Is Getting A Student Loan A Big Risk For An International Student?

Students loan exist to help students, whether undergraduate or postgraduate students with the cost of their education.

Some student loans cover tuition fees and other maintenance expenses, while some only cover the tuition fee depending on the student loan service provider. 

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Generally, any student can have access to student loans, whether indigenous students or international/foreign students.

However, the student must meet the requirement of the loan service provider. Students must also provide all the necessary documents before the loan will be approved.

For the repayment term, students can pay back the loan within 5 years to as much as 20 years. This solely depends on the loan service providers. 

As an international student who wants to study in another country other than yours, there are student loan facilities that you have access to. But it is natural to want to know the risks involved in such a venture before applying for the loan.

Normally, many people do not like the idea of loans and it is not the first option in the minds of many people.

However, student loans can be the only option for some students who want to actualize their goals.

So, what are the types of loans available? What are the risks involved in taking student loans?

Let us find out. 

Types of Loans

There are two types of student loans, other ones fall under any of these two. They are:

Federal Student Loans

Federal loans are sponsored by the government but they are mostly for the indigenes of a country who are studying in that particular country.

For international students, it might not be possible to get access to federal loans, except if you have become a citizen of that country. However, there are international loan options available to you that are equally effective.

Examples of federal loans include:

1. Direct subsidized loans: these are based on financial need.
2. Direct Unsubsidized loans: they do not require a cosigner, are not credit based and are also not based on financial need. For this type of loan, the school determines how much the student can borrow based on the cost of attendance and other expenses. 
3. Direct PLUS Loans: these types of loans are equally credit-based. They are unsubsidized federal loans available for parents, graduates and professional students. 

Private student loans

Private loans on the other hand are offered by private lenders. Some of them require a cosigner who is a creditworthy individual. Alternatively, parents can also take loans to help their students with education expenses.

Examples include undergraduate loans, graduate loans, income share agreements, and career training and trade school loans.

It is often better to explore the federal loan options first before applying for private student loans. This is because the interest rate for federal loans is lower than that of private loans. 

Advantages of Student Loans

Student loans come to their benefit. It is a known fact that student loans exist to help aid the financial expenses associated with education, especially for undergraduate degrees and postgraduate degrees. But what are the other advantages international students can benefit from taking student loans?

1. Ease of Application Process.

Generally, the application process for student loans is easy and less stressful because it is online. Once you meet the eligibility requirements and you provide the necessary documents, you are good to go. Some of the necessary documents you need include:

• Proof of identity
• Student visa
• Creditworthy cosigner where needed
• Educational transcripts
• Estimated cost of studying and living in the country U.S. This is for those who want to study in the U.S. and your school will provide an official cost for you).
• Copies of documents you have for the qualifying exams you took to gain admission. 
• Proof of identity

Note that these are not all the documents you need to present, but these are the recurring ones for different loan service providers. The eligibility requirement differ based on the loan service provider and what they expect. 

2. Low-interest rates

This is another advantage of student loans. When compared to other types of loans, the interest rate of student loans is reasonably lower which makes them more affordable. Federal loans are lower than private loans. It is advisable to check out the possible options you have first before settling for the one you think is most suitable for you. 

3. Flexible repayment terms

Many student loan providers offer flexible payment terms. For some of them, payment does not start until after you are done with your programme and you have graduated. This gives you ample time to plan yourself properly to budget for the repayment.

Some of the repayment plans can take as little as 5 years to as much as 20 years depending on your loan service provider and the type of loan you apply for. 

4. Improvement of your credit score.

When you take an education loan and you pay it back within the stipulated time, it gives you a positive credit history and in turn improves your credit score. This sets you up for better opportunities in the future especially if you are planning to apply for an auto loan or a mortgage. 

5. Qualifies you for additional resources

Some benefits come when you apply for student loans. Some of them include counselling and financial aid workshops. Many student loan providers give these opportunities to help students understand the repayment process, and what it entails, properly manage their loans and maximize their savings. This can be helpful, especially for international students who need guidance on the loan repayment process. 

Risks Involved in Taking Student Loans as an International Student

While there are benefits students stand to gain when they apply for student loans, we cannot ignore the fact that there are also some risks that come with it. Some of the disadvantages that come with taking student loans include: 

1. Loans might not cover all your expenses. 

Depending on your loan service provider and the type of loan you apply for, it might not cover all the expenses associated with your education. This means that you will have to source for other means to fund the extra expenses on your education journey. 

2. It can dent your credit score

When you miss payment dates, or you default in paying back your student loan, or you take on more debt and are unable to manage it after graduation, it can dent your credit score. Not only will it affect your credit score.

Also, if your loan requires a cosigner, it can as well have a negative impact on their credit score too. This means before you apply for the loan, you need to have a solid repayment plan so as not to dent your credit score. 

3. Starting your career with a debt.

Applying for student loans to help with your education expenses means that after you graduate, you will start your career servicing a debt. Although, getting a college degree or a postgraduate degree can increase your employability chances. This will in turn increase your monthly income. You will need to now budget repaying the loan from your salary. This can span from 5 years to as much as 20 years depending on the loan plan you are on. 

4. Student debts don’t go away.

When you send in your application for student debt and it gets approved. You automatically have to repay it until you finish the payment. If you get a car or a property and cannot afford to pay it back, you can negotiate and return it back but unfortunately, student loans do not work like that. Once you get it, you must pay it back. Some loan repayment plans are on autopay. This means that at certain agreed times, a percentage of your income will be automatically debited to fund your student loan. 

Although there are loan forgiveness programs, these are often applied to federal loans rather than private loans.  Federal loans most times are not open for international students. You can defer your loan or you can adopt the refinancing option to repay the loan. 

5. Reduces your purchasing power

Knowing that you have a loan to repay automatically lowers your purchasing power. You will have to put in extra effort to ensure that you work and can afford to pay back your loan. While doing this, it means you will have to find a way to reduce your expenses and increase your income. You might have to cut down on certain things for a while so that you can afford to pay back your student loan on time. 

Paying back your student loan on time will give you a good credit score. It is often better to pay back before the stipulated date as this is beneficial to you. To know how you can repay your student loan on time, click this link. 

Furthermore, everything has a bad side and a good side and this also applies to student loans too. But without scholarships or grants, or having a sponsor, it might not be easy to fund your way through college on your own. Hence, the need to apply for a student loan to help with the expense.

International students may not have access to federal loans but can apply for private loans that also have a lower interest rate.

To get started on your loan application journey, click on this link.

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