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How to Pay Off Education Loan at Home Country after getting Job in US?

Studying in the US can be very expensive, depending on the school you apply to. Many international students take education loans in their home country to pursue higher education in the US as studying Masters in the USA Costs a lot of money and not everyone can afford it.

Some of the common options taken by international students are to take education loans from banks or fintech companies. In fact, I also did the same thing to fund my education in the US. I took a bank loan as well. In this article, let me share my story and the approach I took to pay off my education loan and explain why it works out as the best option for most of the international students as well.

Background: My Education loan details in my Home Country

In my case, I took $25,000 USD education loan in India for studying in the US, from one of the national banks. As usual, as you know, they asked for all the property papers or any assets to back up the loan. Ultimately, we ended up getting a loan, and the interest rate we got was around 14% Interest rate per annum. It is called APR (Annual percentage rate in USA).

Interest rates in India can vary anywhere from 9% to 16%. For instance, Kotak Mahindra Bank Education Loan is at 16%, where as the loan at a bank like SBI is around 11%.

Interest rates in the US vs. India or your country

As I wrote in article Where to put your money either in US or India?, the interest rates in the US are relatively very low. It is on either side, either for borrowing money or your money sitting in bank account.  In the US, you can get a personal loan for around 9% APR or even less.

Sometimes, your cards have balance transfers where you can draw cash for less APR. The key point here is, it is cheaper to borrow money from a US Bank than from your home country like India.  Let’s say you get the personal loan for about 9%, then the difference between US Personal loan vs. Indian education loan interest rate is about 5% APR. (14% – 9%)

How did I pay loan? Best way to pay education loan in your Home country?

Over the course of my student life in the US, I have built a good Credit History .  After I graduated and got a job, I went back to one of my banks that I had an account with for a long time and asked them if I could get a personal loan. In general, many banks give personal loans without any security for up to $25,000, if your credit history is good.

As part of the process, they will run your credit check and determine your credit history. In my case, they also asked me to submit my pay stubs of the last two months. After I submitted everything, they gave me a personal loan of $25,000 without any security backing like car or anything.

I took all the personal loan money and sent it back to India. I got the US personal loan for 8.9% APR. My Indian education loan was at 14% APR (annual interest rate). I did a solid saving of 5.1% per annum. Just to run you the numbers,

  • It is a saving of $1,275 per annum for a $25,000 loan. If you have not realized, you have saved 1/20th of your loan amount on interest rate per year.
  • If you take 5 years to pay off the loan, you may save more than $5,000, just on the interest rate.

Anyways, the rationale for taking a personal loan in the US is just simple, low-interest rates. There are other options too; you may take a 0% balance transfer on credit cards too if you cannot get a loan. The only thing is you may have 4% transaction fee and stuff, but if you plan to pay it late or you have a good deal, I think it is worth taking it.

Which US Banks offer lower interest rates for personal loans?

One of the things that I realized after my research on personal loans is that big banks do not mean that they would give you lower interest rates. You would be surprised to know that some very small credit unions will give better interest rates on personal loans.

Instead of going to the large banks like Chase, Bank of America, Wells Fargo, etc., I suggest you walk-in to a local credit union or Federal credit union that is in your area and ask them for personal loan. You would be surprised to know they would offer lower APR than the large players. Again, not trying to generalize but in most cases.

Below are some examples of US credit unions and their personal loan rates for your review.

What was your experience with loans and saving money? Can you think of any other creative way to pay off your education loan in Home country after Graduation and getting job in US ?

   

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51 Comments

  1. Hi Kumar, can you please elaborate on how you sent that money to India, did you send it to any of your relatives’ account or your own NRO/NRE account? Or did you directly wire that money to the bank? Similar to Ansh’s query above I am worried about gift tax implications if I send the money directly to the bank where my loan account is

    Reply
  2. If an Indian parent takes Educational loan from a nationalized bank in India or Credila for his son’s MS study in USA (California) and after son secures a job in US, if he starts repayment of loan in US dollars, can he avail any tax benefit in USA? Is he eligible for any tax refund on loan re-payment?

    Reply
  3. I need an advice. I took education loan of Rs. 20,00,000/- from Credila for my son’s MS in USA in tje joint names of my son, myself and my wife who also is working. He has completed the MS course and well placed with a big company in USA having about USD 1,00,000 p.a. emoluments. In India I am repaying the loan and claiming rebate on income tax on the interest of education loan. The remaining loan is about Rs. 15,00,000/- at present.
    My son is proposing to transfer the loan to USA so that he can repay it as it will increase his credit rating also. What is the best way to do it? (i) Take a personal loan in USA and repay the full education loan (ii) Transfer the loan to USA (iii) Or we should continue like this.

    Please suggest.

    Reply
  4. hello .i have got education loan of 14 lakhs (10 lakhs tution fees+4 laksha expenses).I am thinking of staying off-campus.How can i redeem loan for off-campus rent.Will the property owners gives us receipt or something so the bank can disburse the amount.

    Reply
    • dinesh,
      Well, it is not very common for the property owners to give receipts. If the property you stay is managed by a rental agency, then you can request for invoice and use the same. Alternatively, there is rental agreement that says the monthly rental and contract duration, you can use that and copy of the checks you sent to them for claiming the reimbursement.

      Reply
  5. about ms in us , studying through bank loan shall we able to get 100% loan for fees and living expenses , shall the bank grants 100% loan for education loan, and any other financial crises arises if they sanction less than 100%

    Reply
    • Most banks have an upper limit on the amount that can be borrowed for studies abroad, their websites generally have details about this.

      Reply
    • yesh,
      It always depends on the amount you plan to borrow and the bank you borrow from. I suggest you check with few banks on the conditions.

      Reply
  6. Thanks for sharing a lot of useful information! It would be great if you also told us how you transferred such a large amount of money. Did you transfer it to your family and then they used it to repay your loan? Or did you wire transfer it to your loan account directly? As I understand, transferring over $14,000 to a person other than your spouse in one year counts as a “gift” according to the IRS in USA, and so you are required to fill the Gift Tax Form while filing your tax returns. You are required to pay the gift tax only when your lifetime gifts exceed $5 million (!) but you are still required to file the gift tax form every time your annual gift to someone exceeds $14k.
    I am in a similar situation where I want to transfer $23k for my education loan, but I really want to avoid filling all the paperwork for the gift tax form.

    Reply
    • Could you please share your experience on how did you manage to repay the load of 23K $. This will be helpful for people like me who is in the same situation now.

      Thanks a lot!

      Reply
  7. I am planning to take education loan from HDFC Credila for 100% tuition and living expenses coverage as I do not have any other means to fund my education. Will it create a problems in getting an F1 visa?

    Reply
    • Sharma,
      Any education loan should be fine as long as it is trustworthy and a bank or something that can sponsor. It should not create any issue.

      Reply
      • Hi Kumar, thanks for the information. I had another follow-up question. I have heard from many people currently studying in US that if you do not show family funding and go for education loan as sole funding option it creates problems during visa interview and sometimes even leads to rejection. Could you please clarify this? I am relying on education loan to fund my MS

        Reply
        • Sharma,
          It is very much debatable…It is all speculation from the rejected applicants. All the Visa officer care about is, how will you fund your higher education. If you have an approved loan and carry letter stating the same, that should be sufficient…having said that, we really do not know what is going on in the VO mind…I have known many people who have just used that sole funding and made it through visa interview…Stay positive and go ahead…Do NOT try to fabricate anything, that will create more trouble than being truthful with loan.

          Reply
    • I am sorry to say, but it’s not good thing to junk the thread with questions which are not related to topic. You can create a new thread, or post it in other thread which is related to it. And answering to your question, I don’t think it should be an issue unless and until you have loan from a licensed financial institution, more over HDFC Credila got good reputation, so don’t worry, but I guess the rate of interest is higher than SBI or other nationalized bank, if you have chance try with them(Just for the sake less interest rate.), or else you can go with credila. Hope this helps.

      Reply
  8. My daughter is studying B.Tech 2nd year in India. My husband suggests we take educational loan (though we have sufficient funds). After her 4 years of study here, she wishes to do M.S. in US (My brother is a US citizen). Will there be any problem in getting visa?

    Reply
    • aarthi,

      There could be 2 issues:

      1. When submitting financial documents for F-1 tuition, you will have to show outstanding loan balance. That may bring down your net asset value.
      2. Having a close relative as US citizen could raise a flag that she may immigrate and may not return to her home country.

      Visa is never a guarantee. You should always have a plan B.

      Reply
    • aarthi,
      There is no problem as such…but, getting visa depends on many factors and it is never a definite answer that you will get it for sure…All you can do is prep your child to be with proper documentation and give the best shot at visa interview.

      Reply
  9. Hi.
    Thanks for the Info.
    Is getting a job in MS software engineering in US is a very difficult thing.All is set and reading your article clears my mind a lot.

    I want to know whether MS degree from US eligible in India or not.
    If I got a job Luckily I will be in a situation to clear debts as you said like that but otherwise means I will be in a huge financial crisis right.

    Thanks & Regards
    Y.vishnu

    Reply
  10. This only works if Indian Rupee keeps a constant rate with USD. If INR depreciates by 6% over the course of the loan than your interest savings have been wiped out. There is still a benefit as you have paid off a secured loan so your India property is no longer at risk in case of default and now have only an unsecured personal loan. This can be good if things go horribly wrong and you have to return to India. But this can also be temptation to default as only your credit history and not your property is at risk.

    Reply
  11. Hi,

    I am applying for H1B Visa, i have query related to home loan. Suppose I have home loan running for 20 years, can I go to US on H1B visa if got selected? OR before going to US on H1B i have to pay my home loan? Please guide.

    Thanks

    Reply
  12. hiii sir! i want to do MS in US .We are financially poor .can u please let me know the steps that how can i get a loan.Even if i want to take loan i need to submit any property documents.

    Reply
  13. hello sir,
    I am final year BE student. actually i want to do MS in us, now i’m prepairing
    for GRE and TOEFL. but i have a problem is that money. my father per year income is around 1 lack rupees. so i am going to take education loan from bank.
    so can you suggest me how can i get a loan ?

    Reply
  14. Hello sir,
    I am going to Canada for an undergraduate course next year.I am hoping to take an education loan near about RS.2000000.Please guide me about the best ways to repay it and with minimum risk.

    Thanks

    Reply
  15. Hello sir,
    I am going to Canada next year for an undergraduate course and hope to take a loan near about Rs.2000000.Please guide me the ways to repay it with minimum risk?

    Thanks

    Reply
  16. I’m not a international student, but i also take some education loan , so would any one can help me out how should i pay back the edu. loan with my job startup.

    Reply
  17. Hello again Saurabh,

    I have another basic query. At the beginning of my H1B petition process my petitioner had sent me my Academic Credential Evaluation Report which was done by The World Academic Research Center Inc, USA. What I want to know is:

    Whether this step (Academic Credential Check & Evaluation) is a necessary requirement by the USCIS for H1B petition filing or is it a requirement by the Labour Department to obtain the LCA or it is just for the Employer’s benefit & satisfaction to ascertain that I have necessary educational/academic qualification for the job and that the documents are not fraudulent?

    Thanking you once again in advance.

    Reply
    • AJ,
      To be eligible for H-1, a person needs to have 4 years of college education equivalent to US Bachelors. When the person has done education outside US, USCIS usually looks for education equivalency certificates to know if the person qualifies. This is what that agency did for you and employer and is an important step in the H-1 petition processing.

      Reply
  18. Hello Kumar

    Thanks for sharing your experience. As i am also International Students from Indian and is going to take around 40000$ as my Loan. I have applied for FALL 2012 and got admit from wayne state university.I belong to middle class family. Please tell me that would it be easy to get a job being an international student and pay off my loan after My MS from SOFTware Engineering .. ?

    Reply
  19. Hi Kumar,
    I appreciate the painstaking effort you have taken to help countless international students. This website has a lot of info that I wish I had read 4years ago.

    Reply
  20. Great Info.I have been trying to figure out a way to repay my education loan.However I have average credit history.
    Can you list some banks which do not require any security?
    Also so how does the repayment work? does the US bank transfer the money to the Bank from whom I took the loan directly or I need to do it myself?

    Reply
    • Well, with credit crunch and sub-prime lending issues, it can be challenging without good credit history. But, if you show your salary slips and have direct deposit with them, they might give you loan. I cannot list the banks off the top of my head. Any small credit unions are good. Repayment works based on how much you borrow, they give you a fixed monthly amount that you have to pay every month for 60 months or so to repay it. You can repay early too. I do not think they transfer directly. You will have to take the money and send it to your bank in home country.

      Reply
  21. If I want to apply for Student loan from US, what do they take as security? Any comments? Do I need to have a US resident as the debtor?

    Reply
    • Puja, unless you are a citizen or have GC, they do not give education loan in US. You may get an education loan if someone with a green card or citizenship co-signs your loan. What it means is, they are liable for the loan if you do not pay it.

      Reply
      • Thanks! Another question, If I want to apply for student loan from US (with US citizen as co-signer), do I need to have the loan approved before I apply for Visa. If yes, how can I start applying for loan when I’m not in US.

        Reply
        • Puja, I do not know if you will be able to apply out of US…Unless your sponsor is in US and he applies for education loan on your behalf….

          Reply

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