Gaining admission to a US dental college is often such a dream come true that most students take time to realize the financial implications of paying for the program itself. The costs include not just tuition and kit fees but living expenses/relocation as well. Many international students have no idea regarding the different financial options available or how to go about obtaining student loans. In this post, I have put together some pertinent information regarding the same.

Federal student loans

These are loans funded by the Federal government. If you are a Green card holder (permanent resident) or a US Citizen, you are eligible to apply for these loans. The advantages of these loans are that they usually have low fixed interest rates (currently under 4%) and provide flexible repayment/deferment options, including income-based repayment, no penalty for pre-payment, forbearance, loan forgiveness etc. They can be applied for by the student themselves as they do not need a credit check or a co-signer (except Direct PLUS loans). The disadvantage is that there is a limit on the funds available each year determined by FAFSA (Free Application For Federal Student Aid) and it may not completely cover your college expenses.

The different types of federal student loans are:

• Direct Subsidized Loans and Direct Unsubsidized Loans
• Direct PLUS Loans (for graduate and professional students or parents); and
• Federal Perkins Loans

If you qualify for a subsidized loan, the government will even help you pay for interest charges accrued while you are in school. This can cut down on the amount you owe. The Direct PLUS Loan is for parents of undergraduate students to pay for their child’s education or for graduate/professional degree students to pay for their own education. The government no longer issues Federal Perkins Loans (expired in September 2017).

To apply for federal student loans, the first thing you need to do is complete a FAFSA application. The FAFSA submission period is from October to June every year.

Private student loans

Private student loans are the most common route for international students and for US citizens/permanent residents whose federal loans may not completely cover their expenses. These loans are private loans from lenders such as a bank, credit union, state agency, or a school and could have either a fixed or variable interest rate (sometimes over 18%). Unfortunately, all international applicants and applicants with less than favorable credit scores will need a co-signer to apply for private loans.  Loan approval and the interest rate is dependent on you/your cosigner’s creditworthiness.

With a private student loan, you can borrow up to the full cost of attendance (COA) which includes tuition, books, supplies, housing, cost of living etc. In order to determine your maximum loan amount, you will need to contact your school’s financial aid office. After you apply and receive credit approval for you and your co-signer, the lender will contact your school to certify the amount of the loan.

Private student loans typically have higher interest rates, no federal subsidies and less repayment assistance options compared to federal student loans but lenders are adding more options to borrowers such as deferment and forbearance in order to compete with federal offerings. You may be able to write off interest payments on student debt to reduce taxable income by as much a $2,500. This tax benefit can help offset a borrower’s tax burden. But the loan has to meet certain eligibility requirements for the student loan interest deduction to apply.

The repayment period generally ranges from 10-25 years, but the larger the loan, the longer the repayment period. The standard repayment plan options are:

• Full Deferral – Students are able to defer payment until 6 months after graduation as long as full-time status is maintained. Students can defer payments for a maximum of four years, which is the typical length of a degree.
• Interest Only – International students only pay the interest while in school, up to four consecutive years, and can defer the principal until 45 days after graduation, or when the student drops their course load to part-time.
• Immediate Repayment – Payments on both interest and principal are due immediately once the loan has been dispersed.

Who is a co-signer & what are their obligations?

The co-signer must be a US citizen or Green card holder (most commonly close friends or family members), with good credit, who has lived in the US for the past two years. An excellent credit score around 700 plus will give you the best interest rate.

The co-signer is legally obligated to repay the loan if the borrower fails to pay or defaults on the loan. One concern co-signers have is the amount they cosign for and how it will impact them. Private student loans are deferred loans, meaning you don’t start paying them until 6 months after you graduate. This means that if the cosigner decides he wants to buy a car or a house while the student is still in college, he or she can do so. The student loan will show up on their credit history but it will be a deferred loan (re-payment hasn’t started) and it does not affect their credit score.

How to apply for private student loans

Banks, credit unions and a new crop of online lenders all offer private student loans. The top private student loan providers are Citizens Bank, Discover, Navient, PNC Bank, Sallie Mae and Wells Fargo as well as online lenders including SoFi, CommonBond and College Ave.

You can apply online, in person at a branch or you will be mailed the physical application. Documents needed from you include the completed loan application and your current I-94 (even if your I-94 expires in 6 months it is ok as long as it is valid at the time you apply for the loan). The cosigner will need to furnish a copy of green card, social security number and pay stubs (preferably less than 30 days old).

While you can begin the loan application prior to being accepted to your school, you will need to be accepted with your student visa to finalize the loan.

Some students are able to use loan approval as proof of funds, but it’s not easy and it’s up to the school and consular officer if they’ll accept a loan approval as proper funds. You would need to apply for the loan now, list the school you plan to attend, get initially approved based on the credit of your co-signer, then use that initial approval to complete your acceptance to the school. You will also have to provide a valid student visa in order to finalize the loan. After you apply and receive credit approval for you and your co-signer, your school must certify the amount of the loan. The proceeds are then disbursed directly to the school.

If you’re offered a private loan, you have 30 days from the date that your application is approved to accept or reject the offer. Before accepting a private loan, make sure you understand the fees, interest rate, and repayment terms. These things vary greatly by the lender, so make sure to read the agreement carefully for any private loan you consider. Stay tuned for an upcoming post on questions to ask before signing for a student loan.

Grants & Scholarships

Scholarships and grants are available but usually, they are very competitive and do not cover all expenses. The federal government lists grants (which do not have to be repaid) at studentaid.ed.gov.

International students are mostly excluded from scholarships, since these awards frequently require applicants to be U.S. citizens or permanent residents. It can take some digging, but there are a handful of scholarships that international applicants may be qualified to win. Your home country may also offer resources and scholarships for citizens who plan on earning a degree overseas. And don’t forget about scholarship search sites like FinAid, FastWeb,  Cappex.com and InternationalStudent.com that can help you find awards no matter what country you’re from.

Hope you will find the information in this post helpful. Leave your comments and questions for me in below in the comments section.