Types of Abroad Education Loans for the USA

International student loans for the USA generally fall into two main categories:

• Secured Education Loan (With Collateral) : This type of loan requires the applicant to pledge an asset as security along with the loan application. The collateral can include movable or immovable assets such as Fixed Deposits, LIC policies, non-agricultural land, residential properties, or commercial real estate. Most public sector banks in India require collateral for education loans meant for studying abroad.
• Unsecured Education Loan (Without Collateral) : This loan option does not require the borrower to provide any collateral. However, since it involves a greater risk for lenders, the interest rates are usually higher compared to secured loans. These loans typically require a co-applicant or co-signer, and the approved loan amount depends heavily on the co-applicant’s income level and CIBIL score.

Secured Education Loan for Studying in the USA

As previously discussed, a secured education loan for the USA requires collateral, which often allows you to borrow a larger amount than unsecured loans. Another advantage is that a co-applicant may not be necessary when opting for a secured loan. If you’re exploring loan options for studying in the USA, two major public sector banks to consider are the State Bank of India (SBI) and the Union Bank of India (UBI).

Here is a comparative overview of these two banks, outlining key details such as the maximum loan amount, margin money requirement, and applicable interest rates for student loans to the USA:

Unsecured Education Loans for Studying in the USA

If you do not have any assets to pledge, you can still pursue higher education in the USA through unsecured education loans. Several private banks, Non-Banking Financial Companies (NBFCs), and international lenders offer non-collateral loans to help fund your studies.

Private banks and NBFCs usually require a co-applicant or co-signer who meets specific financial criteria and has minimal liabilities. On the other hand, international lenders typically do not ask for a co-applicant or co-signer, making them a convenient option for many students. An added benefit of choosing international lenders is that they disburse the loan amount in USD, which can help reduce foreign exchange costs and associated charges. However, keep in mind that these lenders often have higher interest rates.

Each lender has its own set of benefits and limitations. To help you make an informed decision, here’s a comparative chart of popular financial institutions that offer unsecured education loans for Bachelor’s, MBA, and Master’s programs in the USA:

Expenses Covered Under an Education Loan for Studying in the USA

After your education loan has been sanctioned, the next step is to initiate the disbursement. At this stage, you have the flexibility to either withdraw the entire approved amount at once or opt for partial disbursements based on your needs. Most students prefer taking the loan in parts, as interest is charged only on the amount that is actually disbursed—not the full sanctioned sum. This approach helps reduce the overall interest burden, especially if funds are withdrawn gradually.

The types of expenses typically covered by lenders under an education loan for the USA include:

•  Tuition fees
•  Living costs (including accommodation, food, utilities, etc.)
•  Health insurance
•  Visa application fees

Academic-related expenses (such as lab charges, equipment, and other study materials)