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What African Students Should Know About International Student Loans

What African Students Should Know About International Student Loans

Studying overseas can be expensive. Fortunately, more and more lenders are offering loans to international students. Here's what you need to know to get started.
What African Students Should Know About International Student Loans

Studying overseas can be expensive. Many African students who would like to further their education abroad are limited by lack of funds. Fortunately, more and more lenders are including student loans for international students in their product offerings. After evaluating how much you can raise and looking at scholarships and financial aid from the institution that you plan to join, there’s one more option to complete your term funding: student loans for international students

Let’s face it—the majority of African students don’t have adequate education about international student loans. The complicated financial terms and jargon can leave you bamboozled, making the search for an appropriate international student loan even more difficult.  You probably have plenty of questions: Am I eligible for an international student loan? Who is a cosigner? What is an APR? 

We have the answers to these questions and more. Let’s explore 11 of the most important things you should know about student loans for international students. 

What Are International Student Loans?

International Student Loans are private education loans that are administered by lenders to international students from around the world who wish to study abroad.  These loans are a viable financial option for African students who have exhausted their personal funds, scholarships and other funding options.

In order to be considered for international student loans, you have to be attending one of the approved schools and studying an approved program. In most cases, lenders also require international students to have a US citizen or permanent resident cosigner. 

Who Is Eligible to Apply for International Student Loans?

Are you an African student wondering if you’re eligible for a student loan? Unfortunately, some lenders don’t provide international student loans to citizens of certain countries. Be sure to check the lender’s website for detailed information on eligibility before starting the application process. 

The good news is that you can easily check your eligibility for loans from different lenders online. The most important factor in determining eligibility is being admitted to an eligible college abroad. Many lenders offering student loans for international students also require you to have a qualified cosigner. You can check your eligibility for a loan using our pre approval tool. A cosigner is not required to check your rates, and you can even compare rates with and without a cosigner. 

What Is an APR (Annual Percentage Rate)?

Annual percentage rate (APR) is the percentage of interest you will pay on a loan per year. For instance, if you borrow $100 at a 5% APR and pay none of this amount, you will have accrued $5  in interest after a year.

When you’re comparing different student loans for international students, APR is one key factor you need to consider. This crucial number determines how expensive a student is. It's important to look beyond the principal amount to have a clear understanding of how much you’ll owe. Make use of online student loan calculators to figure out what the APR on your international student loan means.

Interest rates for student loans usually vary from applicant to applicant depending on yours and your cosigner’s credit score, income, and other factors. Lenders offer variable and fixed rates. Simply put, a fixed APR does not change over time while a variable APR does.

What Is the Best Time to Apply for an International Student Loan? 

If you intend to study in the US using student loans for international students, you should get started on your preparations early. You want to make sure that the funds are disbursed before the beginning of the academic year. 

It is best to apply for a student loan after you’ve received your acceptance letter from the school you plan to attend.

If you are already enrolled at a U.S college or university, you can apply for an international student loan whenever you need it. Make sure you apply early in advance to have the funds disbursed before the beginning of your school term. 

Lenders have varying application and approval timelines. The timeline depends on how long it:

  • Takes you and your cosigner complete your application
  • The lender takes to review those documents
  • The school you’re enrolled at certifies you for the loan

With these considerations in mind, it’s often recommended that students apply for loans at least 6 weeks before the beginning of the academic year. 

As an African student who plans to study abroad, it's important to note the enrollment dates and deadlines of your school.  Before you begin the application of a student loan, you may need to ensure that you have a willing, creditworthy US citizen or permanent resident cosigner on standby.  

Which Discounts Can Students Get on International Student Loans?

Lenders often offer discounts on student loans as  incentives for prospective student loan borrowers. Let’s look at three of the most common student loan discounts:

  • Automatic payment discount: Given to students who agree to have lenders automatically deduct their monthly student loan payments from their checking account. Typically, lenders offer a 0.25% interest rate reduction for automatic payments. 
  • Graduation discount: Graduation discounts or rewards reduce the principal balance on your loan when you graduate within the required timeline. The principal reduction is typically 1% or 2% of the loan balance or a specific dollar amount, such as $250, $500 or $750, depending on the student's academic degree level.
  • Customer appreciation discount:  Customer appreciation discounts are mostly offered by banks for borrowers who have other accounts. These discounts help the lender advertise their other banking products and services.

What Is a Student Loan Grace Period?

The grace period is the duration of time given by a lender between when you graduate and when you have to start making repayments for your loan.  Most lenders offer students on the deferred repayment plan a period of between six to nine months before they are required to start making repayments. This time allows students to find a job and settle financially before they start making payments. It’s important to note that interest still accrues during your grace period.

What Can International Student Loans Be Used For?

As with all education loans, there is a caveat as to what you do with the student loans for international students. Your loan is mostly meant to cover education-related expenses. Here are the main expenses that you can cover using your international student loan:

  • Tuition fees
  • Any other mandatory fees specific to a school
  • Books and educational supplies/equipment
  • International student insurance
  • Transportation (including airfare)
  • Accommodation 
  • Other school-related expenses – such as food, personal expenses, leisure and communication

How Much Can You Get Through International Student Loans?

Lenders have varying maximum and minimum loan amounts. Most of them will fund you up to the total cost of attendance, minus any other financial aid you receive. To determine the amount you need, contact your school’s financial aid office. After applying for an international student loan and receiving credit approval, your school must certify the amount of the loan.

Be sure to compare the minimum and maximum loan amounts from different lenders and their terms to find the most suitable option for you. 

What Are the Fees Associated With International Student Loans?

Besides loan amounts, there are various fees associated with student loans for international students. They include: 

  • Origination Fees: This is the percentage of the loan amount charged by the lender for the processing of the student loan. Simply put, this means that the amount you receive may be slightly lower than the amount you have borrowed. If a lender charges origination fee, it’s likely to be between 1% and 6% of the loan. 
  • Prepayment Penalty: A prepayment penalty is the amount you pay a borrower if you pay off your student loan earlier than it was meant to take. 

Basically, lenders charge you for the loss of interest payments that they were anticipating. A prepayment penalty can be a fixed amount, or calculated based on the loan’s principal or how much interest remains when you pay off the loan.

  • Late Fees: This is the amount lenders charge for late or missed student loan repayments. Lenders may either charge a specific dollar amount or a percentage of the unpaid amount. 

For instance, Ascent Financing charges 5% of the amount of the past due payment after you’ve gone more than 10 days without making a payment. The minimum late fee is $5 while the maximum is $25. 

Who Is a Cosigner and Do International Students Require One?

A cosigner is a person who is legally obligated to repay the student loan if the borrower fails to pay. Many lenders require international students to have either a US citizen or permanent resident as a cosigner. The main reason for this is because international students do not have a credit history in the US.

A cosigner must:

  • Have a good credit score and credit history
  • Be a US citizen or permanent resident
  • Have a stable source of income
  • Be willing to cosign the international student loan on your behalf

The good news is that having a cosigner with a good credit score may lead to lower interest rates on student loans for international students.  

Tips for Finding a Suitable Cosigner for Your Student Loan

  • Ask family and friends: In most cases, cosigners are close friends or relatives. If you have close family or friends living in the US, as if they may be willing to cosign your international student loan.
  • Check with university alumni associations: Some schools have programs to help international students find qualified cosigners for their loans.  Alumnus, who are now established in the US, understand the dilemma of finding a suitable cosigner and may offer to cosign private loans for promising students. Check if your school has any such programs.  

How Can You Repay Your International Student Loan?

In most cases, private lenders may offer borrowers various repayment plans. You can choose the plan that best suits your financial situation. 

Let’s take a look at the most common repayment options available for student loans for international students:

  • Immediate repayment: This plan requires you to make full monthly payments while still in school. It is great for half-time students who have a stable income. The benefits of this approach is that it helps to minimize the interest you pay, resulting in the greatest savings. However, it's not realistic for most students to make full monthly payments while enrolled in school.
  • Interest-only repayment plan: This option requires you to pay only the interest on your loan while you’re still in school. This is nice because it makes monthly payments more manageable and it keeps your loan balance from increasing while you're in school. There is a slight emotional toll to this approach, however, as you'll be making payments throughout school but the principal balance will not be decreasing. Stay positive and try to keep your strategy in context.
  • Partial interest repayment plan: This plan allows you to make a fixed monthly payment while still in school that only covers part of the interest you owe. For instance, a lender may require you to pay $25 or $50 dollars a month. Paying a partial interest payment will keep your loan balance from growing as fast as it would otherwise. You will owe more upon graduation than if you had opted for an immediate repayment or interest-only replayment plan.
  • Full deferment: If you go for this option, you pay nothing while you’re enrolled in school. You only start making payments after the grace period. However, your loan continues to accrue interest while you’re in school. The nice thing here is that you have no bills while you're in school This can be a big stress reducer. Interest will be applied while you're studying though, and you could owe significantly more than the original principal balance.

A Glossary of Other Common Terms in International Student Loans

  • Academic year: The period in which students attend school or university each year.
  • Accrued interest: The amount of interest earned from a debt.
  • Amortization: The process of scheduling out a fixed-rate loan into equal payments
  • Annual loan limit: The maximum amounts that a student may receive for an academic year.
  • Award letter: A letter that informs an applicant that benefits have been approved.
  • Award Year: Year in which an award is granted.
  • Borrower: A loan applicant.
  • Cancellation: Loan cancellation is when the lender relieves the borrower from the obligation of repayments  
  • Capitalization: The addition of unpaid interest to the principal balance of your loan.
  • Capitalized interest: The addition of unpaid interest to the principal balance of your loan.
  • Consolidation:Student loan consolidation is the process of combining multiple loans with different rate and terms into a single loan  
  • Conditional loan approval: When a lender gives you a conditional approval on your student loan, it means that your application has successfully gone through the first screening. 
  • Cost of attendance: College’s total estimated cost of expenses (including tuition, room and board, books, supplies, transportation, loan fees, and miscellaneous expenses)
  • Credit report: A summary of how you have handled credit accounts, including the types of accounts and your payment history, as well as certain other information that's reported to credit bureaus by your lenders and creditors.
  • Credit score: A credit score is a number between 300–850, that depicts  your creditworthiness.
  • Debt-to-Income-Ratio: All your monthly debt payments divided by your gross monthly income.
  • Default: Failure to repay a loan.
  • Deferment: Loan deferment allows you to temporarily suspend making payments on the principal of your loan.
  • Delinquency: When you don’t make a payment, your loan becomes past due or delinquent.
  • Disbursement: The payment of funds to your school by the lender 
  • Discharge: Forgiveness or discharge of your loan means that you are no longer required to repay some or all of your loan.
  • Enrolment status:  An indication as to whether you are enrolled for study or have graduated.
  • Financial aid: Money you receive to help in payment of college fees such as scholarships, work-study, and grants
  • Fixed interest rate:  An unchanging rate charged on your  loan 
  • Forbearance: Student loan forbearance enables borrowers to temporarily suspend loan payments when they’re unemployed or in dire financial straits 
  • Forgiveness: When you’re no longer required to pay a loan (also known as cancellation or discharge).
  • Interest deduction:A federal income tax deduction that allows borrowers to subtract up to $2,500 of the interest paid on qualified student loans from their taxable income.
  • LIBOR (London Inter-Bank Offer Rate):An interest rate average calculated from estimates submitted by the leading banks in London. It’s used as a reference for setting the interest rate on lending between banks and on other loans.
  • Loan Period: The academic year or portion of an academic year (for example, a single semester or quarter) that the loan is requested for.
  • Part-Time Enrollment: Part time enrollment means student takes fewer credits per semester, usually less than 12.
  • Prepayment: When you pay off your student loan early 
  • Prime rate: The interest rate that commercial banks charge their most creditworthy customers, generally large corporations.
  • Principal balance: The amount of money you owe, without interest and other charges 
  • Private student loan: Educational loans offered by banks, credit unions, state loan agencies and other financial institutions.
  • Repayment: The action of paying back a loan.
  • Repayment period: The time frame you have to repay a loan.
  • Servicer: An organization that collects debt payments on behalf of a lender.
  • Subsidized loan: Federal student loans for undergraduate students with financial need. Such loans do not accrue interest while you are in school at least half-time or during deferment periods
  • Tuition: A sum of money charged for teaching at a college or university.
  • Unsubsidized loan: Loans for both undergraduate and graduate students that are not based on financial need.
  • Variable interest rate:  An interest rate on a loan or security that fluctuates over time due to being based on an underlying benchmark interest rate or index that changes periodically.

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