Setting out to refinance an international student loan can seem like a confusing maze of vague options and dead ends. Many international students who attended college in the United States probably had to take out loans to cover their education costs and are now working on visas.
Refinancing student loans is a tricky process for international students due to limitations many lenders set regarding loans to visa holders. Knowing the refinance process and where you can go to seek assistance will be vital to making sure the best loan, interest rate, and payment plan choices are at your fingertips. This article will guide you through the basics of seeking refinance lenders who cater to international students.
Basics of Refinancing an International Student Loan
The basis of student loan refinancing in any context is replacing any current education loan with a new one that will typically lower monthly payments and save you money throughout the remaining life of the loan. It is important to note that refinancing does, in fact, issue you a new loan, as it pays off the original loan you signed for at the start of your studies.
Many refinancing lenders for international student loans will issue you new account numbers, very likely a new interest rate, and new repayment terms as specified by whichever loan plan you select.
The majority of international students in need of tuition assistance in the U.S. may have loans with private lenders because federal funds are generally not made available to noncitizens. For that reason, most of our emphasis in this section will center on how to refinance international student loans from private lenders. Factors such as FICO score and income versus total debt amount can influence your refinancing options.
The following three items represent key components of consideration when choosing any refinance company for international student loans:
- Interest Rates: Private lenders often offer fixed and variable interest rates, so comparing options as pertain to the specific amount you want to refinance is a good idea.
- Repayment Plans: Look for repayment options that best suit your budget, but remember that the shorter your repayment term, the more money you save on interest overall.
- Prepayment Options: Some lenders charge a fee if you pay your loan off earlier than arranged, while others do not penalize for early repayment.
You may have heard the word “consolidation” in reference to student loans. The primary difference between consolidation and refinance centers on the type of loan that you hold. Consolidation is typically only available for student loans associated with the federal Direct Loan Consolidation program. This would be a chance to merge multiple federal student loans into one consolidated loan and can be accomplished with no cost to consolidate. Refinancing, by contrast, always takes place through the services of a private lender.
Why Refinance and Who Qualifies?
Many of the best refinancing options for 2020 require a borrower to have already established U.S. credit history or have a co-signer who meets specific lending criteria, such as legal citizenship and a high credit score, which some may find exclusive. Sometimes, even when a lender can be found to cater to international students without a co-signer, the trade-off can be higher interest rates. For this reason, a “niche market” has sprung up to serve the unique needs of borrowers interested in refinancing international student loans.
Refinancing an international student loan can be a wise financial decision because doing so will generally lower your monthly payments and save you a sizable sum over the loan length. Refinancing also gives you the liberty to release any co-signer of your original loan from further financial responsibility, offering you greater autonomy over your loan. Many international students who have completed their university education in the U.S. are considered specialty workers and contribute in high-paying fields. This means that, while many local lenders are not structured for cross-border financing, the people who tend to need it would be considered stellar candidates, based on income, in any other circumstance.
Some companies have come to realize this discrepancy and have begun offering special refinance rates that apply to the recalibration of international student loans. Let’s take a look at a few basic categories of qualifications.
- Permanent residents qualify if they have a minimum of two years left until the expiration of status or if they have already filed for an extension.
- Visa holders qualify with a minimum of two years remaining before status expiration and/or if they have filed a renewal or application for permanent residency.
Credit and Income
- Many lenders require an established U.S. credit history of some kind.
- Most lenders will evaluate you on your salary-to-debt ratio. Obviously, the more money you make and the smaller your loan amount, the better you fare in this category.
- No matter your credit history, some loan companies will require you to have a co-signer who qualifies as a U.S. national or eligible noncitizen.
- Even when you qualify to refinance on your own, a co-signer with excellent credit and a solid income can help you get a lower interest rate in many cases.
The following subsets of people would be deemed “eligible noncitizens” to refinance an international student loan:
- U.S. nationals, to include those native-born to the islands of American Samoa or Swains Island
- U.S. permanent residents
- Any person with an Arrival-Departure Record from the U.S. Citizenship and Immigration Services showing any of the following statuses: Conditional Entrant issued before April 1, 1980, asylum granted, Cuban-Haitian Entrant, refugee, or parolee
- Anyone labeled as “battered immigrant-qualified aliens” or the child of anyone designated in this manner
- Anyone holding T-nonimmigrant status or those with parents of this status
Remember that qualifying for one criterion does not mean that you will qualify on all criteria for every lender or even the lender of your preference.
Refinance Companies for International Students
Refinance Your Way to a Simpler Financial Future
Refinancing an international student loan can ease stress and simplify your financial life, whether your primary goal is to get out of debt faster or save money every month by only facing one loan payment. Remember that refinancing may not be the best option for everyone because certain beneficiary elements of federal student loans, such as student loan forgiveness or income-driven repayment plans, may not be available once you refinance with a private lender.
College Finance is committed to being of service to all students, parents, and graduates by providing insightful resources dedicated to examining all angles when it comes to paying for your college education. It is vital to carefully weigh all of the pros and cons to maximize the positive impact that refinancing can have on your financial life.