Student loan basics: What every international student should know before borrowing
New to student loans? Understand key terms like interest rates, APR, grace periods and repayment before borrowing for your studies abroad.
Studying abroad is exciting, though it also comes with a long list of financial decisions. After receiving your university offer, you start calculating tuition, rent, visa fees and travel costs. For many international students, the next step is figuring out how a student loan might help cover those expenses.
If you’re borrowing for the first time, the terminology can feel confusing. Interest rates, APR, grace periods, co-signers and collateral all play a role in how loans work and how much you’ll eventually repay.
Understanding these basics early can make the process much easier. This guide explains how student loans work and what every international student should know before borrowing.
What is a student loan?
A student loan is money you borrow to pay for your education. You repay it over time, usually with interest.
For international postgraduate students, loans are often used to cover:
Tuition fees
Living costs
Study materials
Health insurance
Other education-related expenses
Some lenders send funds to you. Others send funds directly to your university
Key terms you need to understand
Before you borrow, you should understand these basics.
1. Principal
The principal is the amount you borrow.
If you borrow USD $40,000, that’s your principal.
2. Interest rate
The interest rate is what you pay to borrow the money. It’s expressed as a percentage.
Student loans may have:
Variable rates, which can change over time
Fixed margins plus a variable base rate
Your rate can vary based on your profile, programme and chosen school.
3. APR (Annual Percentage Rate)
APR shows the total cost of borrowing, including interest and mandatory fees. It helps you compare loan offers more easily.
When you see Representative APR 12.15%*, that’s a standardised example of the overall cost.
4. Grace period
A grace period is the time before full loan repayments begin. Different lenders structure this period in different ways. In some cases, borrowers may make reduced payments while they study. In others, repayments may not begin until after graduation, or may gradually increase once the borrower starts working.
With Prodigy Finance, repayments begin after your grace period (depending on your loan terms). This structure is designed to give you time to settle into your career before starting your full loan payments.
5. Loan term
The loan term is how long you take to repay the loan. Common terms range from 7 to 20 years.
Longer terms may reduce monthly payments, though total interest paid over time can be higher.
Secured vs unsecured student loans
There are two main types of education loans.
Secured loans
These require collateral, such as property or savings.
If repayments are not made, the lender can claim the asset.
Unsecured or no-collateral loans
These do not require property or assets.
Instead, the lender evaluates your:
Academic background
University
Programme
Future earning potential
Prodigy Finance loans fall into this category for most borrowers. They are designed for international students and typically do not require collateral*, focusing instead on factors such as your chosen university and programme when assessing eligibility.
How the application process typically works
While every lender differs slightly, the process usually includes:
Check eligibility online
Complete an application form
Upload required documents, such as your admission letter and passport
Receive a provisional offer
Accept your final offer
University confirmation, after which funds are sent.
When do you start repaying?
Repayment structure is one of the most important things to understand.
With many international student loans:
You don’t repay while studying
A grace period follows graduation
Repayments begin after your grace period (depends on your loan terms)
Your monthly repayment depends on:
Your loan amount
Your interest rate
Your loan term
Planning your future budget before borrowing helps you understand what’s manageable.
A quick example
Imagine you borrow USD $50,000 for a master’s degree.
After graduation, you secure a role earning USD $70,000 per year.
Your repayments begin after your grace period (depends on your loan terms). You budget your monthly payments alongside rent and living expenses.
This is why choosing the right programme matters. Strong career outcomes support long-term repayment comfort.
*This example is illustrative and does not constitute financial advice or a guarantee of employment, salary level, or repayment experience. Actual loan terms, variable interest rates, earnings, and affordability will vary based on your profile, programme, economic conditions, and full credit assessment.
What to consider before taking a student loan
Ask yourself:
What is the total cost of attendance?
What is my expected starting salary?
How long is the loan term?
Is the interest rate variable?
When do repayments begin?
A student loan is an investment in your future. Understanding the basics helps you borrow responsibly.
Ready to explore your options?
Student loans don’t have to feel complicated.
Once you understand principal, interest, APR and repayment terms, you can make a confident decision.
If you’re planning to study abroad, you can check your eligibility with Prodigy Finance and see how funding could support your next step.*
