Every year, the United States allows students from all over the globe to study atits top universities and colleges. The country is a global leader in higher education, as evidenced by the fact that around 1 million students from 193 countries head to the U.S. for higher education.
Research shows that in 2024, the amount of outstanding student loan debt in the U.S. has reached $1.68 trillion, owed by 44.7 million borrowers. International students living and studying in the U.S. may encounter more hurdles while looking for options to lower their monthly payments. But it’s still possible for them to save more and reduce the time requiredto pay back the loan via refinancing.
Challenges of Student Loan Refinancing for International Students in the U.S.
Refinancing student loans can be difficult for foreign students working in the United States without an established credit line. Building a U.S. credit history, having an eligible cosigner, and qualifying for a niche loan for international working graduates in the States, are all basic international student loan refinancing conditions.
International students in the U.S. usually face difficulty when looking for loan refinancing because they must be U.S. citizens to qualify. This restriction is put into place because foreign graduates with temporary visas are likely to leave the country for good.
If they leave the United States out of necessity or choice, they can’t be compelled to pay their loan amount. Currently, the growth rate at which international students are applying to stay in the U.S. is decreasing.
Restricted U.S. Credit History
Since international graduates don’t hold social security numbers, getting accepted for a credit line in the U.S., such as a credit card, is problematic. This rule isn’t just limited to non-permanent visa holders since a credit history illustrates the borrower’s ability to repay debts in the USA.
It’s important to mention here that not all foreign graduates face this problem while living in the States because there are specifically designed credit card programs that target novices with a limited credit file.
The Process of Student Loan Refinancing in the U.S.
Higher education program costs are burdensome and international students typically pay the brunt of it. The average published tuition and fees at public four-year institutions in the U.S. increased from $590 from $9,850 (in 2019 dollars) in 2014–15 to $10,440 in 2019–20. Over these five years, average net tuition and fees have increased by about $400.
While foreign graduates living in the U.S. are mostly unqualified for federal loans, some students require more effort to qualify for the refinancing loan obligations set by banks and credit unions in the country. But international students in the U.S. can still be eligible for student loan refinancing. Statistics indicate that 75.3 percent of private student loans are in repayment status.
When Is Student Loan Refinancing Suitable For international Students Studying in the U.S.?
High Student Loan Rate
While living and studying in the U.S., international students are charged exorbitant interest rates on their current student loans. They could pay their debt more quickly and save more if the refinancing interest rate is lower than the current loan rate.
High Monthly Payments
A growing number of students struggle to make their current monthly payments. Roughly 20 percent of America’s 43 million federal student loan borrowers are in default, with millions more behind on their loan payments. Refinancing their student loan with a longer repayment period can reduce the monthly charges and save more each month.
When Is Student Loan Refinancing Unsuitable For International Students in the U.S.?
Access to Federal Loans
A few international students staying in the U.S. end up qualifying for federal loans. In that case, it’s not advisable to refinance student loans through private institutions since that can take away benefits like student loan forgiveness programs or income-driven replacement.
Approval for Lower Interest Rates
A high income and strong credit history can help foreign graduates settled in the U.S. to attain lower interest rates. But there’s no guarantee of a student gaining acceptance for reduced rates. So, students should check their rates before applying, with lenders who allow a soft credit check.
Paying Off the Loan
While refinancing is effective for lowering the overall costs that international students staying in the U.S. pay for their degree, it isn’t the last stop as they must still pay their debt. Budgeting, looking for other extra-paying jobs, and looking for shorter repayment periods can help immigrants living in the States save time and money on their student loans.
Eligibility Criteria for Student Loan Refinancing for International Students in the U.S.
Strong Credit Score
International students in the U.S. normally do part-time jobs on or off-campus, which can help develop their credit score during their studies. The U.S. Department of Commerce stated that in 2018, international students contributed to $44.7 billion to the country’s economy, an increase of 5.5 percent from 2017.
Prospective Job Offers
Spending time in a stable better-paying job or securing employment during their residence can help international students living in the U.S. to pay their debt with relatively more ease. In this way, they’ll have a better chance of getting their student loan refinanced.
Lenders are more likely to accept a student loan application if the international borrower living in the U.S. pays on time. This ensures that the student has sufficient finances to manage monthly loan payments and not default in the future. By making credit card payments on time, avoiding overdraft fees, and keeping a check on their account, the student loan application’s acceptance chances increase.
U.S. Cosigner with a Strong Credit History
Adding a creditworthy U.S. consigner to their application can help graduates staying in the U.S. to meet a new loan’s requirements at the most reasonable interest rates. Some foreign graduates may already have a U.S. cosigner on their loans.
In this case, having the consigner endorse a new refinancing loan can help alleviate international students’ financial burden and prevent the loans from becoming an imminent prospect.
Banks with Flexible Borrower Requirements
Some banks and lending institutions are willing to help international students in the U.S., but not all foreign graduates may fall under their requirements. Some institutions have their own eligibility criteria that apply to student visa types normally not catered by other lenders.
Qualifying for Refinancing in the Absence of Cosigner
Between 2004–2016, nearly 1.5 million international students received an extension to stay and work in the USA after graduation. International students staying in the U.S. can still qualify for student loan refinancing without a cosigner in place. One of the conditions to abide by is to have a valid visa for the next couple of years. If the student visa is close to the expiry date, foreign graduates may have to apply for extensions or permanent residency.
Refinancing cannot reduce interest rates if a student’s credit score is low. So, having an excellent credit history can help international students living in the U.S. attain better rates and lower their overall costs.
Proof of Funds
Foreign graduates in the USA should have strong financial banking or income to qualify for refinancing in the absence of a cosigner. This is because solid proof of funds can help lenders gauge whether the candidate has the means to make monthly payments while staying in the country
About the Author
The author is a financial expert on student loan refinancing and parent loans at ELFI (Education Loan Finance)—a national private lending company. She has helped innumerable foreign and local college graduates and parents staying in the U.S. strategically manage their finances to secure degrees from high-quality educational institutes in the country.