I’m a firm believer that information is the key to financial freedom. On the Stilt Blog, I write about the complex topics — like finance, immigration, and technology — to help immigrants make the most of their lives in the U.S. Our content and brand have been featured in Forbes, TechCrunch, VentureBeat, and more.See all posts Frank Gogol
Refinancing International Student Loans: The Ultimate Guide
Paying off student loans can be tough, especially if they’re international student loans. You constantly need to juggle between part-time jobs and studies.
This is when refinancing an international student loan (or even student loan consolidation) can come as a relief. So how does refinancing student loans work and what is it exactly?
What is Student Loan Refinancing?
Student loan refinancing is simply paying off your current student loan with a new one that has better offerings: lower monthly fixed payments/lower fixed interest rates. Doing this saves you money month-to-month. Although there are other ways to budget while paying off your student loans, student loan refinancing is one of the most effective ways to lower monthly expenditure. (Nevertheless, we recommend a combination of both!)
Chances are high that when you took a student loan before starting school, the bank loaned you money at a higher interest rate based on your future potential and due to the risks involved. In these cases, banks are only going to get their money back once you graduate and find a job, so the risks they take are naturally high.
Thus, things change when you re-apply for a loan once you have graduated and secured a job. In this case, the risk of defaulting on the loan is much lower as compared to the original situation. As we mentioned before, this benefits you in the form of lower interest rates and lower monthly installments, and therefore money saved.
However, not everyone is eligible for student refinanced loans. Let’s have a closer look at what it takes to get your student loan refinanced.
What are the Benefits of Refinancing for Visa Holders
Let’s take a look at the 5 reasons why international student loans should be refinanced.
Lower Interest Rates
There are a lot of people in the U.S. who struggle to repay their student debt. High interest rates are one of the main reasons. Refinancing your international student loan usually comes with lower interest rates. This is because hopefully, you’ve been faithfully repaying your current student debt, which means your credit score has increased. You probably also have a higher and steadier income than when you were a student. This makes you less of a risk to lenders so they offer lower interest rates.
Having a lower interest rate not only lowers your monthly payment, but it means you save a lot of money in the long run.
Single Monthly Payment
Over the course of your studies, you may have taken out different forms of credit to help fund your studies. These different lines of credit have to be repaid in different amounts at different times of the month. The reality is, it can be hard to keep track.
When you refinance all your student credit, you will be taking out one loan and repaying all of them. So, you are also consolidating all of your debt to one lender. This enables you to plan and budget for only one monthly payment.
Lower Monthly Payments
Lower monthly payments often come with the lower interest rate you get with refinancing. But, it is also sometimes a benefit you get just because you are able to negotiate better credit terms for your F1 student loans.
Keep in mind that lower monthly payments without a lower interest rate mean you will be repaying the loan for longer. This results in paying more interest over the lifetime of the loan. But, if your monthly finances are tight it might be the right choice for now.
Your Choice of Lender
At first, when you are looking for international student loans, you usually have to accept whatever offer comes at you. Even if it is not the best lender or your first choice. But now, since your credit profile is probably looking much better, you can opt for the lender of your choice. You don’t have to be stuck with a service provider you don’t want.
Better Customer Service
This slots in with the previous point. Since you will now be in a stronger bargaining position, you can choose a lender who has good customer service. You will no longer be stuck with a lender who knows you don’t have many other options as an international student.
Refinancing your F1 student loans means you have a choice and your lender will have to do its best to win you and keep you.
Is it Possible to Refinance Student Loans for International Students?
The good news is, yes! International students can refinance F1 student loans.
Can You Refinance if You’re Not a Resident?
Being a non-resident does not mean you aren’t eligible for education loan refinancing. You might encounter a few additional obstacles when applying but it’s definitely not impossible. There are even lenders who specifically cater to immigrants and visa holders.
Eligibility Criteria for Student Loan Refinancing
In order to get your student loan refinanced, you should meet certain requirements, including:
Good Credit Score
Having a good credit score is necessary to get your loan refinanced. You can do so by engaging yourself in a part-time job on campus to pay bills on a timely basis, for example. There are many additional strategies you can engage in to build your credit score quickly.
However, not all international students get an opportunity or have the time to work part-time. There even are students who don’t obtain their SSN until they graduate. In these cases, it becomes harder for them to get a loan — because even though it is possible to get a credit score without an SSN, it’s still very difficult.
Employment or Prospective Job Offers
As we discussed above, banks and financial companies generally provide better interest rates when refinancing because they know your future prospects of finding stable employment are higher with a degree/work experience.
Thus, make sure that you have stable employment secured, or at least have a job offer available. In regards to the job offer, showing that you have accepted the job offer and have a set date for joining would be ideal and would further your chances of approval.
Having an approved visa is important because it lets the lender know that if worse comes to worst, the borrower won’t be running away with the money. Therefore, it is essential that you have a visa approval.
Please note: If you are a non-STEM major with an OPT of 12 months, you need to assure your lender that you will be getting your H1-B visa soon.
Avoid Late Fees and Defaulting
Avoiding late fees (and fees in general) is crucial; it lets the lender know that you have enough cash flow in your finances to handle a loan and not default somewhere along the line. If you’re a credit card user, make sure that you make your credit card payments well before the due dates (automatic payments are the way to go).
Additionally, avoiding overdraft and insufficient funds fees is another important step in letting the lender know that you are financially responsible. Lastly, knowing how much money is in your account every day is necessary so that you can avoid any untimely (and embarrassing) overdraft fees.
All of these things count against your financial stability, so you need to be wary of the fees associated with personal loans (especially those or international students).
Once you qualify for all of these criteria, it is the time to approach banks and financial institutions to ask them to refinance your student loan.
But wait – not all banks and financial institutions refinance student loans, especially when you are an F-1/OPT/H1-B visa holder. Let’s find out why.
Why is it Tough For International Students To Get Student Refinancing Loans?
As an international student, it is certainly difficult to find an institution that will refinance your loan. We’ve listed a few of the reasons why down below.
Most Student Loans are Granted by the U.S Government
A large number of financial institutions do not possess the power and permission to finance student loans. This is because the US government started granting all student loans themselves a few years ago.
They Do Not Charge Off Student Loans
A student loan certified by an accredited university cannot be discharged in bankruptcy (it is near impossible for this to happen). In other words, you have to pay back these loans over your life.
However, if the student leaves the country, there is no recourse for the financial institution that granted the loan. This is probably why most financial institutions hesitate to give loans to H-1B and F-1/OPT visa holders.
Most International Students Have Short Visas and Large Loans
Generally speaking, student loans are large in amount — an average student loan is for $30,000.
Needless to say, it is going to take several years to pay these loans back. And, if a student doesn’t have a visa valid enough for such a long period, the lender might be at risk. This is yet another reason why lenders generally refrain from refinancing student loans.
After passing all of these hurdles, you’ll eventually find a lender that refinances your student loans. But, there is a catch: you might find that US citizens are given better interest rates on refinanced student loans than most international students.
Why Are International Students Given Higher Interest Rates on Student Refinancing Loans?
The answer is simple – international students, especially ones with F-1, OPT, and H-1B visas, are considered risky for several reasons, many of which have been mentioned in this article:
- International students have a short-term visa
- International students may be forced to leave the US due to being unemployed, which can happen for reasons out of their control (e.g. recession)
- International students can leave the US any moment, leaving the lender with no recourse
Don’t let all of this discourage you!
International students are still able to refinance their student loans. The only trick is to meet the eligibility criteria and assure lenders that you won’t default on your loan.
So, is now the right time to refinance your student loan?
4 Signs You Need to Refinance Your International Student Loan
Here are a few signs that indicate you need to refinance your student loan.
1. Your Student Loan Rate is Way Too High
This is one of the major signs to look for. If you suspect that your current student loan is charging you high interest rates, it is the time to look around for available options and make a switch.
Keep in mind that by switching to a student loan with a lower interest rate, you can manage to pay back your debt much more quickly.
Additionally, to fully ensure that your decision to refinance your student loan is right, compare the interest savings in both cases with the help of a student loan refinance calculator.
The amount of money you’ll save over months and years should make the decision-making process pretty clear.
2. Your Current Payment Terms Are Either Underwhelming or Overwhelming
If you think that your current loan setting is not the right fit, then it’s the right time to explore other options. If your current monthly payments are too much for you to handle, you can look to refinance your loan with a longer repayment period, which in turn lowers your monthly payment.
This, of course, has a good and bad side: it’s easier on your pockets month-to-month, but will have you paying more in the long run, as you will be paying for a longer period of time.
Conversely, if your current monthly payment is easy for you, you can choose to pay more each month, therefore saving you money you would have otherwise spent on interest.
3. You Have an Improved Credit Score Due to Decreased Debts
As time passes and your income increases, chances are high that your credit will have improved as you pay off your debts. If this is the case, you can qualify for better interest rates.
This would be a great time to make a switch and refinance your student loan.
4. Your Income has Improved
If your income has indeed improved, chances of getting a loan with better interest rates are much higher — this is the case even if you haven’t lowered all of your debts (#3).
Student loan refinancing companies want to ensure that you can afford the interest rates and repayment amounts attached to your loan, and to do so you need to have adequate income.
How to Apply for refinancing as a Noncitizen
With most lenders, you will encounter the following general application process when you apply for education loan refinance.
Shop around and apply for student loan refinancing deals at different lenders. Before you apply to different lenders, make a short list of those you like and whose eligibility criteria you meet.
As a non-resident, lenders will look at a combination of the following eligibility factors:
- Qualifying minimum credit score
- Whether you’re signing with a cosigner
- Valid visa
- Any work permits
- Proof of employment or written job offers
- U.S. bank account
- U.S. personal phone number
- Proof of residence in the U.S
Once you’ve shortened it to two or three, do a pre-approval so you can see what terms they’ll offer you. Make sure you compare them properly and choose the best offer for you. Once you’re set, do a formal application. Most lenders allow you to apply online which makes the process quick and easy!
Supply all the documentation required by the lender for a successful application. Make sure you have proof of valid visas, work permits, and any other relevant documents. It is always a good idea to get all the possible documents ready before you start applying. This makes the application process much smoother.
Some lenders may contact you for follow up calls if they need any additional information. They often want to clear the last few details before they can provide you with a loan offer and terms.
After applying, the lender will provide you with a final offer. Read the terms very carefully and make sure the terms are better than those of your current loans. If you are happy, you can accept the offer. Usually, they provide a promissory note to sign which seals the deal.
Once the lender receives the signed documentation, the funds will be disbursed. Depending on your agreement with the lender, the funds will either be paid directly to your existing debts or the funds will be disbursed to your account and you need to repay them. The timing of the disbursement will depend on the lender. It can take anything from 2-3 days to a month.
How to Find the Right Refinancing Lender for Your Situation
Since you are an international, your options will be more limited. The good news is, you still have a choice and you should only go for lenders who can meet your specific needs. It’s always a good idea to start with writing down your needs. Set up your budget to know what monthly payment will be possible for you or what your desired outcome from refinancing is.
Once you’ve got that, you can search for lenders who can offer you what you want and need and whose eligibility criteria you meet. As we mentioned above, it is really important to set time aside and do proper homework. Compare the different offers from different lenders so you can make sure you choose the right one for you.
International Student Loan Refinance with Stilt
Stilt is one of the leading financial services companies in the US, and one of the very few that specializes in lending to immigrants and non-US citizens. We focus on providing loans to international working professionals and students in the US at the best rates possible – even if you don’t have a credit score.
What’s more, Stilt is the only lender in the US that offers student loan refinancing to international students on F-1, H-1B and OPT visas. The application process is simple yet comprehensive and allows us to provide you with the best interest rates and the largest loan amount in no time.
Click here to apply for a loan and start saving today!
That’s all there is to it! While it may seem difficult — or even impossible — to refinance your loan as an international student with no credit history, with the right information and help, you can make your high-interest rates and excessive monthly payments a thing of the past.
Got any questions? Sound off in the comments below and we’ll do our best to help!