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Studying abroad can be a rewarding experience for students, but one of the biggest barriers is figuring out how to pay for it. The average cost is around $17,785 for a semester, according to the International Institute of Education.
If you have exhausted your scholarship and grant options, the next form of financial aid to consider is study abroad loans.
As a rule of thumb, you should always use federal loans before borrowing from a private lender. These typically have lower interest rates, more repayment options, and better financial hardship protections.
Jump to a section:
- Federal Student Loans to Study Abroad
- Private Study Abroad Loans
- What to Consider With Study Abroad Loans
- Alternatives to Study Abroad Loans
Federal Student Loans to Study Abroad
You can typically use federal student loans to study abroad if your school is already apart of the federal student aid program (which most are). You will need to complete the Free Application for Federal Student Aid (FAFSA) if you haven’t already.
You should contact the financial aid office at your school in the United States to determine which type of aid you can use for your trip and what paperwork you need to fill out.
Potential study abroad loans from U.S. Department of Education include Direct Loans and PLUS Loans. Which you qualify for will depend on if you are an undergrad or graduate student and what other federal loans you have taken out.
Note: If you plan to earn a full degree from an international school, the process is different from just studying abroad for a period of time. You will need to choose a school that participates in the U.S. federal student aid program to be eligible. You can learn more here.
Private Study Abroad Loans
If you have exhausted your federal student loan options, the next step is to compare private student loans.
These are offered by private banks and lenders instead of the government. Since eligibility for these is mostly based on your credit score, you may need a cosigner with good credit to help you qualify. You typically have to be a U.S. citizen or permanent resident as well.
While interest rates are usually higher than federal loans, private lenders have started offering discounts and other benefits that help reduce the total cost of the loan. Most private lenders also allow you to make payments while you are still in school or wait until after you graduate.
The application process for private study abroad loans is fairly straightforward and can be done almost entirely online. If you plan on using a cosigner, he or she will have to provide some additional information to complete the application.
Want to apply for a private study abroad loan? Check out our top-rated lender College Ave
What to Consider With Study Abroad Loans
Before taking out student loans to pay for studying abroad, you should understand how they work and how much they will cost you over time. Here are some things to keep in mind:
- Interest rate. This is the biggest factor in determining how much your loan will cost over time. The lower the rate, the better.
- Repayment term. Your loan term determines your monthly payment and factors into the loan cost. The longer your repayment term, the lower your monthly payment will be, but the more your loan will cost over time.
- Fees. Most private student loans don’t come with fees but federal student loans have origination fees of around 1% to 5%. This fee is taken out of the money that is disbursed to you so make sure you take out enough to cover what you need plus the fee.
- Grace period. This is the amount of time you have before you have to start repaying your loan. For federal loans and most private loans, the grace period is 6 months after graduating or leaving school. Be sure to double-check your loan’s grace period so you know when payments begin.
- Ability to repay. This may be hard to forecast when you are still a student, but you should think hard about how much student loan debt you will have after graduation and if you will be able to afford your monthly payments. If you think you may have a hard time affording your debt, it may make sense to skip the study abroad trip.
Other Options to Pay for Study Abroad
If you haven’t yet looked into scholarships, grants, and other forms of “free money” to pay for study abroad, you should. Since these don’t have to be repaid, you should always try using them to fund your trip before turning to loans.
International Student Scholarships
There are scholarship programs specifically for students who plan to study abroad.
International student scholarships work like domestic scholarship programs in most cases. Many are merit-based, but some are need-based as well. Some may also be reserved for specific destinations or programs.
Find Sponsors or People Willing to Donate
Finally, another way to fund your study abroad trip without using loans is to find sponsors or people who will donate. You can hold a fundraiser, set up a GoFundMe, or ask family members to help you.
If you are going to be asking people you know, ask for small donations, and do so in a personal way. Also, let them know in detail what you plan to study and where you’re going. Anyone who might be willing to donate is likely interested in the backstory and details of your plans.
There are many student loan options for Americans studying abroad. If you are eligible for federal aid, you may be able to use that funding to study abroad. If you qualify for private student loans, you can typically use these as well.
Be sure to understand how study abroad loans work and consider your other options before taking one out.
Ready to apply for a study abroad loan? Check out our top-rated lender College Ave
Author: Jeff Gitlen