What You Need To Get a Loan (In General)
Here is a list of some of the requirements you will need to provide:*
- Green card/visa/proof of residency
- Employment authorization form
- Individual tax identification number (ITIN), if you do not have a Social Security number
- Know your credit score (many loans require a credit score of 600 at a minimum)
- ID
- Proof of address
- Income verification or offer of employment
- Personal information
- Education history / school records
- A list of your monthly expenses
- Proof you’ve paid rent, utility, or other bill payments on time
- Tax return
*Note: this is a generalized list and may not necessarily apply to student loans (for example, a student will not be required to provide tax return, employment authorization, etc)
The Types
There are mainly two types: federal and private.
Private: Provided by private lenders such as banks or credit unions
Federal: Provided by the US Government
| Federal | Private | |
| Benefits | – No credit history required – Fixed + low interest rates – Flexible repayment options – Ex. income-driven repayment plans* | – Potentially higher borrowing limits – Potentially cheaper than federal loans – Available to those who don’t qualify for federal loans |
| Cons | – International students and nonresidents may not qualify | – The circumstances of each loan may vary; some private loans may be better than a federal one, others may not – No access to income-driven repayment or forgiveness – If you are not careful, you risk borrowing more than you need |
| Eligibility | – Generally, you need to be a U.S. citizen or eligible non-citizen (such as a permanent resident) | – Eligibility varies by lender. Some may require a co-signer who is a U.S. citizen or permanent resident |
| How to Apply | 1. Fill out the FAFSA at https://studentaid.gov/apply-for-aid/fafsa/filling-out 2. Review your Student Aid Report (SAR) sent after you submit your FAFSA 3. Accept the loans offered in your financial aid package from your school | 1. Research and choose a lender a. Make sure to compare loan conditions from various lenders 2. Fill out the lender’s application form 3. Provide necessary documentation (proof of income, credit history, co-signer details, etc) 4. Wait for approval |
| Repayment | – Once you graduate, leave school, or drop below half-time enrollment – If you have a Direct Subsidized/Direct Unsubsidized loan, you can begin repayment six months after graduation, leaving school, or dropping below half-time enrollment – Various repayment plans are available (Standard, Graduated, Income-Driven) | – Repayment terms vary by lender – Typically, repayment starts after you graduate or leave school, but some lenders offer in-school repayment options |
Federal
- To receive a federal loan, you must submit the Free Application for Federal Student Aid (FAFSA).
- You need to provide information about your income, your parents’ income (if applicable), and other financial details.
- Fill out the FAFSA at https://studentaid.gov/apply-for-aid/fafsa/filling-out
This is optimal because you don’t need a credit history to qualify, and they come with various programs not offered by private loans. These include income-driven repayment plans, loan forgiveness, and more
- Types of Federal Loans
- Direct Subsidized Loans: For undergraduate students with financial need. The government pays the interest while you’re in school
- Direct Unsubsidized Loans: Available to all students regardless of financial need. You are responsible for all the interest
- PLUS Loans: For graduate students or parents of undergraduates. Requires a credit check
Qualification
Make sure you qualify
- The qualifications for private loans vary from lender to lender
- To see specific eligibility criteria for federal loans in consideration of your own situation, we suggest visiting the official website: https://studentaid.gov/understand-aid/eligibility
How Much to Borrow
Consider how much you should borrow – only what you need, and can reasonably repay
Here is a formula from Finaid that is a good rule of thumb:
If you don’t have a good idea of how much your school will cost, here is a helpful resource: https://collegecost.ed.gov/net-price
It is really important to try to take only what you need. As loans usually include interest, it can be easy to fall behind on payments if you are not careful, and as a consequence, become burdened with debt.
Interest
Be prepared for interest. Whether you opt for either a federal or private loan, you will still owe the lender more than the amount you borrowed.
Here is a table adapted from Federal Student Aid that is helpful in determining your federal loan’s interest rate (fixed), specifically for loans between July 1 2023 and 2024:*
| Borrower Type | Loan Type | Fixed Interest Rate |
| Undergraduate | Direct Subsidized Loans and Direct Unsubsidized Loans | 5.50% |
| Graduate or Professional | Direct Unsubsidized Loans | 7.05% |
| Parents and Graduate or Professional Students | Direct PLUS Loans | 8.05% |
Here is a helpful formula to calculating your interest:
Total Interest = (Principal loan amount) x (interest rate) x (loan term)
It is important to recognize that interest is a big component in making student loans potentially difficult to pay off. Thus, in researching your possible loans, it may be wise to calculate the added expenses of interest to choose an option that you will be able to manage.
Limits
Recognize that you can’t use the loan money on everything. Even if you receive your money directly, it should only be used for educational purposes. This means that you cannot use it for entertainment, food from restaurants, vacation, clothes, and similar things. However, your student loan does typically cover transportation, study abroad costs, groceries, personal supplies, and other education-related expenses
Heres a good rule of thumb: If an expense is important for your education, such as supporting living agreements, basic daily needs, or school attendance, it is likely reasonable to use your student loan funds. However, please keep in mind that the conditions of a loan are subjective. Make sure to read your loan details and agreement to make sure you understand the specific limitations of your loan (for example, some loans may only cover tuition).
Managing Your Loan
- Know the Terms:
- Make sure to read and understand all the points within the loan document before signing
- Stay Organized:
- Keep track of how much you borrow
- Note the interest rates and repayment terms
- Budget:
- Make a budget that includes your loan payments
- Stay in contact and seek help if necessary:
- If you have trouble making payments, communicate with your lender immediately. There may be options to defer or reduce payments.
Effect of Immigration Status
Effect of Immigration Status
When trying to access traditional financial products, the biggest challenges that immigrants may face is the lack of a social security number and/or credit history. Lenders might hesitate to lend to immigrants because they’re unsure about the applicant’s employment status and ability to repay. However, don’t worry! There are various resources available that account for this, which is why we highly recommend this source:
- Nerd Wallet – “10 International Student Loans for 2024”: https://www.nerdwallet.com/best/loans/student-loans/international-student-loans
- Specifically tailored for international students who don’t qualify for federal loans
- Interface is very informational and easy to use and understand
You may also want to consider a personal loan. This can benefit you when you don’t like the conditions of federal or private loans, and wish for more flexibility.
Key Takeaways
- Understand what you need to obtain one (see list)
- Decide what type of loan you want
- Federal
- Subsidized or unsubsidized
- Private
- Do you qualify?
- Understand how much to borrow (see suggested calculation)
- Understand interest
- Researching specific interest rate
- Use suggested calculation
- Understanding the limits of the loan → educational-related
- Purposes only
- Have a good management plan
We realize that the process can seem stressful, but just know that there will always be some form of assistance available. For more information on student loans, feel free to visit Consumerfinance.gov, which is a great resource to answer any questions specific to your situation.