One of the biggest things you have to consider about studying abroad is the cost. As an international student, you will need money for everything from your university application to visas, accommodation and tuition. This can be a lot to take on, and that is why student loans exist. Of course, borrowing the substantial amount you may require is not something you should do lightly. To help you make your way carefully through the process, we've compiled our international student loans guide.
Before we begin, here is some useful vocabulary to help you understand everything:
- Loan – Money given to you by a lender; or the agreement to lend it
- Lender – The financial institution that gives you the money
- Agreement – A contract
- Interest – The extra money you must pay back after you borrow money, or the extra money you earn when you invest money
- Interest rate – The percentage of what you borrow that is added to what you must repay, or the percentage of what you invest that you will earn
- Repayment – Paying money back
What is a student loan?
A student loan is an arrangement under which you borrow a set amount of money from a lender over a fixed period of time, in order for you to pay for your education.
Most top study destinations offer government student loans. These loans have lower interest rates and longer repayment terms than ones given by private lenders such as banks. Unfortunately, they are rarely available to international students.
Where can I get a student loan?
As an international student, you can look to banks and private lenders. Many major financial institutions and specialist student loan companies have lending schemes designed for study abroad.
Depending on where you live, you may also be able to obtain a student loan through your local or national government. Often, this will be on better terms than you would find with a private lender.
You may find many different places to get a student loan. If so, it will be wise to compare them closely. Look carefully at what each one offers before making a selection.
What can I use a student loan for?
Student loans are usually intended for study-related expenses. As a minimum, this will mean your tuition fees, but it commonly extends to other educational matters like books, and general living costs such as food and accommodation.
Your loan agreement will state what your loan can and can’t be used for, and you must read these conditions carefully. If you break the terms of the agreement, your lender may end it early and ask you to start repayment immediately.
What do I need to apply for an international student loan?
Every lender has different requirements for international student loans. However, when applying, there are some things that you can expect them to want from you. These include:
- Admission letter
- Academic certificates or transcripts
- Photo ID (eg passport)
- Proof of address
- Recent bank statements
Additionally, there will be multiple detailed forms to complete, which will require various other pieces of information. It is important to remember that these can have legal significance, so you should fill them in with care and honesty.
Many lenders also ask for a co-signer. This person promises to repay the loan if you don’t. They should be someone with whom you share strong trust, and who is prepared to take on a potentially large financial responsibility. Hopefully, this will not be necessary, but they must accept the possibility.
When do I have to pay back my loan?
This depends on the terms of your agreement. However, you are very unlikely to have to pay anything until after the end of your studies. Following this, there is often a grace period, allowing you time to start earning money before repayment begins. Typically, this lasts for around six months to one year.
Subsequently, you will start repaying your loan and the interest it is accruing in accordance with an agreed plan. You will be expected to make regularly scheduled partial payments until the full amount has been accounted for. The longer this takes, the more interest will be added.
What other costs do I have to consider?
When you take out a student loan, other costs may arise. These can include:
- Sign-up fee
- Service fee
- Payment handling fee
- Late payment fee
The terms used to describe fees like these can vary. However, if there is a chance that you will be subject to any of them at any point, this should be established when you take out your loan.
Although lenders should not hide anything, it can be easy to overlook or misunderstand such charges. Therefore, it is important to get them to explain everything to you clearly when you sign up. You may also want to consult the advice of someone who is familiar with student loans, if possible.
What happens if I can't pay back my loan?
If you start missing payments, you will be charged a late payment fee and potentially greater interest. There will also be a negative impact on your credit score, if one applies in your location. This could make it more difficult to get further financing in future.
If you have a co-signer on your loan agreement, that person may be called upon to pay any outstanding amount, in addition to penalty charges and interest. Make sure that they are prepared for this when you take out the loan. While you may not expect to ever need their help, they are agreeing to provide it if you do.
While this may all sound intimidating, there are things you can do to avoid the worst outcomes. If you anticipate that your repayments may soon become unmanageable, it may be a good idea to tell your lender. They might be able to agree changes to the terms of your loan, or to defer it. Of course, it will still need to be repaid, so think carefully about how you would handle this.
Above all, it is important to try and keep things achievable. While this may sound easier said than done, it will help to only borrow what you need, and to budget carefully. You cannot predict the future, but you can try to prepare for it.
What other types of student finance are there?
Loans are not the only way international students can fund their education. Some are self-funded, helped by family or friends, or sponsored by an organisation such as an employer or government.
More often, though, finance is provided by scholarships. Unlike loans, these funding awards do not need to be repaid, providing great peace of mind to students that receive them.
Some major scholarships, such as the Australia Awards, can pay for the whole of your study abroad experience. However, these are rare, and come with competitive application processes. Nonetheless, there are a huge number of others that can contribute to your costs, including many that are provided automatically by your study institution.
While you are studying, it may also be possible to earn money by working. Every country has different rules around how many hours a week you can spend doing this, but all will allow it. They do not want you to be distracted while studying, but do want you to be financially secure.
We hope that our international student loans guide has cleared up any uncertainty you may have had about the subject. If you would like to read more about the matter of student finance, try our guides to scholarships, working while studying, and the cost of studying abroad.
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