed by NSDL e-Governance Infrastructure Ltd, in collaboration with the department of financial services in the ministry of finance, department of higher education (a part of the human resource development ministry) and the Indian Banks’ Association lobby group. NSDL is short for National Securities Depository Ltd.

Students will need to first register on the website and then fill a simple form to apply for a loan on the portal, which they can also use to write to banks about their grievances, if any, with the loan-sanctioning and disbursal process. The website also provides a link to the national scholarship website where students can access student loan schemes being offered by various government departments.

Thirteen banks, including the State Bank of India, IDBI Bank, Canara Bank, Union Bank of India, Bank of India and Punjab National Bank, are registered with the portal to offer education loans. Of these, five banks have integrated their system with the portal for providing the loan processing status to students.

The number of banks will increase in the coming days, said Gagan Rai, chief executive and managing director, NSDL e-Governance Infrastructure.

“All state-run banks will be covered,” he said.

In his budget speech this year, Jaitley had proposed to provide students a single-window electronic platform for scholarships and educational loans.

“With a view to enable all poor and middle-class students to pursue higher education of their choice, without any constraint of funds, I propose to set up a fully IT-based Student Financial Aid Authority to administer and monitor scholarship as well as educational loan schemes, through Pradhan Mantri Vidya Lakshmi Karyakram. We will ensure that no student misses out on higher education for lack of funds,” he had said.

Total outstanding education loans falling under priority sector lending stood at Rs.58,700 crore as of end-June, an increase of 2.8% from a year ago.

“It will make it easier to get an education loan. At present, the only option is to physically go to every branch and apply for a loan. The approach also varies from one branch manager to another. If the name of the institution is not very well recognized, then banks are wary of giving a loan,” said Abhijit Shankar, 19, who has dropped a year after his 12th board exams, since he did not get into Indian Institutes of Technology (IIT) and opted not to go for the more expensive private colleges.