Over the past few years, there have been two main types of private loans, including those private loans available to international students. The first are called “school certified” (or school channel, in lender terms) and the second are called “direct to consumer” loans (DTC in lender terms).
Direct to Consumer Loans
With direct to consumer international student loans, the school is not really involved in the loan process at all. The student has to prove that he or she is enrolled in a school approved by the lender, typically by submitting a class schedule or letter of acceptance; however, the school itself does not need to do anything. The student can borrow the amount that the student decides is needed, up to a maximum set for that school by the lender, and the lender doesn’t care or know what other funds the student may have available. The upside is that these loans are very flexible, very fast in processing, and typically paid directly to the student. The downside is that they are easier to abuse and get in trouble by borrowing too much, as there is no school involved in determining exactly how much the student needs to borrow to afford his or her education. Often direct to consumer loans have higher interest rates and fees than school channel loans as well – the difference can be minor or major.
School Certified Loans
In school certified or school channel loans, the financial aid office is involved in determining exactly how much a student can borrow. The school looks at all of the student’s available funds, scholarships, other aid or loans, etc., and sets a maximum borrowing amount that could be far lower than the maximum total permitted for a school. For instance, as a very rough example, if a school had a total maximum annual cost of attendance of $30,000, then a student with no personal or family funds available and no other aid could borrow up to $30,000. However, if the school determined that the family should pay $5,000 per year and the student received a scholarship for $10,000 per year, then the student would only be approved to borrow $15,000 per year. For this reason, school channel loans are harder to abuse by borrowing too much, usually offer lower interest rates than DTC loans, but are less flexible and take longer. Funds are disbursed to the school, not the student.
DTC Loans No Longer Available
Over the past 18 months, as a result of the credit crunch and student loan legislation, most (if not all) direct to consumer private student loans have disappeared, and all direct to consumer international student loans have certainly disappeared. Only school channel international student loans are left, including on InternationalStudentLoan.com.
This means that it is even more important to work through your school, plan carefully, and only budget to borrow the smallest possible amount you need – as that is all the school will certify you for anyway. ANd start your process earlier, as it takes time to process a school channel loan. The lender and school each have to do their part in evaluating your eligibility for a loan and the amount you can take, and this extends the process.
Click here to learn about the international student loans available through InternationalStudentLoan.com.
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