Student loans can be an effective means to finance your education. International students looking to study abroad require accessible funds to help cover the costs associated with studying in another country. From funding your tuition to paying for everything from registration fees to accommodations, flights and food, not many students have the money they need on hand without extra support.
Student loans may provide access to these funds upfront, allowing students to cover educational costs now and repay the loan later. But searching for the right international student loan, with the right interest rates and the right terms can be tricky.
This article examines the ins and outs of student loans, specifically private student loans for international students. We’ll discuss why student loans are the go-to option for so many students looking to study abroad, the different types of student loans out there, and what to consider when taking one out.
We also touch on the process behind how to get low-interest student loans and the tools you can use to compare them before picking the one that’s right for you.
Student loans: Funding your education
Student loans have become an important part of enabling students around the world to pay for their studies. More and more students are turning to student loans to afford the increasing costs associated with higher education. In fact, as of August 2024, the total value of student loans among students in the U.S. alone stood at $1.74 trillion – more than 40% higher than just ten years ago.
There was a time when student loans were seen as a last resort. As times have changed, however, student loans have evolved from something once seen as expensive into essential tools that aim to empower students and provide them the funds needed to access higher education.
Today, a low-interest student loan is the preferred option for many students – even among those who have other means to fund their higher education. Why? Read on to find out.
Why students take out loans
As the cost of education increases, more and more young people have to find ways to finance it. Gone are the days of cashing in childhood savings or working a part-time job to pay your way through university, replaced with figuring out how to get low-interest student loans.
With booming competition in the labor market and more specialized degrees and professions emerging, costs have skyrocketed. Since 2004, public college tuition in the U.S. has risen 141%, while the costs of attending a private institution have almost tripled by a staggering 181%, according to the Education Data Initiative.
When you take the impact of inflation and the cost of living spikes in the countries that are home to these top institutions, things can get very pricey. Thankfully, some student loans are now more accessible, affordable and flexible than 20 years ago, empowering students from across the globe to finance their higher education dreams.
Advantages and risks of student loans
As government and financial sector regulations have evolved to control how student loans are awarded and administered, loans have generally become safer, more accessible and more affordable. These important financial tools have transformed into extraordinarily useful financial resources offering far more benefits than liabilities.
Here are some pros of using student loans to further your education overseas:
- Student loans provide financial access to institutions that would otherwise be unaffordable.
- A low-interest student loan usually boasts lower interest rates than other non-student loan options.
- Some international student loan applications don’t require a student to find a cosigner or put up collateral.
- Many private student loans offer very flexible repayment options.
However, there are some considerations associated with taking out an international student loan that you should think about before signing on that dotted line.
- A loan may be insufficient to cover all your education-related expenses, leaving you in need of additional funding.
- Lack of employment opportunities may complicate paying the loan back.
- Taking out a loan is a financial decision with long-term implications due to the length of time it takes to repay, even affecting other big financial decisions like buying a house.
- You may not graduate, leaving you with no qualification, but an outstanding student loan to repay.
That’s why understanding how to get low-interest student loans by comprehensively comparing your options is so important. But what should you be looking at when it comes to comparing loans?
Low interest rates
The student loan market is extremely competitive. Since these loans are used to fund an expense that will likely yield strong lifetime returns in the form of better work prospects, there’s no shortage of applicants.
As such, lenders are likely to offer attractive loans to compete for the millions of students in need of higher education financing. This means lowering interest rates or offering other incentives to attract more applicants.
Types of student loans
There are many different types of student loans. However, the two primary forms of student loans available to students across the globe include federal student loans and private student loans.
- Federal student loans
These student loans are reserved for non-international students, usually with very low interest rates. These loans also have very strict qualifying criteria, including requiring the student to be a citizen of that country.
- Private student loans
Private student loans are by far the most common, flexible and popular options for students, especially those looking to study overseas. Offered by banks, credit institutions and specialized international student loan providers, private student loans can often be customized and aim to meet the student’s specific needs.
There are numerous private student loan options available. Some offer extremely attractive interest rates and repayment terms, while others are risky or may even be scams disguised as loans. This is why it’s vitally important to research, understand and compare the student loan options available to you while working on how to get low-interest student loans.
Aspects of student loans
The number one question most students ask when taking out a low-interest student loan is: How low is the interest rate actually? While this consideration is often the main factor when applying for a student loan, it’s important to remember there are many other elements relating to student loans that you’ll have to consider before accepting one.
Interest rates
Interest rates are what’s charged by the lender for borrowing money. They are calculated as a percentage, added to the borrowed amount, and will need to be paid on top of the initial loan value. Interest rates can vary drastically.
Typically, there are two types of interest rates for students to consider:
- Fixed interest rates
These interest rates don’t change for the duration of the loan’s term, even if the prime lending rate changes. While this is good news if interest rates increase, if interest rates fall, the student still must repay the interest at the agreed rate.
Since interest rate changes won’t affect monthly payments, some international students prefer fixed interest rates as they provide more certainty on monthly repayment amounts.
- Variable interest rates
A variable interest rate means that should the prime lending rate change, so too will the interest accruing on the outstanding loan amount. This will have an effect on the monthly repayment amounts and can affect the loan’s APR (more on that in a bit).
International students looking for flexibility may opt for variable interest rates, especially if they’re expecting rates to decrease in the future. Of course, should the rates go up, so too will the overall cost of the loan.
Students will always be looking for the lowest interest rates around. However, sometimes, a private student loan that comes with a slightly higher interest rate also contains favorable terms and conditions that may make paying the added interest worthwhile.
As an international student, the lender or credit institution may offer you higher or lower interest rates depending on your status, current financial situation, where and what you plan on studying, and how much you want to borrow through your international student loan.
Loan APR
A loan’s APR, or Annual Percentage Rate, measures the loan’s interest plus all other associated fees and charges, i.e. application fee or insurance requirements. Because of fees and charges, the total cost of a loan could be higher than what was originally anticipated. These additional amounts can surprise many borrowers, adding a significant amount to the overall cost of the loan.
This means the APR gives a more accurate comparison between different loan options, as it reflects the total cost of the loan on an annual basis.
International students should always ask the financial institution offering the loan to disclose the APR, as this will significantly affect the attractiveness of the loan and the ultimate cost of paying it back.
Terms and repayment options/plans
The typical low-interest student loan is offered with the student in mind. This means that creditors are well aware applicants will likely be busy studying for several years or more after taking out a loan and paying loans back during that period could be more difficult. A student loan’s terms and conditions are as important as the interest rate.
- Repayment period – This is related to how much time you’ll spend paying back the student loan. Usually expressed in months, the repayment period can range from 12 months to as many as 120 (10 years) or more. The loan, plus its accrued interest, is broken up into individual payments, and you’ll be required to make these payments every month.
Depending on how long your course or program may run in a university abroad, this repayment period could be affected by your study plans. Remember, though, the longer the repayment term, the more you’ll end up paying in interest in the long run in most cases. That’s why many lenders offer flexible repayment plans to suit your situation and requirements.
- Repayment plans – Some student loans will require reduced repayments before a student completes their studies to cover interest and capital amounts, even extending this to six months postgraduation in some cases. Some flexible payment options may even allow a lump sum initial amount to be paid to cover this period. Some options give students the power to pay off their loans sooner or all at once, and in some cases, lenders allow the student to complete their studies before commencing with repayments.
These varied and innovative repayment plans allow students to consider different options and approaches to repaying the loan and how much they end up spending on it. However, students should also plan for the unforeseen or unexpected when searching for a low-interest student loan.
- Cancellation terms – Students must also agree to the terms of the loan relating to what happens if the student stops studying, drops out or fails. In this case, regardless of whether a student has found a job backed by their degree, they’ll still need to be required to repay the loan. Some loans offer extended payment options and plans to assist a student if their situation changes, but these allowances may carry additional fees or drive up the overall cost of the loan.
International students studying abroad may face a greater risk than native students of being disqualified or cut from courses for underperformance or changes in government policy. This means lenders could increase their interest rates to cover the risk – another reason to compare as many loan options as possible when trying to understand how to get low-interest student loans.
- Penalties – Defaulting or failing to pay back a loan installment can have serious consequences. From penalty fees added to the outstanding loan amount to the lender’s ability to claim assets and even legal consequences, students should carefully consider the penalties associated with their loan agreement before signing it. Additionally, defaulting on loan repayments could negatively impact credit scores.
Since many international student loans require a cosigner before approval, make sure the person willing to sign on your behalf is also willing to cover the payments and penalties if you can’t or something goes wrong.
Smart borrowing tips
Taking out a student loan to fund international study is a big step, but it’s also an important investment that carries some risks. This means making sure you understand the commitment you’re making and what a private student loan means to your higher education ambitions.
Here are some useful tips and pointers to remember when considering your international student loan options:
Be realistic about your educational financial needs.
Think carefully about how much money you’ll need to complete your studies overseas. This includes all associated costs beyond your tuition. If you underestimate the amount you need to borrow, you may end up falling short and running out of critical funds. Overestimate and you’ll be paying interest on funds you don’t really need.
Create a loan repayment plan.
By developing a reasonable loan repayment schedule that accurately reflects your repayment capacity and accounts for unexpected developments, you’ll have a much better idea of what this commitment means. Plus, a comprehensive plan with demonstrable milestones may increase the likelihood the lender approves a low-interest student loan.
Do your research about institutions and their costs.
Not everyone can afford to attend Harvard or Oxford University. And not every credit institution will be willing to grant you a private student loan to cover the high costs of attending these universities, even if you do get accepted. However, by conducting careful research on the universities, including the cost of tuition, additional administration fees and anticipated living costs, you’ll develop a much more accurate view of how much you need to borrow.
Develop a budget and stick to it.
A budget will allow you to maintain control of your expenses and to come to terms with your spending habits. By developing spending discipline before embarking on your international study experience and following smart budgeting tips, you’ll be more prepared to use your loan proceeds efficiently and effectively.
Compare multiple loan options
Even if the very first international student loan offer you look at meets your requirements, don’t stop searching. The more student loans you compare, the more likely you’ll find one that suits your needs and offers great interest rates! But how can you do this? By using a student loan comparison tool.
Comparing low-interest international student loans
Student loans can be complex and difficult to get your head around – especially for international students trying to determine how much they’ll need in a country they likely don’t know much about. That’s why using a loan comparison tool, like Find My Loan, can make understanding how to get low-interest student loans easy and efficient.
With Find My Loan, you can spend more time doing your research on the overseas universities and colleges you’re planning on applying to and figuring out exactly how much you’ll need to borrow through a low-interest student loan. This means less time searching through the endless lists of international student loan options out there and a more accurate view of the loan options that actually matter. Compare loans directly, looking at their terms, cosigner requirements, and, of course, interest rates to find the right loan for you.
Find a list of eligible lenders, reputable credit institutions and even what you need to kick off the loan application process in seconds. Then, explore more of the insights and resources at International Student Loan to learn everything you need to know about accessing the private student loan funds you need to make those international study dreams come true!
