USA Education Loan Process- 2019 [Complete guide]
Every year, over a hundred thousand students from India move to the US for their higher studies. The most common mode of funding resorted to by such students is either a US education loan or self-funding. When it comes to a US education loan, most banks are unaware of the documents expected from students by universities/colleges and the US embassy. As a result of these bank officials’ ignorance, an equally huge number of students miss out on golden opportunities to study in the USA. A last-minute hustle for these documents puts aspiring students through undue stress. This article aims to dismiss certain myths and give you a clear idea about the USA education loan process, thus helping you save your time and avoid unnecessary stress.
You may get a clearer idea about the same by watching the 17th episode of Loanflix, a web-series that will give you information about education loans and much more.
Which loan should you opt for?
As we have mentioned in our previous articles, banks in India lend two kinds of abroad education loans. Students can opt for either of them. Collateral loans from nationalized banks are a safe bet in comparison to non-collateral education loans.
For the USA education loans, collateral loans of up to Rs.1.5 Cr can be availed from government banks under certain conditions. NBFCs lend non-collateral loans of up to Rs. 50 Lakhs. However, they can even lend higher amounts depending on the student’s requirement and profile.
When is the right time to apply for a USA education loan?
This is a question asked by many USA education loan aspirants. In the USA education loan process, there are majorly two important phases during which a student is required to arrange for funds.
- The first phase involves getting the I-20 form issued from the respective college/university without any obstacles. After getting the admit, universities/colleges mention that students are supposed to provide proof that they possess sufficient funds that could help them sustain in the USA. It is only after a student submits this proof of funds that the respective college/university issues an I-20. If an education loan seems impossible, students can self-fund the I-20 amount temporarily and then go for an education loan.
- If a student is entirely dependent on an education loan then it is recommended that they start the education loan process, a month and a half in advance before the money is required.
Getting their F-1 visa approved is the second phase in which students are required to provide proof of their finances to the US embassy.
- If students need to arrange for funds at the time of the visa application, then it is advised that they do so before applying for the visa.
- Generally, the average time taken by banks to process a US education loan should not exceed more than 20-22 days. However, if there are any discrepancies in the student’s profile regarding any aspect of the loan process or the application process, it may take longer.
Anyways, take help and assistance from the WeMakeScholars financial officers who can guide you with the best way to secure an education loan on time. As the WeMakeScholars initiative is funded and supported by the Ministry of IT, Govt. of India, there are no charges involved for our services. So, request a callback and get assistance.
Moving on, there are three major stages involved in the USA education loan process that will take you closer to your dream of going for higher education in the US.
Stage 1: Documents required while applying to universities/colleges in the USA
One of the first and the most important step for any student to ensure their admission into any college/university in the US is to acquire the I-20. For this very purpose, universities/colleges ask students to submit the following important documents. In the USA education loan process, bank officials, due to their ignorance, may hesitate to give these documents without any assurance being given to them. Here’s how you can make it possible.
Solvency letter: Many universities in the USA, for eg., the San Jose State University, require students to submit a solvency letter as proof that an education loan will fund their studies.
- Although applying through a public-sector bank is the recommended method to fund your higher studies, most students find it difficult to procure a solvency letter from them. One of the major reasons for this obstacle being that unfortunately, most government bank officials are unaware of the policy updates made by international universities and colleges. They are also unaware of the internal policy changes made within the bank association’s network.
- When students approach these officials for such a document, the officials, being unaware, refuse to provide this document. This is one of the points where students get stuck in the USA education loan process. In cases where banks have refused to issue this letter to students, our team has intervened and made it possible. The reason being that the financial team at WeMakeScholars has been at the core of many policy changes made by most of the major lending banks in India. Hence, you can apply via WeMakeScholars to avoid any such issues.
- NBFCs, on the other hand, provide this document in the form of a pre-sanction letter to students who meet most of their profile parameters.
Another important term that you, as an international student aspiring to go to the US for your higher studies needs to be updated about, is the pre-admission disbursement. Although it is rarely asked by universities and colleges, it is crucial that you know about it.
Pre-admission Disbursement: A few universities and colleges in the USA require students to show the presence of the amount mentioned in the I-20 form in their account as proof, at the time of applying to them, before even issuing the admit. The banks’ terminology for this amount is ‘pre-admission disbursement’. Very few, countable universities/colleges ask for tuition fees before granting admission to their respective students. Since this amount has to be arranged even before their admission is confirmed, this situation can be dicey for students who plan on funding their higher studies through an education loan. This is because most government banks in India hesitate to issue a pre-admission disbursement without any guarantee from the students’ side. If you are applying for your USA education loan with assistance from WeMakeScholars, then our team can take care of this by discussing this with the bank.
When students approach NBFCs for the same, they will definitely lend the required amount as pre-admission disbursement. However, according to their loan repayment policies, the student will be required to pay the interest from the next month itself whether or not their admission is secured. This doesn’t make any sense. However, if the student requires this disbursement through a nationalized bank and if it is a mandate for the student in order to secure admission, this can be made possible through our team at WeMakeScholars.
Stage 2: Admits & I-20
Loan sanction letter before I-20:
Getting their loan sanction letter issued by the lending banks has been the most persistent issue faced by students in the USA education loan process.
- After students get the admit and before issuing the I-20 form, most of the US universities and colleges mention that students need to submit a solid financial proof in order to convince them that they are capable of funding their expenses. Students who plan to self-fund their higher studies can submit this proof in the form of their bank account statements.
- Students who plan to fund their higher education with the help of a loan need to submit a loan sanction letter from their lending banks, as proof. An amount equivalent to that mentioned in the I-20 form has to be shown by students in their accounts for this purpose. Now, the problem arises when a student, while applying for a US education loan, directly approaches the lending bank for the loan sanction letter.
- Due to their limited knowledge about the policy reforms, bank officials refuse to even start the US education loan process unless they receive the I-20 from the students. So here’s a little piece of information.
A provision for banks to issue the loan sanction letter before the I-20 is released exists. So If your bank official tells you otherwise, do not hesitate to get in touch with the financial team at WeMakeScholars. Or better, start your loan process with WeMakeScholars!
Submitting your bank FD account as financial proof: Submitting a student’s fixed deposit amount as proof of fund during a US education loan process is also another method. However, this is subjective because certain universities and colleges accept fixed deposits as proof of funds while some do not.
Pre-Visa Disbursement: This requirement is not asked by all colleges/ very rarely. However, while most universities and colleges in the USA only require certain documents as financial proof, certain institutions like the Syracuse University, University of Maryland College Park, and certain departments of the Harvard University require students to provide them with proof of the university tuition fee amount being transferred to the respective university accounts before the I-20 is issued.
Indian banks call this kind of disbursement, a pre-visa disbursement, as such students need the disbursement of their loan amount before their visa procedure. Most public-sector bank employees hesitate to disburse the entire loan amount into a student’s account or university account without an I-20. However, students who had started their USA education loan process with WeMakeScholars did not have to face this issue as our financial team was able to procure the pre-visa disbursement from banks, thus helping a lot of students get their admissions on time.
Stage 3: Post I-20 to F-1 Visa procedure
Getting the I-20 is just one milestone in the USA education loan process. The next important step is getting your visa approved from the US embassy without any hassles. Now the criteria set by the US embassy with respect to the proof of funds for students to get an F-1 visa is slightly different.
- To getting the I-20 form, students only need to provide proof of expenses required for just a year of the course duration. This is not the case for a visa.
- When a student applies for a visa, the US embassy considers their expenses for the entire course. They need to know that the student has sufficient funds that can enable them to sustain in the US for the total duration of the course.
- So, if the course duration is of 2 years, students need to double the amount mentioned in their I-20 and provide proof for at least 75% of the total expenses to the US embassy.
Students who plan to take an education loan: If a student plans to fund their higher studies with the help of an education loan, they need to apply for the appropriate loan amount, keeping the above points in mind.
Self-funding students: Students who plan on funding their higher education by themselves need to ensure that the funds mentioned in the documents which were submitted as financial proof while applying for the I-20 are still present in their bank accounts even after receiving an I-20 and while going ahead with their US student visa procedure.
There are many students who temporarily self-fund the I-20 amount to get it issued and later on borrow an education loan to fund their course. In such cases, the loan sanction letter is also accepted by the US embassy for an F-1 visa. Also, self-funding students are expected to arrange for funds for the entire duration of the course, before going ahead with the US visa application process.
Getting their education loans approved on time is one of the major issues faced by every education loan applicant. Many students miss out on their admission dates due to their or their lending banks’ mismanagement. So how can you do the USA education loan process in a time efficient manner? Should you wait for your respective college/university to send the admission confirmation or should you apply for an education loan way in advance? To know the hack to this problem, do watch the 17th episode of Loanflix.
Every year, thousands of students who dream of studying in the USA, apply for education loans. However, most of the loan applications are not approved on time by their lending banks mostly because of the bank officials’ ignorance about the document requirements made by universities/colleges to students. A lot of banks are unaware of the document requirements of embassies. Even when bank associations update their policies regarding the education loan process for different countries, the officials do not bother much to update themselves regarding the same. This article aims to empower every student who plans to apply or is in the process of applying for a US education loan about this fact. So the next time your lending bank rejects your US education loan application, you will know what to do and whom to approach, without having to rely on information from your bank. In our next article, we will be giving you an insight into the detailed education loan procedure for universities/colleges in Canada.
Note: WeMakeScholars is an organization funded and supported by the Government of India that focuses on International Education finance. We are associated with 10+ public/Pvt banks/ NBFCs in India and help you get the best abroad education loan matching your profile. As this initiative is under the Digital India campaign, it is free of cost. The organization has vast experience dealing with students going to various abroad education destinations like the US, Canada, UK, Australia, Germany, Sweden, Italy, China, France among others.