Studying in the USA has long been a dream for many international students, including a significant number of Indian students. The country’s academic excellence, flexible academic system, cultural diversity, global recognition, unique curriculum, and lucrative job opportunities make it an attractive destination for higher education. However, the soaring cost of living and tuition fees can be daunting, especially for those without strong financial backing. Fortunately, with the availability of education loans for USA studies, aspiring students can still pursue their dreams of studying in the USA.
In this comprehensive guide, we will explore how to finance a study in the USA and the various options for obtaining educational loans for international students.
Application Process for Education Loan to Study in USA
Contents
To study in the USA, the application process for the majority of universities typically commences in October. Therefore, it is advisable to initiate the evaluation and sanctioning of the education loan, along with obtaining solvency letters as ‘proof of funds’ for the universities, before this period. It is possible to assess the loan options before receiving confirmation of admission.
Once you receive the confirmation of admission and the i20 form from the university, the loan disbursement can be processed. Given that the entire procedure can be time-consuming, it is essential to start early with each step to avoid last-minute rushes. Even while waiting for the offer letter after submitting your applications to the institute, it is crucial to remain proactive. Utilize this time to conduct thorough research on the various loan options offered by different banks.
Financing Study in USA
Securing a study loan in the USA can be challenging, particularly for international students. Traditional banks may hesitate to grant loans due to visa status, lack of credit history, and a lack of a co-signer. However, there are viable solutions available. International students can explore various lending sources to finance their education in the USA. These options include:
- Indian Banks: Several Indian banks, such as SBI, HDFC, AXIS, PNB, and others, offer education loans for studying abroad, including in the USA.
- Financial Services in India: Some financial service providers like Avance Financials and Leap Finance also offer educational loans for international students studying in the USA.
- US Banks and Lenders: International students can consider US-based banks and lenders like Discover, Citizen Bank, Wells Fargo, etc., which provide loans specifically for studying in the USA.
Banks and Providers Offering Study Loans in USA
Let’s take a closer look at some of the major banks and financial service providers offering educational loans for Indian students studying in the USA, along with their respective terms and conditions:
1. HDFC Bank, India
- Loan Amount: Up to INR 20 Lakhs
- Interest Rate: 9.55% to 13.25%
- Collateral Security: Flexible
- Moratorium Period: For selected courses
- Repayment Period: Up to 14 years
2. State Bank of India
- Loan Amount: INR 30 Lakhs
- Interest Rate: Up to 2% on the current base rate of SBI
- Collateral Security: Required for loans above INR 7.5 Lakhs
- Moratorium Period: Course completion + 1 year, or 6 months after getting a job
- Repayment Period: 1-15 years
3. Axis Bank, India
- Loan Amount: INR 20 Lakhs
- Interest Rate: 16.5% to 17.5% (Special rates for women)
- Collateral Security: Required for loans above INR 7.5 Lakhs
- Moratorium Period: 6-12 months
- Repayment Period: 5-15 years
4. Punjab National Bank, India
- Loan Amount: As per requirement
- Interest Rate: Base rate for pursuing education at the top 100 universities in the world
- Collateral Security: Flexible
- Moratorium Period: 1 year
- Repayment Period: 15 years
5. Bank of Baroda, India
- Loan Amount: INR 20 Lakhs
- Interest Rate: 7.75% to 8.9%
- Collateral Security: Required for loans above INR 7.5 Lakhs
- Moratorium Period: Course duration + 1 year
- Repayment Period: Up to 10 years for loans below INR 7.5 Lakhs and up to 15 years for loans above
6. Canara Bank, India
- Loan Amount: INR 20 Lakhs
- Interest Rate: 7.80% to 9.40%
- Collateral Security: Required for loans above INR 7.5 Lakhs
- Moratorium Period: 6-12 months
- Repayment Period: 15 years
7. IDBI Bank, India
- Loan Amount: INR 20 Lakhs
- Interest Rate: 8.40% to 8.75%
- Collateral Security: Required for loans above INR 7.5 Lakhs
- Moratorium Period: 1 year
- Repayment Period: 15 years
8. Avance Financial Services, India
- Loan Amount: Customizable
- Interest Rate: 13.15%
- Collateral Security: Flexible
- Moratorium Period: 6 months after the course or 3 months after getting a job
- Repayment Period: Flexible
9. Discover, USA
- Loan Amount: Based on GPA
- Interest Rate: 2.99% to 13.99%
- Repayment Period: Flexible
10. Wells Fargo, USA
- Loan Amount: Covers 100% of the cost
- Interest Rate: 3.21% to 6.76%
- Moratorium Period: 6 months
- Repayment Period: 5-20 years
11. LeapFinance, India
- Loan Amount: Covers 100% of the cost
- Interest Rate: 8.25% to 9.85%
- Collateral Security: Not required
- Moratorium Period: 6 months after getting a job
- Repayment Period: 15 years
12. MPOWER
- Loan Amount: INR 16-79 Lakhs
- Interest Rate: 7.52% to 14.98%
- Moratorium Period: 6 months after the course
- Repayment Period: 10 years
13. Prodigy Finance
- Loan Amount: Flexible
- Collateral Security: Not required
- Interest Rate: 5% to 8.50%
- Repayment Period: 7-20 years
Collateral and Non-collateral International Loan Requirements
When considering educational loans for studying in the USA, students can choose between collateral and non-collateral loans based on their preferences and financial situations.
1. Collateral Loans: Collateral loans require students to pledge movable or immovable property as security against the loan amount. The bank will assess the value of the collateral and grant the loan accordingly. Accepted collateral typically includes liquid assets like shares, bonds, FDs, as well as immovable properties like houses, commercial properties, or land. Other assets like mutual fund units, gold, life insurance policies, government securities, etc., may also be considered as collateral.
2. Non-collateral Loans: Non-collateral loans, as the name suggests, do not require any form of property as security. Instead, these loans often require a parent’s or third-party’s signature as a guarantee. However, being a guarantor comes with significant responsibility, as the guarantor becomes legally liable to repay the loan if the borrower is unable to do so.
It’s crucial for students to carefully consider the type of loan they opt for based on the expenses they need to cover during their study abroad journey. Apart from tuition fees, students should factor in other costs such as examination/library/laboratory fees, study materials, travel expenses, insurance premiums, study tour expenses, etc.
Expenses Covered under US Education Loans
Ensure to verify the scope of expenses included in your US education loan. In addition to tuition fees, it’s crucial to be aware of the other costs covered by your loan program. Nowadays, various loan options cater to different types of expenses beyond tuition fees. Some of the expenses encompassed by these loans are:
- College and hostel fees
- Fees for examinations, library, and laboratory usage
- Costs related to purchasing books, equipment, and instruments
- Deposits such as caution deposit, building fund, and refundable deposit
- Travel expenses
- Insurance premium (if applicable) for the student
- Purchase of a laptop, if required for the course
- Other expenses like study tours, project work, or thesis-related costs
Always be well-informed about the extent of coverage provided by your education loan to avoid any unexpected financial burdens.
Eligibility Criteria for Study Loan in USA
Before applying for a study loan in the USA, students need to ensure they meet the eligibility criteria set by the lenders. The typical eligibility criteria include:
- The student must be an Indian citizen.
- Strong academic record.
- Admission to technical or professional study programs that are job-oriented.
- A confirmed place at a university in the USA.
- Age above 18 years.
Documents Required for Education Loan to Study in USA
Banks and lenders require certain documents to assess the student’s capability to repay the loan. Students should prepare the following documents:
- University Offer Letter (proof of admission).
- Estimated cost of study (as per I-20 form).
- Loan application form.
- Original education certificates/mark sheets.
- Documents/Scorecards of qualified exams like IELTS, TOEFL, GMAT, GRE, SAT, etc.
- Residential proof of student and guarantor.
- IT return of the co-borrower/guarantor.
- Identification proofs and PAN card of the co-borrower/guarantor.
- Co-borrower’s proof of income.
- Passport copy of the student.
- Details of assets/liabilities of the parents/guarantor/co-borrower.
It’s advisable to confirm the specific document requirements with the chosen bank/lender, as they may vary based on the loan amount, type of collateral, and other factors.
How to Apply for Student Loan in USA
Applying for an educational loan to study in the USA involves careful planning and preparation. To streamline the process, students should follow these steps:
- Choose the Right Intake: Select a suitable intake for your US education and begin the loan process before the universities’ application procedures commence.
- Evaluate Lenders:Evaluate various lenders or banks by considering factors such as loan amount, interest rates, repayment periods, loan processing time, loan margin, and processing fees, among others.
- Submit Crucial Documents: Ensure all required documents are submitted for loan consideration.
- Conditional Loan Offer: Upon receiving the conditional loan offer letter from the bank/lender, use it as “proof of funds” to gain approvals from the university, visa/immigration office, and financial aid institutes.
- Loan Agreement: Once all necessary documents are provided, students will be asked to sign the loan agreement.
- Receive the Loan Amount: After completing the formalities, students can expect to receive the loan amount.
Receiving the loan amount is just the beginning of the process; students must maintain satisfactory academic scores throughout the course. Additionally, some banks may offer pre-payment options or consignor management, which can be explored if allowed.
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FAQs
What are the typical loan margins offered by banks for study abroad loans?
Banks and lenders usually offer around 90% of the required funds as a study abroad loan, expecting the remaining 10% to be arranged by the students themselves.
How is the student loan amount repaid?
The student loan amount is typically repaid in instalments after completing the course, spanning a period of 15 to 25 years. However, the exact duration and instalment amount can vary depending on the specific bank, lender, and type of loan chosen.
What is the most crucial factor to consider when applying for an international study loan?
Before committing to an international study loan, it is imperative to carefully read and comprehend the terms and conditions. Seeking advice from experts outside of the bank representatives can be beneficial if any uncertainties or doubts arise.
What is the maximum loan amount a student can receive for studying abroad?
The loan amount for studying abroad can range from INR 4 lakhs to 40 lakhs, depending on the student’s specific requirements. In certain cases, certain private banks or lenders may offer even higher amounts with specific terms and conditions.
What challenges can arise with education loans in the USA?
While the application process for education loans to pursue courses in the USA may seem straightforward, students may encounter complications, such as hidden costs, confusing interest rates, and a complex application procedure.
When to apply for an education loan?
The best time to apply for an education loan is as early as possible, once you are certain about securing admission to the university of your choice in the USA. It’s recommended to start your loan process simultaneously.
Can I get an education loan to pursue my bachelors in the United States of America?
Yes, you can get an education loan to pursue your bachelor’s in the US, provided your course falls within the category of acceptable bachelor courses and you meet all other eligibility criteria.
Is it better to take an education loan in India or the USA?
It is better to take education loans from Indian lenders because US lenders generally charge higher processing fees, students cannot take advantage of interest subsidy schemes and tax benefits. Moreover, even though their interest rates may appear lower numerically, due to currency exchange rates, the interest amount charged by foreign lenders is much higher than that charged by Indian lenders.
How much bank balance is required for a USA student VISA?
When applying for a USA student VISA, you will need to have a bank balance of 1.5 times the i20 amount for a 2-year course.
How much student loan can I get in the USA?
You can obtain a secured education loan of up to Rs 1.5 crore or even higher from public banks in India by pledging acceptable collateral. If not, you can get an unsecured education loan of up to Rs 60 lakhs or even higher, depending on your loan profile, to study in the USA.
Which bank is best for education loans for the USA?
Public banks offer lower interest rates, starting from 8.50%, and have high credibility. However, if the applicant lacks collateral but needs the loan urgently, then private banks and NBFCs are the best option.
From where can I get an unsecured education loan to study in the USA?
You can get an unsecured education loan of up to Rs 60 lakhs, without collateral, to study in the USA from private banks and NBFCs, as per their different loan schemes and products.
What is the USA education loan interest rate?
The interest rate for secured education loans for the United States of America starts from 8.50%, while the unsecured education loan starts at 10.5%. However, the interest rate depends on the bank/lender and the loan scheme under which the loan is being taken.
Conclusion
Studying in the USA offers immense opportunities for personal and professional growth. Despite the high cost of living and education, Indian students can make their dream of studying in the USA a reality with the help of education loans. By understanding the available options, eligibility criteria, and necessary documentation, students can successfully finance their study abroad expedition and open doors to a world of academic excellence, cultural diversity, and rewarding career prospects.
Remember, with careful planning and perseverance, nothing is impossible, and the journey to a bright future begins with a single step towards higher education in the USA.
