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How to refinance your student loan when you don’t have a green card

Boaz Valkin - February 06, 2018

How to refinance your student loan when you don’t have a green card

With its incredible post-graduate study opportunities, the US remains an attractive destination for international master’s students. Sure, the investment costs are commensurate with the experience, but millions of students have found the ROI (personally, professionally, and financially) worth the time and money.

The number of international graduate students in the US (and globally) continues to rise despite cost increases and tightening immigration regulations.

That doesn’t mean it’s become any easier to secure a US student loan without citizenship or a permanent residency visa (most people know it as a green card). In fact, it’s so difficult that some of the top programmes - especially those with strongly-regarded business faculties - have gone out of their way to offer cosigner-free loans for international students.

Sadly, it’s not a long list.

Moreover, despite the university facilitating such loans (think of participating institutions, such as Harvard and Stanford, as the American co-signer banks will recognise), international students are still considered risky business.

Why do international students struggle to find financing in the US?

The banking and loan systems (in any country) weren’t developed to provide for outsiders.

  • Banks don’t know how to price risk internationally.
  • Foreign financial information usually differs from domestic data making it difficult to assess equally.

International graduate students securing university-facilitated loans often find themselves in the same position as those that have a private co-signer. The effect is most often seen in higher interest rates. (That is, after all, how banks manage their risk.)

Higher interest rates are a primary reason American students opt for refinancing. It makes no sense that a graduate from a high ranking institution with a confirmed job offer and work authorization in the US, is unable to refinance a loan.

And the good news is, you won't need a green card to get refinanced.

Common financial sense tells you to refinance with a lower interest rate (if you can) 

The US educational loan market has undergone a few shifts over the years - in both the public and private sectors, and refinancing has become increasingly popular for American students (here, meaning citizens or green card holders). At its core, this shift has to do with a greater understanding of risk factors on both sides.

Why has there been a shift to refinancing in the US?

  1. Graduate students (with or without previous student debt) are a riskier proposition when they’re about to launch into two years of committed, full-time study. They won’t have stable income during that time (nor is their performance in a programme guaranteed), their job prospects could change dramatically over the course of 24 months, and banks really only consider the historical information (what an applicant previously or currently earns and owes).

  2. That same student looks a lot more attractive after graduation and a permanent employment offer. Though specifics will certainly play a role, most banks would offer a lower interest rate to the applicant holding the master’s degree as opposed to the one pursuing their degree.

Refinancing a higher-interest loan in favour of a lower-interest loan simply makes sense.

But, how are you supposed to secure refinancing without a green card? (And, if you battled to find a US co-signer in the first place, you probably feel as though there is no reason to go through that hassle again.) 

Here’s what you need to remember:

  • Banks can only work with current or historical data and that they can only consider the information provided within their own territory.

  • If you’re not a citizen and you’re not holding a green card, it doesn’t matter how much money you’re making or whether you’ve never missed a payment in your life, they will see the most glaringly obvious fact - your stay in the United States has an expiration date. Whatever it says on your F-1, OPT, or H-1B paperwork is what banks have to go by. 

  • They can’t work on your intentions, which in any case, may be different than those of the State or Homeland Security departments (and are often subject to political direction changes). Without a green card or permanent residency, US banks can’t consider refinancing your loan without the co-signer stipulation you faced during round one of your educational financing challenge.

What are your refinancing options?

Why did you take a private American educational loan in the first place? Everyone has different reasons, but lower interest rates and the intention to gain US work experience post-graduation (and make a solid dent in the loan through payments in dollars, as a result) are pretty high on the list.

While those interest rates may still be higher than American students would be able to secure from American banks, they’re often much lower than international students would find at banks in their home country. (And, in some areas, the ability to secure a loan without using the property of everyone you know as collateral is a strong enough reason to find an American co-signer.)

Higher interest from banks in one’s home country may not even be the norm (sometimes they are, of course, but not always). Those lenders have the right to worry that, as an international student, they won’t be able to reach you for repayments. They, too, work with historical data - they have no idea what you’re capable of earning after graduation (and whether you’ll even secure a local or international position).

The trick is finding an international loan provider that can work with your existing financial data alongside US universities and post-graduate opportunities.

If you took a US educational loan with an American co-signer, you might want to let them know they could be off the hook sooner than they thought.

Ready to start your future off on the right foot?

Want to know when Prodigy Finance launches refinance so you too can take advantage of the benefits?

Prodigy Finance Ltd is authorised and regulated by the Financial Conduct Authority.

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