Financial aid is a broad term that covers various types of support, including scholarships, grants, and loans, all of which help students around the world realize their education dreams.
A student loan is actually one type of financial aid – specifically, a kind that must be repaid. However, many people use the term “financial aid” to refer only to non-repayable forms, such as scholarships and grants. This can lead to confusion about what each option offers. So, what are the key differences, and which is the right choice for you?
Traveling abroad to study in top universities around the world can be an expensive exercise and only a few students have the financial means to pay for it upfront. That’s why understanding the differences between financial aid and international student loans is so important.
This article examines the factors and elements that set financial aid for international students and international student loans apart. We’ll explore what they are, the pros and cons of picking the best option for you, their suitability, and how to find them.
Student financing 101
Education is expensive. The best academic opportunities, even more so. And it isn’t getting any cheaper. In today’s ultra-competitive labor market, having a quality education is essential. Those who receive the training, skills and experience needed to excel in their fields are far more likely to go on to find sustainable employment than their less-qualified peers.
The increasing need to pay to play overseas
Being able to attend the universities and colleges that provide the education necessary to reach the heights required for success often means having to travel abroad. Many countries lack the university facilities or sufficient teaching expertise needed to ensure the next generation can compete on the global stage. Universities in countries like the U.S. are among the best in the world, and earning a degree from them usually means a secure and prosperous future.
The price of an international college education
Unfortunately, attending many of these institutions comes with enormous price tags. For the 2022/23 academic year, the average Ivy League college’s tuition ranged from $57,000 to over $65,000 per year – and that’s without living expenses at around $20,000. Private non-Ivy League U.S. colleges, while largely cheaper, still cost in the region of $40,000 annually for tuition.
Pricy, but not impossible for the international student
For the international student hoping to enroll at a top U.S. university, these costs can seem impossible. However, with the opportunities afforded by financial aid for international students and international student loans, foreign students can comfortably and confidently attend these institutions backed by sustainable funding options that they can manage.
Definition: Financial aid versus student loans
To understand the fundamental difference between financial aid and student loans we need to know what each one is.
Financial aid defined
So, what is financial aid? Financial aid, or financial assistance, is the funding made available to assist students with covering the various costs of their postsecondary education. Financial aid comes in many forms, including grants, scholarships and bursaries from schools. Government entities, and even private individuals and companies, fund financial aid programs via sponsorships and various initiatives.
Financial aid is usually provided to the most needy or deserving students, and competition for the limited financial aid out there is high. Financial aid money often doesn’t need to be paid back, and recipients are sometimes required to maintain strict performance or compliance standards to keep on receiving it.
Student loans defined
What is a student loan? Student loans, in contrast, are quite different from typical forms of financial aid. These loans are the most widely accessible and frequently utilized financial mechanism for paying for a university education. In the U.S. alone, 2022-2023, students took out almost $100 billion in student loans. Student loans are also called educational or study loans, and they come in various formats. The broad availability, flexibility and level of control offered by student loans make them an especially attractive financing prospect for students.
Student loans are designed to help cover the costs of a student’s education. Unlike grants or scholarships, loans must be repaid, usually with interest. However, loans, including international student loans, are available to most applicants and come with a variety of payment terms, prerequisites and options. For international students, loans are a practical and affordable solution for taking care of international study costs.
Types: Financial aid versus student loans
Financial aid and student loan structures are diverse. We can categorize them based on how they provide the necessary funding to the student, their coverage, amounts, terms and – in the case of student loans – interest rates.
Types of financial aid
While the defining characteristic of financial aid is its intention to assist students who desperately need funds to pay for their education, how it’s provided can determine who receives it and how much it covers.
- Grants – This form of financial aid is typically need-based, and applicants must provide documentation to support their financial situation.
- Scholarships – This financial aid type is generally provided through special funding or donations to various institutions. Scholarships are commonly awarded to students based on merit. The iconic Rhodes Scholarship program is a well-known program that pays for students to attend the University of Oxford in the United Kingdom.
- Sponsorships – Sometimes, a company may sponsor a student’s university costs. These targeted programs may, for example, exist as an agreement that the student will work for the company after graduating instead of paying the money back.
In the U.S., federal financial aid is chiefly reserved for American citizens, and international students are generally excluded from receiving it. However, some government programs and university initiatives do offer financial aid for international students, though their qualification requirements can be very complex.
Types of student loans
Student loans, like regular loans, are structured around a bank or similar credit institution lending the money needed for attending university to the student. This money must then be paid back over a predetermined term, often with interest.
- Federal (or government) student loans – These student loans are offered to students by federal agencies or governments, often at a reduced interest rate. They offer other favorable terms not generally seen on typical bank loans. Most non-U.S. citizens don’t qualify for federal U.S. student loans.
- Private student loans – These are the most popular option for both local and international students looking to finance their education. They can be obtained from banks and specialized credit institutions that offer a vast array of different options students can pick from to suit their needs. International student loans fall into this category.
- Personal student loans – Sometimes, a student may be lucky enough to have a wealthy family member or community member willing to lend them the money they need for their studies. However, repayment terms and loan sustainability can be tricky, and these “informal” loans are extremely rare.
Loan conditions, like repayment terms, interest rates and when repayments must commence, can often be tailored to meet a student’s specific needs.
Pros and cons: Financial aid versus student loans
Both financial aid options and student loans come with upsides and risks. While the biggest positive of these financial assistance instruments is their ability to help students from around the world realize their educational dreams, it’s important to understand the risks and obligations they come with.
Advantages and disadvantages of financial aid
The biggest advantage of financial aid is that it usually doesn’t need to be paid back. This makes it an appealing option for students coming from more impoverished backgrounds or those international student candidates who find top universities in the U.S. to be unaffordable.
Pros of financial aid:
- Often requires no payback
- Excellent options for needy students
Financial aid, however, can be pretty difficult to come by. And even if you do gain approval, the scope of the assistance may not be enough to cover all your expenses. Financial aid offers usually also come with qualifying criteria and conditions that must be maintained.
Cons of financial aid
- Limited availability and extremely high competition
- May not cover all university costs
- Strict qualifying and maintenance criteria
- Risk of stigmatization from other students
Advantages and disadvantages of student loans
Student loans provide far more control than financial aid. They allow students to explore options from different entities and allow for increased financial flexibility. Student loans are popular not only as a source of academic funding but can also be used for other expenses.
Pros of student loans
- Extensive, diverse student loan options available.
- Highly customizable, allowing for greater control.
- Students can determine loan amounts.
- Students can choose what educational expenses to cover using loan funds.
- Loan amounts can cover ALL international study expenses.
While international student loans provide impressive flexibility and control over an international student’s finances, there are a few elements to look out for. If, for example, a student fails to graduate from their studies or qualify, the entire loan amount will still need to be repaid with interest.
Cons of student loans
- Interest must be paid on top of the loan amount.
- Some student loans include payment schedules that may be tough to meet after graduating.
- Some student loans require a cosigner or collateral.
Eligibility: Financial aid versus student loans
Different countries have differing eligibility requirements for financial aid, while almost anybody can apply for a student loan. Depending on your situation, background, intended study ambitions and need, eligibility requirements may entitle you to receive financial aid for international students or disqualify you from applying. Conversely, there are few limitations on applying for a student loan.
Financial aid eligibility in the U.S.
Non-U.S. citizens are often excluded from qualifying for financial aid provided by the federal government. However, some universities and states offer financial aid for international students specifically. Since financial aid is limited, but many students apply for it, demand for this financial assistance is incredibly high.
Student loan eligibility for international students
Technically, anybody can apply for a student loan, provided they meet certain conditions. These may include, but are not limited to, providing collateral, proving an ability to repay the loan, and sometimes having a cosigner.
Typical student loan eligibility requirements
- A U.S. cosigner who is a citizen or permanent resident
- Proof of ability to repay the loan
- Confirmation of application/acceptance to a U.S.-based educational institution
There are often other requirements and conditions for applying for a student loan. These depend on various factors, including your country of origin, current financial situation and where you want to study.
How to find an international student loan and apply for one
Finding and qualifying for financial aid is hard enough, but finding the right international student loan can sometimes feel impossible. Thankfully, you can compare different loan choices available to international students looking to study in the U.S. without having to explore endless options and offers.
Understanding the differences between financial aid for international students and international student loans is important, but did you know they can be used together? If you manage to receive financial aid but it’s not enough to cover the cost of your studies, you can simply deduct that amount from your loan application.
Compare international student loans available to international students looking to study abroad in countries like the U.S. Take advantage of the effectiveness and ease of International Student Loan’s comparison tool, enabling you to quickly and easily identify and review the broad scope of available international student loans. Find the financial aid and student loan that unlocks the possibilities of becoming an international student.
