International Students Guide to Financial Aid & Student Loans
International students who want to study in the U.S. face a number of hurdles, from applying for visas to applying for an American university. After passing those hurdles, many international students must be able to secure financial resources to enable them to complete their education. For international students with their sights set on studying in the U.S., there are certainly no guarantees they will be able to overcome these obstacles. But, for the more industrious and persistent among them, there are resources available if they know where to look.
International Student Aid is Not a Sure Thing
According to the Institute of International Education, more than three-quarters of international students in the U.S. rely exclusively on their own resources to finance their education. Graduate students, who stand a better chance of obtaining financial aid, were less in need of family resources. The study also found that less than 20 percent of financial aid received by international students comes from U.S. sources. Seven percent of funding is provided directly from the universities, 5 percent from their home governments and 5 percent from private organizations.
As challenging as many American college students might find the process for obtaining financial aid, it pales in comparison to what international students face. With the Free Application for Federal Student Aid (FAFSA), American students must only complete one application which can then be applied to any school they choose. Based on the student’s financial eligibility and the availability of aid at their school of choice, they can qualify for a number of different types of financial aid, including Pell Grants, work-study programs and federally-subsidized loans. In addition to financial eligibility, the only requirement for students to receive aid is that they be enrolled more than half-time and complete a minimal number of college credits each semester.
For international students, there is no such universal application process because, with the possible exception of Canadian and Mexican foreign nationals, they are not eligible for federal assistance. Any possible sources of financial assistance for international students have their own eligibility requirements, and the application process varies from one source to the next. The first challenge is to learn where to find these sources and then learn how to navigate their application process.
Where to Find Sources of International Student Financial Aid
There are a number of potential sources of financial aid for international students. The first place to look is with their own government to see if it or private organizations in their country offer support to study in the U.S. Their country’s ministry of education would have information on grants and awards offered to students who wish to study abroad. These sources may also be limited and may require a nomination from someone within the government.
Scholarship and Grant Database
There are a number of free databases that track and compile information on scholarships and grants available through private, corporate, nonprofit and government organizations that support undergraduate international students. Below is a list of more commonly used databases that either offer access to these sources or provide the information needed to pursue them.
College Board: Free online source of information on scholarships and grants available for all college students, including international students seeking to study in the U.S.
FastWeb: Free search service for any type of financial assistance for students who don’t have access to traditional sources of funding.
International Education Financial Aid: Designed specifically for international students in search of financial assistance.
International Scholarships: Another search service dedicated to international students.
United Nations Educational Scientific and Cultural Organization (UNESCO): Free online scholarship database for international students.
These sources are verified as free resources. Be careful when choosing an online database because some charge fees for their use. Always ask in advance if there are any fees, and under no circumstances send money or provide credit card information. Always check with the college’s admissions office to verify the legitimacy of a scholarship source.
There are a number of international organizations that offer scholarships and loans for study in the U.S.; however, most of them limit their funding to graduate students. Among the organizations that participate in financing international students are the United Nations, the League of Red Cross Societies, the Soros Foundation, the World Health Organization and the World Council of Churches.
In the U.S., the Organization of American States is a Washington D.C.-based, international organization that offers interest-free loans to qualified students from Latin American and Caribbean countries. The loans are funded through the Rowe Fund program and are offered to graduate and postgraduate students, along with students in their final two years of undergraduate studies. Check the website to learn more about eligibility requirements and which universities are eligible to receive loans.
It is important to note that the funding available through many of these organizations is somewhat limited, so expect a high level of competition for awards. Among the most competitive and prestigious awards granted each year are Fulbright scholarships. Less than 5,000 scholarships are awarded annually worldwide. Fulbright students must be enrolled in an eligible graduate studies program and be on a J-1 visa for the duration of their sponsorship. Information on the Fulbright program can be obtained from the Bureau of Educational and Cultural Affairs of the U.S. State Department.
Although they are limited, there are some educational institutions that offer direct aid to international students. Financial aid for undergraduate students is extremely limited, and the aid that is available to graduate students is often in the form of teaching and research assistantships and most are based on academic merit. Merit-based scholarships are typically awarded on the basis of special skills, talents or abilities. Some schools award scholarships based on TOEFL scores combined with the student’s academic record or their involvement with the arts.
Some of the top universities in the U.S. do offer direct assistance to international students, including Harvard, Princeton, MIT and the University of Pennsylvania. There may be as many as a two hundred universities that offer up to 50 aid packages to international students. The schools most likely to offer financial aid to international students are the very wealthy universities as well as smaller colleges that want to attract more international students. The good news is that many colleges and universities emphasize cultural and ethnic diversity in their admissions goals. The bad news is that the limited amount of financing that is available is directed mostly to graduate students.
Students who intend on enrolling in a graduate or postdoctoral program should contact the schools that interest them to see what is available. International students already enrolled in a U.S. university can contact the school’s International Student Advisor or Financial Aid Office for more information.
International Student Loans
Federal student loans have become the main source of funding for U.S. college students, but they are not available to international students. However, an increasing number of sources now offer private international student loans. These are private loans that offer high loan amounts with extended repayment terms and reasonable interest rates. All international student loans require a co-signer who is a permanent U.S. resident with good credit and who has resided in the U.S. for the last two years. The co-signer, who is typically a close friend or relative of the student, is legally obligated to repay the loan if the borrower defaults.
Interest rates on privately-funded international student loans are calculated based on one of two indexes – the Prime Interest Rate or the LIBOR (London Interbank Offered Rate). The lender will add a margin of an additional percentage number that is determined by the creditworthiness of the co-signer. Once the loan application is approved, the lender will disclose the total interest rate, at which point the borrower can accept or refuse the loan.
In looking for private lenders, it is important to note that many tend to target their lending activity to students from specific regions or countries that meet specific criteria.
MPOWER – A New Kind of Private Lender for International Students
Founded in 2016, Washington D.C.-based MPOWER Financing has ridden the fintech wave into the rising tide of student loan financing. However, their focus is strictly on making loans to high-potential students who have been left out of traditional financing options. That generally includes international students and domestic students who lack a creditworthy co-signer. Utilizing a crowdfunding investment model, MPOWER brings together students in need with investors who seek a solid yield while helping to make a positive impact on the lives of students.
Unlike other private lenders that rely heavily on credit scores, MPOWER uses a completely different set of criteria to assess a student’s creditworthiness. In determining the borrower’s ability to repay the loan, MPOWER looks at factors such as their chosen school, the anticipated graduation date, their grades and scores, as well as internship or work experience in their chosen field. They will also assess projected future earnings to ensure they don’t put the student into more debt than they can afford. All of this information is plugged into a formula that takes just 15 minutes to render a decision on the loan. Students who don’t meet MPOWER’s criteria of “high-potential” might not be approved for a loan.
The biggest advantage for international student borrowers is that MPOWER does not require a co-signer or collateral for the loan. Like most other types of student loans, payments may be deferred until six months after graduation. MPOWER does limit the top loan amount to $25,000 per year, but it offers competitive rates on terms of 3 to 10 years.
MPOWER demonstrates its commitment to their student borrowers’ financial success by offering courses in financial literacy. The courses are designed to help students learn how to manage their finances and debt while preparing for life after college.
International Students Need to Plan Ahead and Start Early
It is highly recommended that international students have their college financing lined up before they leave for the United States. To be accepted into most U.S. schools, they will be required to show proof of their college financing. They will also need to prove to the consular officer in charge of issuing visa stamps that they have sufficient funds to cover their living expenses as well as their college tuition costs.
The process for securing college financing should commence at the same time as the process for applying for admission, which can take up to 18 months. Schools with competitive admissions could take much longer. It is important to be aware of the application deadlines at the schools being considered, which can be up to 10 months before beginning the school term. Most schools require personal statements and some might require letters of recommendation from teachers or other people who know the student well.
Most U.S. schools require completion of one or more of the standardized admission tests, such as the SAT, ACT, TOEFL, GRE, MCAT or LSAT. Potential students also need to provide transcripts and verification of official status as a student at the school they are currently attending. Many schools require the submission of transcripts and official documents to a credential evaluator who examines the credentials and translates the documents for curriculum review.
It wasn’t very long ago when international students had to rely almost exclusively on their own resources if they wanted to study in the U.S. Although there are now more private sources of financial assistance available, it requires a lot of time, preparation and due diligence to find an option that can best meet their needs. The planning must begin well ahead of the expected timeframe for traveling to the U.S. A good place to start is with some of the resources listed in this guide.