Understanding Student Loan Terms

Understanding Student Loan Terms

For many college-bound students around the globe, a loan may be essential to achieving their educational ambitions. Especially for those wishing to pursue studies abroad, loans play an increasingly vital role in helping them reach their goals.

In many cases, international students need a loan to be able to afford the price of tuition, travel, as well as room and board at these colleges and universities.

Types of Loans

Understanding the terms of your student loan is paramount. There are two main sources for these loans: government issuers and private banks. Doing research on both types of lenders can help you make an informed decision about which type best suits your needs.

Federal Loans

For US citizens and permanent residents, the government offers low interest loans to help pay for college. While these are great options, students must first meet eligibility requirements and provide paperwork demonstrating their current financial situation in order to determine qualification for grants or other forms of aid. Non-US citizens unfortunately do not qualify.

Federal student loans are an important source of funding for college students in the United States. There are four types of federal student loans currently available to US students: Direct Subsidized Loans, Direct Unsubsidized Loans, Direct PLUS Loans and Direct Consolidation Loans. Direct Subsidized Loans are available to undergraduate students with financial need and the government pays the interest while the student is in school. Direct Unsubsidized Loans are available to both undergraduate and graduate students, but the student is responsible for paying all interest that accrues. Direct PLUS Loans are available to graduate or professional degree students and parents of dependent undergraduate students, but require a credit check. Finally, Direct Consolidation Loans allow borrowers to combine multiple federal education loans into one loan with a single monthly payment.

Private Student Loans

Private student loans are a great option for international and US students looking to finance their education. With several different loan programs available, you can shop around to find the best one that meets your financial needs. Be sure to double-check if your lender is compatible with your school since this will be necessary in order for them to certify the amount of money borrowed. Additionally, non-US citizens or permanent residents usually require an American co-signer on their loan; although there may be exceptions at some schools where no cosigners are needed. Find out what kind of private student loans you might qualify for by using our helpful comparison tool.

Interest Rates

Interest rates are a crucial factor to consider before taking out any loan. They influence the overall cost of borrowing money and can be thought of as the fee for being able to access funds from lenders. For international students, it’s important that they know how much their interest payments amount to so they don’t get caught off guard when repayment comes due.

International students can ensure they are making the most informed decision by becoming fully aware of their loan details, such as interest rates and when these begin to accumulate. Knowing exactly how much is needed for a loan will help in building an effective budget plan.

One of the most important things to understand when taking out a loan is what kind of interest rate you’re agreeing to: Variable or Fixed. With variable rates, your payments can change over time - so be prepared for your repayments to go up or down over time. On the other hand, if consistency and predictability are important for you, then fixed-rate loans will keep your monthly costs stable throughout repayment as the rate is fixed for the term of the loan.

Learn about working on an F1 Visa as an international student and Opening a Bank Account in the US.


After graduating, many students have a grace period before they need to start repaying their loans. This time usually spans 6 months and gives them the opportunity to get settled in life after school before taking on this financial commitment.

Student loan repayment plans can differ greatly depending on the type of loan, rate, and term. The length of a typical payment plan is 10 years; however this timeframe could be reduced or extended based upon the lender or an individual's preferences. The monthly payment usually includes both principal and interest payments with federal loans requiring a minimum $50 installment each month. When deciding how to tackle student debt it is important to consider what sort of timeline makes sense for you personally.

International students often face the challenge of finding a repayment timeline that fits their budget. Choosing to spread out payments over 30 years (which may be an option with some lenders) can make monthly expenses more manageable, but it will end up costing much more in interest than if they were to take on higher short-term costs and pay off the loan faster.

Before you set out on your educational journey abroad, it's important to do a bit of research about student loans. Find the loan that works best for you, understand interest rates and repayment plans – this knowledge will be extremely valuable in helping manage the cost of your studies!

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