Loans for international students
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Loans for international students

Loans for international students

The idea that all international students are rich and don’t need student loans is just a stereotype. Sure, there are a number who are wealthy and can afford luxury student housing – but there are also many who struggle to pay for their fees and hold part-time jobs to help cover costs.

Taking out a loan to help finance their overseas education can be difficult for international students. They are unqualified for federal student loans in their host country, while banks often require a credit score and/or a co-signer, among other issues.

However, Inside Higher Ed recently reported an emergence of options by companies seeking to help international students with loans due to an unmet need in popular study abroad countries like the UK, Australia and the US.

Although interest rates aren’t exactly low, many countries are making it easier for international students to apply for student loans, based on their course programmes or where they are studying.

Who qualifies for these international student loans?

Emmanuel Smadja is the Chief Executive Officer of MPOWER Financing, a “Washington-based company incorporated as a public benefit corporation that lends money to international graduate students and upper-level undergraduates attending more than 350 colleges or universities in the US and Canada.”

According to Inside Higher Ed, “The company says on its website it chooses the institutions whose students it will fund based on a proprietary scoring algorithm that considers a variety of data points such as graduation rates, post-graduation employment rates and alumni earnings.”

Smadja said, “You often hear about that international student who has a Ferrari or a Mercedes parked in the parking lot. There’s this stereotype that international students are wealthy and don’t need any financial support, and part of that is availability bias.

“You notice that shiny car in the parking lot; you don’t see the other international students who are walking to class, who are skipping meals, who are wondering how they are going to pay for their second year of grad school.

“There should be financial access to college regardless of how poor your family is or where in the world you come from. Part of the American dream is to level the playing field so it’s about people’s competence; it’s not about their credit history in the US.”

Another company that has a similar model is Prodigy Finance, a company based in London that offers loans for international students – but only those who are undertaking graduate programmes in select fields, specifically business, engineering, health sciences, law and public policy – at more than 500 institutions worldwide.

Sam Weber, Chief Sales and Marketing Officer at Prodigy Finance, said, “We feel like there’s a bit of a misconception, particularly among US university administrators, that international students are, air quote, self-funded, which realistically means they’re finding some way to finance this domestically in their home country.

“What’s different about our model are a couple of things. US-regulated banks that have a student lending arm are typically unable to lend to non-US students unless they have a couple of particular characteristics, one of which would be a [US] cosigner.

“The other is for that same student who might otherwise borrow from a bank in their home country, we don’t require collateral. The whole premise of the offering is the talent is proven for us by admission to some of the best programmes in the world. We’re willing to lend based on that potential and the jobs students will get after that.”

These two companies are different in the types of international students that are eligible for the students loans; Prodigy only offers them to graduate students studying select professional fields, while MPOWER funds both graduate students and juniors and seniors studying any field.

What are the interest rates like?

The premise of these loans are to help international students secure student loans, but they still have to charge interest rates.

However, they aren’t that much higher than other interest rates offered by banks, and students don’t need to put up any collateral or find a reputable co-singer.

Anna Helhoski, Lead Writer and Student Loan Authority with the consumer finance publication NerdWallet, told Inside Higher Ed, “It’s really challenging for international students who don’t have residency, who don’t have US credit history, who don’t have a cosigner who is a US citizen or permanent resident, to get any kind of college funding.

“It definitely comes with some drawbacks. If you do a side-by-side comparison, their rates are definitely going to be higher. There definitely are some more limitations in regards to what you have to do to get the loans, in terms of what you’re studying. That’s what they’re going to be looking at.

“They’re not outrageously high. By student loan standards, they’re high, but they’re better than the alternative, which might be a loan from a home country that could involve putting up collateral, such as a house. It’s better than a personal loan, which is definitely going to be a higher rate.”

She also noted that the companies offer additional services. “Both Prodigy and MPOWER offer career placement services, for example. They also issue letters of financial support that can be used during the visa-application process,” said Helhoski.

As for how much a qualifying international student can receive to help fund their education, Inside Higher Ed says that, “MPOWER has a minimum loan amount of $2,001 and a maximum loan of $50,000, over two academic terms.

“Prodigy’s minimum loan amount is $15,000 per academic year, while its maximum loan amount is the cost of attendance set by the institution; Prodigy’s maximum lifetime limit for student loans is $220,000. MPOWER’s average loan amount is about $20,000 per year, while Prodigy’s is $40,000.”

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