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The basics
Study abroad : Student Finances

Understanding student finance: Loans and debt

Student loans are one way that international students can finance their studies abroad. We answer the key questions and queries with our student finance guide.

Student finance loan, money debt concept vector illustration.


One of the biggest worries about studying abroad is the cost. As an international student, you need money for the application process, the visa process, tuition fees, accommodation fees, and living costs. This can feel too much and may stop you from following your dream of studying abroad.


Although it isn’t easy, there are options for international students when it comes to financing their studies. People often choose to have financial help from their parents or relatives. Some scholarships and grants can help contribute to paying the costs. This article will answer some frequently asked questions about student loans and debt. Before we begin answering the questions, here’s some useful vocabulary to help you understand the text:


  • Agreement - contract
  • Interest – The extra money you must pay back when you borrow money or the extra money you earn when you invest money.  
  • Interest rate – The percentage that you are charged when you borrow money. Or the percentage that a bank pays you when you keep money in a savings account.
  • Lender – The financial institution that lends you the money.
  • Loan – Money that a bank lends someone.  
  • Repayment – to pay back a debt


What is a student loan?


A student loan is a personal loan which allows you to borrow a set amount of money over a fixed time. Most study destinations such as the UK, the USCanada and Australia have government student loans. These loans have lower interest rates and longer repayment terms than loans given by private banking institutions.


However, government or federal student loans are not available to international students, but there are other means of getting a student loan.


What can I use a student loan for?


Student loans are used to pay for tuition fees, accommodation, living costs, books, food, transport, and other study related expenses. The loan agreement will state what the loan can and can’t be used for, and you must read these conditions carefully. If you break the terms of the loan agreement, the lender may end your agreement early and ask you to repay the whole amount immediately.


What do I need to apply for an international student loan?


Every country and financial institution has different requirements when offering international students, a private student loan. In the UK, for example, you will need to be resident in the UK, have a UK bank account, be registered in an accredited university and show proof that you can afford the repayments.


In the USA, you can apply for an international student loan. You will need show proof that you have been accepted by a university and will need to show your student visa. Many lenders may also ask for a cosigner, this is someone who signs the loan agreement with you. 


This person promises to pay the loan if you don’t. A cosigner must be a permanent US resident and have a good credit history. They can also be a relative or close friend. There are also loans that don’t require a cosigner, but these may have higher interest rates attached to them.


In Canada, the situation is very similar. You can obtain a private education loan with or without a cosigner. If you are registered at a Canadian university approved by a lender, the lender will look at your academic history and your career path, not your credit history or that of any cosigner.


In Australia, private lenders and universities can offer loans to international students. For example, The University of Sydney offers interest-free loans of up to AUD 1,000.


To apply for private loans, you must have an Australian visa, need to be living in the country and have a bank account there. You will also need proof that you have been accepted into one of the universities approved by the lender.


When do I have to pay back my loan?


The answer to this question depends on the country and the lender you have chosen. One financial institution requires international students in the US to make interest-only payments while at university and for six months after graduation. 


The repayment of the remaining sum and interest is made six months after graduating and for ten years. Others have repayment terms of between five and 15 years. Remember, the longer the time you must pay the loan, the more interest you will be paying.


When applying for a student loan, you must read the repayment terms and conditions carefully before signing the loan agreement.


How do I pay back my loan?


Loans can be paid in various ways: online payments, wire transfers or cheques.


What other costs do I have to consider?


When you take out a student loan, there may be other costs involved, such as:

  • Sign-up fee
  • Extra-payment penalty fee
  • Loan service fee
  • Payment handling fee
  • Late payment fee


What happens if I can’t pay back my loan?


If you start missing payments, you will be charged a late payment fee and interest. It will also impact your credit score. This would make it very difficult to get further financing later in life. If you have a cosigner on the loan agreement, that person will then have to pay the outstanding amount plus penalty charges and interest.


If you have obtained a loan from an Australian university, you may not be allowed to ask for any of your course documents and may not even be allowed to see the final result of your degree.


What other types of loans/finance are there?


As well as personal student loans in the country where you wish to study, here are other types of methods to help fund your studies abroad:


  • Home country loan – Getting a loan in your own country first may be easier than applying for one abroad. You may also be able to get much better repayment terms and conditions. 
  • Student overdraft – Many student bank accounts offer large overdraft facilities. This is an extension of credit on your normal bank account. It allows you to take money out and make payments from your account even though you don’t have the funds. You will be charged interest on any amount that is overdrawn. The interest rate on overdraft facilities tends to be very high, so it is advisable to pay it off as soon as possible.
  • Student credit card – Most banks also offer student credit accounts with student bank accounts. You can borrow money for up to 55 interest-free days. But again, the interest is very high if you don’t pay this back quickly. 


When trying to finance your way through university abroad, make sure you find out about any scholarships, grants and bursaries available to you first. Next, work out the tuition fees and the cost of living in your preferred country and university. Only apply for a student loan on the minimum amount you need in order to cover these fees, living costs and other expenses.


Remember that in some countries, such as Canada, you can study and work. This will help to reduce the amount of money you will owe when you finish your studies.


Studying abroad is expensive, but in many cases, you will be able to recover the amount you have spent by having far better career and salary prospects by getting a degree abroad.


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