Education Loan to Study in USA: Everything You Need to Know

The biggest challenge one always faces for studying in the USA is to arrange for funds. Cost of living and studying in a country like the USA can be exorbitant and everyone cannot afford it. However, the aspiration to study abroad and make it big in life always drive you to overcome these hurdles. Arranging funds is one of the most crucial parts of the whole exercise. Various banks have understood this scenario and resolved the complexity of financing the higher education by giving student loans to aspirants who wish to study abroad. In this post, we will inform you about various aspects one should consider while acquiring a student loan. We will also discuss what all documents are required, how much tuition fees and other expenses a student loan covers.

Education Loan

Procedure for applying for an education loan

The application process for a majority of the US universities starts in October. So, one should always start the procedure of loan evaluation, loan sanction and getting solvency letters which prove as ‘proof of funds’ to the universities before this period. Loan disbursement can be done after receiving the confirmation of admission and i20 from the university. The loan evaluation can be done before the admission is confirmed. As the whole process is time-consuming, one should always start early with each exercise in order to avoid the last minute rush. After submitting your applications to the institute, while waiting for the offer letter, do not take rest and sit back. This is the time to do thorough research on loans offered by various banks. Check out how to choose your bank for education loan to study abroad.

Compare the loans provided by different banks on the following parameters:

Interest rate
Different elements of costs it covers (e.g. tuition fee, living expenses, cost of books etc.)
Processing Fee
Income tax exemptions
Loan margin
Loan processing time
Prepayment terms

Factors to keep in mind before applying for an education loan

Before applying for a student loan one should always have a clear idea about how much money they require and how much they are going to pay from their own pocket. Other important factors to consider before applying for the loan:
Finalize the course you want to pursue and the university you want to study in
Estimate amount you need to finance the education
Make a list of documents required
Identify the guarantor
Make sure to apply for the loan three months before the visa interview date
Estimate the time of disbursement

Documents required for securing a student loan

While giving a loan, banks also need to verify that you are a genuine student (customer) and you have secured admission in an established university, so, they can assess your capability of repaying the loan. Here’s a list of basic documents, which are usually required by the banks to process an education loan.
Offer letter given by the university (proof of admission)
Loan application form (filled)
The estimated cost of study (as per the I-20 form)
Original education certificates/mark sheets
Documents of qualifying exams (GMAT, TOEFL)
Residential Proof of student and co-borrower
IT returns of co-borrower
PAN card and other identity proofs of student and co-borrower
Proof of income of co-borrower
Passport copy
Details of assets and liabilities of parents/co-obligants/guarantors

NOTE: Requirement of documents can vary as per the banks’ own rules and regulations, so it is always advised to check the list of the documents required with the respective bank.

Expenses covered under the education loan

Always make sure to check apart from the tuition fee what other expenses are covered in your loan scheme. There are various other things which you need to take care. Now a days various loan schemes are available which cover different types of expenses other than the tuition fee. Some of the expenses covered under the loan are:
Fee payable to college and hostel
Examination, library, laboratory fee
Purchase of books, equipment, instruments
Caution deposit, building fund, refundable deposit
Travel expenses
Insurance premium for the student, if applicable
Purchase of laptop (if required for the course)
Other expenses like study tours, project work, or thesis

Things to Remember

Moratorium period: This is the time period during which the borrower need not make any repayment to the bank. This period varies from bank to bank and could last up to some time after completion of the course.
Loan Margin: Usually, banks do not provide the complete amount i.e. 100 percent money needed to fund the education. The majority of the public sector banks issue 90% of the total amount, the remaining 10% has to be arranged by the aspirant himself.
Effect of Exchange Rate: Always calculate the amount which you will be receiving at the time of disbursement, as any change in the exchange rate can affect the amount you will be receiving.