How to get Education Loan in the USA, Best Study Loan Abroad

The biggest challenge one always faces for studying in the USA is to arrange for funds. The cost of living and studying in a country like the USA can be exorbitant and everyone cannot afford it. However, the aspiration to study abroad and make it big in life always drives you to overcome these hurdles. Arranging funds is one of the most crucial parts of the whole exercise. Various banks have understood this scenario and resolved the complexity of financing higher education by giving student loans to aspirants who wish to study abroad. In this post, we will inform you about various aspects one should consider while acquiring a student loan. We will also discuss what all documents are required, how much tuition fees and other expenses a student loan covers.

Procedure for applying for an education loan

The application process for a majority of US universities starts in October. So, one should always start the procedure of loan evaluation, loan sanction, and getting solvency letters that prove as ‘proof of funds to the universities before this period. Loan disbursement can be done after receiving the confirmation of admission and i20 from the university. The loan evaluation can be done before the admission is confirmed. As the whole process is time-consuming, one should always start early with each exercise in order to avoid the last-minute rush. After submitting your applications to the institute, while waiting for the offer letter, do not take a rest and sit back. This is the time to do thorough research on loans offered by various banks. Check out how to choose your bank for an education loan to study abroad.

Compare the loans provided by different banks on the following parameters:

  • Interest rate
  • Different elements of costs it covers (e.g. tuition fee, living expenses, cost of books etc.)
  • Processing Fee
  • Income tax exemptions
  • Loan margin
  • Loan processing time
  • Prepayment terms

 You can also read Step by Step Guide to Education Loans

Factors to keep in mind before applying for an education loan

Before applying for a student loan one should always have a clear idea about how much money they require and how much they are going to pay from their own pocket. Other important factors to consider before applying for the loan:

  • Finalize the course you want to pursue and the university you want to study in
  • Estimate amount you need to finance the education
  • Make a list of documents required
  • Identify the guarantor
  • Make sure to apply for the loan three months before the visa interview date
  • Estimate the time of disbursement

Documents required for securing a student loan

While giving a loan, banks also need to verify that you are a genuine student (customer) and you have secured admission to an established university, so, they can assess your capability of repaying the loan. Here’s a list of basic documents, which are usually required by banks to process an education loan.

  • Offer letter given by the university (proof of admission)
  • Loan application form (filled)
  • The estimated cost of study (as per the I-20 form)
  • Original education certificates/mark sheets
  • Documents of qualifying exams (GMAT, TOEFL)
  • Residential Proof of student and co-borrower
  • IT returns of co-borrower
  • PAN card and other identity proofs of student and co-borrower
  • Proof of income of co-borrower
  • Passport copy
  • Details of assets and liabilities of parents/co-obligants/guarantors

NOTE: Requirement of documents can vary as per the banks’ own rules and regulations, so it is always advised to check the list of the documents required with the respective bank.

Also read: SBI Education Loan for Study Abroad: Ultimate Guide

Expenses covered under the education loan

Always make sure to check apart from the tuition fee what other expenses are covered in your loan scheme. There are various other things which you need to take care of. Nowadays various loan schemes are available that cover different types of expenses other than the tuition fee. Some of the expenses covered under the loan are:

  • Fee payable to college and hostel
  • Examination, library, laboratory fee
  • Purchase of books, equipment, instruments
  • Caution deposit, building fund, refundable deposit
  • Travel expenses
  • Insurance premium for the student, if applicable
  • Purchase of laptop (if required for the course)
  • Other expenses like study tours, project work, or thesis

Read: How does the proposal of levying tax collected at source will affect study abroad aspirants?

Things to Remember

  • Moratorium period: This is the time period during which the borrower need not make any repayment to the bank. This period varies from bank to bank and could last up to some time after completion of the course.
  • Loan Margin: Usually, banks do not provide the complete amount i.e. 100 percent money needed to fund the education. The majority of the public sector banks issue 90% of the total amount, the remaining 10% has to be arranged by the aspirant himself.
  • Effect of Exchange Rate: Always calculate the amount which you will be receiving at the time of disbursement, as any change in the exchange rate can affect the amount you will be receiving.

Collateral Rules

What is Collateral?

Any property whether movable or immovable, which can be offered to a bank as a security for a loan is collateral. Most Indian banks demand collateral as security in order to reduce the risk involved in paying off the credit.

Type of instruments accepted as collateral: Any liquid asset preferably shares, bonds, FD, or any immovable property like the house, any commercial property, or land can be classified as collateral. One important point to keep in mind is that agricultural land is not accepted as collateral. Even mutual fund units, gold, life insurance policy, government securities, shares, bonds, bank deposits, debentures, or bank deposits are also accepted as collateral.

Education loan without collateral

Education loan has come as a big relief to those who want to pursue quality education but face a big challenge while arranging the funds. Now students can avail of a loan of up to INR 4 lacs without collateral. For loans, up to INR 7.5 lacs, parents or guardians are made joint borrowers and a third party guarantee is obtained. For a loan exceeding INR 7.5 lacs property or any other asset is required as collateral. You can also contact India’s leading education loan providers through Shiksha Study Abroad.

How much can you borrow against collateral?

  • If you want to take the loan with your immovable property as collateral, in that case, the bank’s representative will verify your property and prepare a report on whether it can be mortgaged or not.
  • Also, the bank’s representative will evaluate your property. Based on this report, the loan amount will be approved.

Role of a Guarantor

Becoming a guarantor for a loan is a huge responsibility as the guarantor will have a legal obligation to pay in case the borrower defaults on his payment. If the loan amount exceeds INR 4 lacs, then the bank may ask for a guarantee from a third party. If the borrower is not able to repay the loan amount irrespective of the circumstances, in that case, the guarantor holds the liability to repay the complete amount to banks.

Eligibility Criteria

The first and foremost thing to consider is whether you are eligible to apply for the loan or not. The general eligibility criteria that are followed by all the banks are:

  • The applicant must be an Indian citizen
  • The applicant should possess a strong academic record
  • The applicant must be seeking admission to a professional or technical course of studies. Banks always prefer giving loans for job-oriented courses.
  • The applicant must have already secured admission at the foreign university
  • The applicant must be above the age of 18 years or his/her parents will have to take the loan

Repayment

Repayment of the student loan is generally paid in equated monthly installments (EMIs) for a period of 15 years for all categories of loans.

Capability Certificate

Many universities require the students to submit a certificate issued from their banks giving details of the sponsors’ financial capability. It is done in order to ensure that the sponsors are financially capable of meeting the expenses of the student going for studies. Banks issue this capability certificate after reviewing the financial and other supporting documents of the sponsors.

Indian Banks offering loans to study in the USA

Some of the loan schemes offered by Indian banks for studying abroad are:

  • HDFC Bank Education Loan for Foreign Education: This loan scheme can be availed by Indian students who wish to pursue studies abroad. The maximum amount available in this scheme is INR 20 lacs at a nominal rate of interest. Also, it offers tax benefits to the borrower and it can be sanctioned before admission as well.
  • SBI Student Loan Scheme: This scheme can be availed by Indian students who have secured admission in any institute in India or abroad. A maximum of INR 20 lacs can be availed at a nominal interest rate and it has to be repaid within 15 years. Also, if the loan amount is more than INR 7.5 Lacs, then borrowers need to furnish collateral as security. The repayment starts after one year of completion of the course.
  • SBI Global ED-VANTAGE Scheme: This loan can be availed by Indian students who wish to pursue a full-time course abroad. Students can avail a loan of up to INR 1.5 crore and have to repay it within a period of 15 years. The borrowers need to provide collateral to secure this loan and will have to start repayment after 6 months of completion of the course.
  • Oriental Bank of Commerce Education Loan for Study in India and Abroad: This loan scheme is offered to students who wish to pursue their higher studies in India or abroad. If the student wishes to pursue his studies in the US, then the amount of the loan will depend on the fee structure of the institute they have applied to. The highlight of this scheme is that it does not charge prepayment penalty from the borrowers and also give insurance coverage as well. The margin for the loan amount exceeding INR 4 Lacs is 15% on the loans taken for studying abroad.

Apart from this, there are more student loan providers in India for studying abroad.

Loans from NBFCs (Non-banking financial companies)

Apart from the nationalized banks, student loans can also be availed from non-banking financial companies/institutions (NBFCs). Non-banking institutions can offer complete tuition fees to the students. Borrowers need to provide collateral as security to the banks as the loan amount is generally more than INR 7.5 Lacs. NBFCs also provide non-collateral loans to students. Some of the NBFCs options are:

  • Credila: Credila is part of the renowned HDFC bank and provides loans to Indian students wishing to study abroad. The loans are given at a competitive floating rate of interest and can be repaid within a period of 10 years.
  • Avanse: Part of the DHFL group, it is considered one of the most popular non-banking financial institutions in India. Student loans from Avanse cover tuition fees up to 100% and other expenses. Apart from this, the interest rates are floating and the processing fee can go up to 1 to 2 percent of the loan amount.
  • International Student Loan Program (ISLP): This program is specially designed for international students who want to study in the US. Through this program, students can borrow amount as little as $1500 and can extend the repayment period up to 25 years. The loan disbursed under this program covers tuition fees and other expenses.
  • Global Student Loan Corporation (GSLC): The GSLC offers loans to international students to pursue their higher studies in the US without the requirement of any co-signer.

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