Study Abroad

Everything You Need to Know About Student Loans for Study Abroad

Learn how to use financial aid in the form of student loans to pay for your study abroad experience.

Want to study abroad but afraid you can’t afford it? If you’re worried about the cost, don’t lose hope. Luckily there are ways to get loans to study abroad. Financing study abroad can be confusing though so we’ll break it down in the simplest terms to get you on your way to an adventure abroad!

Can I take out a loan to study abroad?

Yes! Whether you use federal financial aid or take out a private loan, you can use loan money to pay for study abroad.

Is it worth taking out a student loan to study abroad?

There are pros and cons to taking out a student loan to study abroad but the answer depends on you and your financial situation. If you’re worried about having a lot of debt, there are plenty of affordable programs out there to minimize the cost. However, despite the price, at GO we truly believe that meaningful travel is life-changing and very worth it!

Can international students get student loans in the US?

Even though international students studying in the US can't get federal financial aid, they do qualify for some private loans. The terms for these loans vary, but international students generally need a US citizen with good credit to be their co-signer. This can be a relative, friend, partner, or anyone willing to take on your debt if you can't repay it. This makes finding a co-signer difficult for many international students.

The best funding route for international students is usually <a href="https://www.gooverseas.com/blog/study-abroad-scholarships-grants">grants and scholarships</a>, either from the university or other organizations.

Types of study abroad loans

To keep things simple, we’ll focus on two of the most popular types of loans: federal and private. Federal student loans are borrowed through the US federal government and private loans are provided by organizations like lenders, banks, and credit unions.

Let’s look at each of them in more depth.

Federal Financial Aid (FAFSA)

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The US Department of Education provides student loan funding to eligible citizens and permanent residents. This loan money can be used in the U.S. or abroad. If you're planning to use your federal funds overseas to study abroad, you must choose an approved international university to enroll directly. Alternatively, you can use study abroad loans with a program provider or a faculty-led program at your school.

Based on your education level (undergraduate vs. graduate) and income level, three different types of loans may be available to be used for both general study and study abroad.

  • Direct Subsidized Loans: available to undergraduates demonstrating financial need. Subsidized loans have the lowest interest rates.
  • Direct Unsubsidized Loans: available to all undergraduate and graduate students. They are not based on financial need.
  • Direct PLUS Loans: available to parents of students as well as graduate students. PLUS loans require a credit check.

Amounts for federal loans vary between $5,500 to $12,500 per year for undergraduates and up to $20,500 for graduate students. The amount will be determined by a large number of factors, including how long you intend to study internationally and whether you are considered dependent on your parents or independent. Each of these loans has different interest rates.

How to apply

Already receiving federal aid for your US university studies? Then you're in luck! You can apply your current aid package to your study abroad. You should work with your university's financial aid office to determine whether you'll need to apply for an adjustment. If you don't have loans though, you'll need to apply online.

To apply for federal student aid, you must fill out the Free Application for Federal Student Aid, or FAFSA. This can be done online and can be completed relatively quickly should you have all the necessary information on hand. This information includes:

  • Social Security Number (SSN)
  • Parent/guardian's SSN (for dependent students)
  • Driver's license number (if applicable)
  • Federal income tax information
  • Available assets (money in checking, savings, stocks, etc.)
  • Untaxed income

There are both state and federal deadlines every year so be sure to check the website for deadlines where you live.

Once you have submitted your FAFSA, you will receive a Student Aid Report (SAR) which will confirm your details and tell you how much you can borrow in loans.

Repayment

One of the major benefits of borrowing loans to study abroad through the US government is the flexible repayment. Once you graduate, you have a grace period of six months before you need to start repaying your loans.

There are several different payment plans, including one that is based on your income so that your payments aren’t higher than you can afford. Remember that your loan balance continues to accrue interest until you pay it off so it’s best to pay as much as you can each month to avoid excess interest.

Private loans

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Private loans are an option for students who have maxed out their federal borrowing limits or do not qualify for federal loans. Private study abroad loans are not affiliated with the US government.

Types of loans

A few of the common commercial private loan providers include:

To help students wade through the many private loan providers available, the financial website Nerdwallet has detailed the best private student loans. Their article compares interest rates and terms to guide you to a well-informed decision.

How to apply

Generally, applications for private companies can be submitted online. Each company will ask for different items for the application but you’ll commonly need to provide the following:

  • Social Security number
  • Address
  • Financial information
  • Requested loan amount

It's important to note that, unlike federal loans, most private lenders require a credit check. If you don't have a credit history you will need a co-signer. A co-signer could be a parent, guardian, or another adult with a good credit rating who is willing to pay back your student loan should you fall on hard times and can't afford the monthly payments.

Repayment

Repayment terms will depend on your lender. Some offer grace periods after you graduate when no payments are due and may allow you to choose repayment plans (ex. income-based). Repayment for private loans tends to be less flexible than federal loans.

Pros and cons of study abroad loans

Studying abroad can be a very rewarding and life-changing experience. It's up to you to decide what is best for you and your family's finances, so here are some pros and cons to consider when borrowing money. It's advisable to do extensive research before committing to any loans.

Point to Consider Federal Private
Credit check Only required for PLUS loans Required
Interest rates Highest rates around 6%; fixed Vary by credit rating and can be upwards of 13%; can be fixed or variable
Application Requires tax, income, and personal information Faster and requires less information
Co-signer Not required for Direct Loans Required for weak or no credit history
Repayment plans Yes; can change plan throughout repayment May or may not be able to change plan throughout repayment
Disbursement of funds Tuition paid directly to school; excess funds for living expenses disbursed after overage processed Tuition paid directly to school; excess funds for living expenses disbursed after overage processed
Loan forgiveness Loans are eligible for forgiveness through any government initiatives, like the Public Service Loan Forgiveness program, or Executive orders Loan forgiveness is not available
Sources: Sallie Mae and Department of Education

This is only a snapshot of the differences between loan provider options so do your research! High interest rates and inflexible terms can leave you taking two steps forward and one step back in terms of your repayment. Your study abroad education and your finances are both important so starting off on the right foot is key.

Don’t forget scholarships and grants!

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Before relying 100% on loans for study abroad, explore the wide range of available scholarships and grants! Some of your options include:

  • Pell Grants: US government education grants of up to $7,395 USD a year that are available to students demonstrating financial need. Pell Grants can be used for study abroad!
  • Benjamin A. Gilman International Scholarship Program: Study abroad scholarship exclusively for Pell Grant recipients. Gilman scholars can receive up to $5,000 USD.
  • GO scholarships: Over 50 scholarships for study abroad, all in one place!

Many third-party program providers, like Semester at Sea, have Pell Grant matching programs. Whatever grant money you use toward your program is matched up to a certain amount.

Thousands of dollars in scholarships are also available from program providers. These can be either need-based or merit-based and there are even full-ride opportunities available!

A few of the program providers that offer scholarships to participants include:

  • ISA: one GO (Global Opportunity) Full-Ride Scholarship is awarded a year along with other funding for students historically underserved in study abroad, and those dedicated to community service
  • CIEE: scholarships and grants ranging from $500 to the full program cost
  • AIFS Abroad: over 15 scholarships and grants for eligible participants
  • CEA CAPA Education Abroad: four scholarships based on financial need, leadership, career development, and diversity in study abroad

These are just a fraction of the options, so check out the other program-specific study abroad scholarships out there!

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Don’t let funding hold you back

Now that you know that studying abroad is attainable, where will you go? Start by checking out your university's study abroad website. If you want more guidance, contact your school's study abroad coordinator to schedule a meeting or attend a seminar. Also be sure to check out how to study abroad for free or cheap, which could open up even more possibilities. The world is waiting for you, don't let financial worries hold you back!