FEDERAL EDUCATION LOANS

Just like domestic study abroad loans, federal education loans are available for students who are keenly interested in pursuing their higher education in other countries. Federal student loan for study abroad can be used to finance education abroad, internships, and research. Before applying for any education loan abroad, it is always recommended for study abroad aspirants to make a plan of their necessary expenses and how much funding they will require. Research will be helpful in prioritizing the actual requirements and supporting you in selecting what is most appropriate for you. Compare the available options, research the education loan abroad that is suitable to your needs, and also make sure the other factors are meeting your requirements.

Federal student loan for study abroad are mainly provided by the US Department, and the purpose of these loans is to facilitate financial aid to students for their higher education in foreign countries. Students from any nationality can apply for federal education, though it is provided by US banks. Nationality is not a constraint for students.

Types of federal education loans: 

Just like overseas education loans in India are divided into two categories, secured and unsecured, similarly, federal education loans are available in three categories. Moreover, you can check your eligibility and choose the appropriate one for yourself.

• Direct Plus Loans: Direct Plus loans are for parents who have students dependent on them. Parents who will borrow the Direct Plus loans will be responsible for loan repayment. The rate of interest on the PLUS loan is high in comparison to other unsubsidised and subsidized federal student loans. Parents will get the total cost of attendance; besides this, other costs will be deducted from the loan amount.

The total cost of attendance here stands for the course duration, which means that the tuition fees for the course duration will be covered under the loan. Interest will be charged throughout the duration of the course. Before disbursing the loan amount to the borrower, the lender will undoubtedly conduct a credit check based on the borrower's CIBIL score.

Eligibility for Direct Plus Loans

To apply for a federal education loan, a student is required to meet the following conditions:

1. Parents must not have an adverse credit history. An adverse credit history is a record of poor payment history on multiple loans and credit cards.
2. Parents must ensure that their child is studying in senior secondary school or has passed out and is applying towards undergrad or postgrad degrees.

• Directly subsidized loans: A subsidy on interest payments will be provided by the lender. During the education period of the students, they are not required to pay the interest on their loan, even in their grace and deferment periods. Students in undergraduate courses are eligible for direct subsidized loans.
• Direct unsubsidized loans: Students who are enrolled in undergraduate, postgraduate, or professional courses can apply for direct unsubsidized loans. Interest payments begin immediately after loan disbursement. Students would be responsible for interest payments and loan repayment; however, there is an opportunity for students to defer the interest payments until the completion of their study period.

Benefits of a Federal Student Loan:

Federal education loans have proven to be a beneficial financial resource to fund their dream of pursuing higher education in foreign countries. Some of the perks have been listed below.

• Directly subsidized interest rates and interest paid by the lender up until the end of the half-time study period For example, if your period is two years, subsidized loans will be a fantastic opportunity for students. If your study period is one year, the US Department of Education will pay the interest up until that point. Even throughout the grace period and deferment period, interest will begin to accrue until the halfway point. The respite from interest payments will allow students to use that time to pay back loans.
• Direct Unsubsidized Loans will provide the opportunity for students to put their interest payments on hold after the deferment period. Once they complete their study duration, the interest payments will start afterwards.
• Direct Plus loans cover the total tuition fees until the completion of the course period. For example, if your course duration is 3 years, the total cost of attendance will be covered, but the other costs will be deducted from the loan amount. Apart from all these factors, a credit check has been an important factor in Direct PLUS loans, so a lower credit score may hamper your loan's approval chances.
• Fixed Interest Rates: The interest rates of federal loans are not fluctuating by nature. Every year, the US Congress sets the interest rates on federal loans once you receive them. The interest rate will remain the same. In comparison to private student loan lenders, who provide overseas education loans at fluctuating interest rates, federal loans come with fixed interest rates.

Eligibility criteria for federal student loans

• The student must be a US citizen.
• Must have a valid social security code.
• Must have been enrolled in the approved courses; any certificate course or degree duration should be more than 6 months.
• Maintain academic progress in the education institution.
• There is no history of default on existing federal education loans.

Borrowing Limit on Federal Student Loans: 

It is crucial to understand how much a student can borrow through federal student loans. Each category of federal loan has a maximum loan amount that can be disbursed to deserving students. These restrictions are determined by the academic year, the student's academic standing, and additional student financial aid.

Below, we have mentioned the loan limits for students in undergraduate, post-graduation, and working professions.

• First-year undergraduate courses: Dependent students can borrow $5500. The subsidy provided under the loan is limited to $3500 in subsidized loans; independent students can borrow $9500 but not more than $3500.
• Second-year undergraduate courses: Students who are dependent on their parents can borrow up to $6500; in subsidized loans, they can borrow up to $4500. While students who are not dependent on their families can borrow up to $10,500, or on subsidized loans, the amount will be limited to $4500.
• Loan limit for third-year undergraduates and beyond undergraduate students: Dependent students can borrow up to $7500, and in a subsidy-based loan, the limit will remain at $5500. However, independent students can borrow up to $12,500, and on a subsidy-based loan, they can borrow $5500.
• Graduate and professional students who have completed their graduation or are working as professionals can borrow up to $25,000 in unsubsidized loans only.

How do I decide about the required loan amount?

When making a decision about how much loan would be sufficient to manage the finances easily, It's important to look out for factors like the tuition fees of the applied university, a prior calculation of the total tuition fee payable for the entire course duration, and living and accommodation costs.

Consider your loan repayment options:

Prior calculation of expenses is an important step in making a well-planned structure for your loan repayment. Taking the loan is a timely requirement, but loan repayment is what we need to start even before the loan is disbursed. It starts from the very first step, when we get to the final interest rates and EMIs of the loan to be paid. It is necessary to recognise your financial obligation.

PART-TIME JOBS: During the study period, many students take up part-time jobs and create their various sources of income. These extra earnings can be the best way to repay your loan amount.

FUTURE SALARY EXPECTATION: Yes, this is a general understanding that for the course we are pursuing, we must do first-hand research about the employment potential and job opportunities in the future. Future salary expectations will be helpful in getting the job of your dreams, and all your hard work will pay off in the end.

Documents Required for Federal Student Loans

We have enlisted the important documents that students will need to complete the application procedure.

• Identity proof of the applicant (valid passport, voter ID, and PAN card)
• Academic proof (marksheet and degree of graduation, senior and upper secondary)
• Current qualification proof
• Scores of exams like IELTS, GRE, and GMAT
• Proof of fee structure
• The university offers a letter (conditional or unconditional).
• Address proof

If an individual is planning to study abroad and finances are their roadblocks, then they can contact the Education Loan Guru. Education Loan Guru will help students with their education loans abroad.