Repayment for International Student Loans in 2020
May 18th, 2020 by Al C
So much of life is made up of the choices you make and loan repayment is no different. Making the right choice when you take out your loan makes a big difference when you have to make those repayments.
Knowledge is power and the more you know about these choices the better prepared you will be to fulfill you loan obligations.
Your lender’s specific terms will be determined by the type loan you select and your individual circumstances.
Note that lenders have put in place specific programs to assist students during the COVID-19 Pandemic. If you currently have a loan and are worried about repayment, or if you’d like further information on the measures in place, read more about that in this post.
Broadly speaking, repayment terms vary in response to three different factors:
- How much will the monthly payments be?
- When will payments begin?
- How long students may be able to defer paying back the loan?
And in general there are three main loan repayment types available to international students.
Although the differences between these three options can seem complicated, taking the time to understand and make an informed choice at the outset can save students from a lot of uncertainty and worry in the long term.
- immediate repayment loan
- full defferral loan
- interest only loan
Students with this arrangement are required to begin making payments on both the interest and the principal of the loan as soon as it is disbursed.
The prospect of such immediate repayment is doubtless intimidating to many international students because most cannot or do not want to work while they study in the United States. They therefore have little chance of being able to make the repayments.
Long-term the repayments compound meaning that in total a borrower may pay less back with this type of loan than with others, and may clear their debt quicker as a result.
A full deferral loan, by contrast, offers completely different loan repayment options. With loans like these full-time students are able to defer – that is, postpone until later – repayment of both the interest and the principal for up to four consecutive year or until after they graduate.
This means that in the short-term this loan would be most affordable as no repayments are due until a set date. In most cases the interest is accumulating during this time, and as a result it is likely that this type of loan will be more expensive and take longer to pay off.
A third option that splits the difference between these two ways also exists.
These so-called interest only loans require international students to make payments on the interest only (and not the principal) of their loans while in school and often allows them to defer the start of their principal repayment for up to 45 days after graduation.
Like the full deferral loan option students are only eligible to postpone repayment for up to four consecutive years and while enrolled full-time.
As you can see, the choices you make can have a huge impact on your bottom line!
Before applying for a loan, be sure to check with your lender the exact terms and conditions on repayment as this may change depending on the lender and the loan you apply for.
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