Taking out an international student loan to attend college or graduate school in the U.S. is a big financial decision. You’ll be paying back your student loans for years to come, so it’s important to compare your loan options and find one that works best for your needs. To help you navigate these confusing waters, we’ve put together this overview of how student loans work for Indian students in the U.S. Read on to learn how to get an international student loan, how student loan interest rates work and more.
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What is an international student loan?
A student loan is a type of instalment loan designed to help students pay for education. When you have a student loan, your lender typically sends the money straight to your school.
Your college or university in the U.S. will apply the funds to tuition, fees, room and board and any other eligible expenses that were specified during the application process. If there’s any money left over, it may be returned to you so you can use it for books, supplies and living expenses accordingly (make sure you check with your school to confirm their policies).
Student loans are not free money – you must pay them back with interest. Interest is the cost of borrowing a loan, and it accrues at a fixed or variable rate. Some lenders also charge a disbursement or origination fee on a student loan. It’s important to understand the differences between variable and fixed-rate student loans to decide which option is right for you.
How are student loans different for Indian students?
American students applying for a student loan in the United States have fewer loan verification documents to submit than student applicants from other countries like India. As part of the loan application process, Indian students must submit an F-1 visa, which gives them permission to study in the U.S.
Indian students must first:
This includes knowing what type of visa they need for studying abroad, applying for a visa and preparing for and taking part in a visa interview with the U.S. Department of State.
What can you spend student loan money on?
You can spend student loan money on your education costs when studying in the U.S., and your school will need to certify the loan amount. These costs will vary from one school to the next, but they may include:
You can also use student loan money to cover your daily living expenses, but it’s important to create a budget and only borrow what you need.
How does international student loan interest work?
As an Indian student, you aren’t eligible for loans through the U.S. government, but you are able to explore private student loan providers. Most private student loans start accruing interest from the day the funds are disbursed to your school.
Let’s say, for example, that you borrowed US$30,000 (INR 25,00,000) at a 13.99% interest rate. Over a 10-year repayment period, your monthly payment would be US$466 (INR 38,800) and you’d pay a total of US$25,874 (INR 21,56,000) in interest charges. Keep in mind that if you choose a lender like MPOWER Financing that allows for interest only payments while in school, those payments will be less.
When you start paying back your student loans, a portion of your payment will be applied to interest charges and a portion will pay down your principal balance. If you can afford to make extra payments, you could pay off your loan faster – which means you pay less interest over the lifetime of your loan. If you plan to pay off your loan early, you’ll want to find a lender that doesn’t have prepayment fees.
One important item to consider is whether you want a loan with a fixed interest rate or a variable interest rate. Some international student loans are fixed interest rate student loans, meaning the interest you pay will stay the same over the life of your loan. Others come with variable rates, which often start out lower than fixed rates but can increase over time.
How do you pay back a student loan?
As instalment loans, student loans require monthly repayment. You’ll get a student loan bill every month for the duration of your repayment period. A common repayment period for student loans is 10 years, but you might have alternative options when you borrow depending on your lender and terms.
Repayment while you’re in school varies by lender. Some lenders have a grace period on student loans, meaning you don’t make payments while you’re enrolled in school or for a few months after you graduate. Once this grace period ends, you’ll start making full payments every month. Others have an interest-only repayment period, meaning you only make payments on the interest during a certain period, such as while you’re still in school. Keep in mind that the less you pay on your loan while in school, the larger your debt will be upon graduation.
You can usually set up automatic payments on your student loans, giving your lender permission to withdraw payments from your bank account every month on or before the due date. Many lenders offer an interest rate discount if you set up autopay. For example, MPOWER Financing offers a discount of 0.25% for setting up auto pay.
How do you get an international student loan?
As an Indian student, you might be eligible to take a private student loan from a bank, credit union or online lender. Many lenders will require you to apply with a cosigner who lives in the U.S., has good credit and has a steady income.
Not every Indian student has access to a cosigner who lives in the U.S. or wants to ask someone to share debt. At MPOWER Financing, our student loans are designed specifically for international students studying in the U.S. and don’t require a cosigner or collateral.
With an MPOWER student loan, you can apply to borrow up to US$100,000 (₹83,33,000 INR) at a fixed interest rate on a 10-year repayment period. While you’re in school and for six months after you graduate, you will only have interest payments to cover. After this period ends, you’ll start making full payments toward both interest and your principal balance.
You can apply for an MPOWER student loan online as it’s a fully digital process. Depending on your situation, you could get your student loan approved and funded in as little as two weeks. See our article on when to apply for international student loans for more information about loan processing timelines.
Learn more about student loans from MPOWER Financing for Indian graduate students.
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Indian students applying for U.S. education loans typically need to provide proof of admission to a U.S. university, a valid F-1 student visa, passport details, academic transcripts and financial documents such as bank statements. Unlike loans in India which might require property collateral, many U.S. lenders designed for international students like MPOWER Financing focus on your academic record and future earning potential instead. Additionally, Indian students should prepare their Statement of Purpose and proof of financial means for the first year as these documents strengthen both visa and loan applications.
Managing currency exchange risk is a significant concern for Indian students with U.S. dollar loans, as the INR-USD exchange rate fluctuations can substantially impact your repayment amounts. To mitigate this risk, consider setting aside additional funds as a buffer against rupee depreciation, exploring currency hedging options through Indian banks, or establishing a U.S. dollar income source such as campus employment or optional practical training (OPT) positions after graduation. Many successful Indian students working in the U.S. tech sector find that earning in dollars while repaying dollar loans eliminates this exchange rate concern entirely.
Yes, Indian students and their families can claim tax benefits under Section 80E of the Income Tax Act for interest paid on education loans taken for higher studies abroad, including U.S. universities. This deduction has no upper limit for interest payment and can be claimed for a period of up to eight years or until the interest is fully repaid, whichever is earlier. However, to qualify for these benefits, the loan must be taken from specified financial institutions or approved charitable trusts within India, so consider coordinating with Indian banks that have relationships with U.S. lenders to maximize your tax advantages.
U.S. student loans typically offer longer repayment periods compared to Indian education loans, with 10-year terms being standard versus the five-to-seven-year terms common in India. U.S. loans often provide more flexible repayment options including grace periods of six to nine months after graduation and interest-only payments during study periods. Unlike many Indian loans that require repayment to start immediately, U.S. lenders targeting international students understand the transition period needed after graduation to secure employment. This flexibility can be particularly valuable for Indian students pursuing degrees in fields that require additional time for job placement, such as research-oriented or specialized technical programs.
Indian students can significantly improve their loan approval chances by building a strong academic profile with high GRE/GMAT scores and targeting universities with strong job placement records in their field of study. Consider applying to lenders like MPOWER Financing that specifically serve international students without requiring cosigners. Preparing a detailed career plan showing research on salary potential in your chosen field demonstrates to lenders your loan repayment capacity. Additionally, securing partial funding through scholarships or assistantships reduces the loan amount needed and strengthens your application. Many successful Indian applicants also highlight previous internship experiences or work history in related fields to show career progression and commitment to their chosen profession.
DISCLAIMER – Subject to credit approval, loans are made by Bank of Lake Mills or MPOWER Financing, PBC. Bank of Lake Mills does not have an ownership interest in MPOWER Financing. Neither MPOWER Financing nor Bank of Lake Mills is affiliated with the school you attended or are attending. Bank of Lake Mills is Member FDIC. None of the information contained in this website constitutes a recommendation, solicitation or offer by MPOWER Financing or its affiliates to buy or sell any securities or other financial instruments or other assets or provide any investment advice or service.
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