Funding your education: student loans vs. school grants

A student loan, or study loan, is a sum of money borrowed to finance your academic pursuits abroad. Just like loans for homes or cars, student loans carry the obligation of repayment, typically with added interest.

If you're considering getting a student loan to fund your education overseas, it's essential to familiarise yourself with basic loan terminology:

• Interest Rate: This is the percentage charged on the outstanding loan amount, representing the cost of borrowing. It can be fixed (staying the same over the life of the loan) or variable (changing based on market conditions).

• Repayment Period: This is the length of time you have to pay back the loan, including both the principal (the original amount borrowed) and the accrued interest. Repayment periods can vary significantly depending on your provider.

• Loan Servicers: These are companies that manage your student loan account. They handle billing and payment processing and provide information about your loan.

• Principal: This refers to the original amount of money you borrowed before any interest has been added. Your repayments will go towards both the principal and the interest.

• Fees: Some student loans may come with additional charges, such as origination fees (a one-time fee charged when the loan is first disbursed) or late payment fees. It's important to be aware of any potential fees associated with your loan.

The process of securing a student loan can vary depending on the lending source and your country of origin. There are two main ways that international students can get loans for their studies overseas:

1. Private loans

Private student loans are offered by non-governmental lenders, including banks, credit unions, and other financial institutions. The application process for a private student loan typically involves the submission of a formal application, provision of personal and financial documentation, and a credit evaluation. Eligibility criteria and interest rates for private loans often depend on the borrower's creditworthiness or that of a co-signer.

For international students seeking a study loan, private options may also involve specific prerequisites related to residency or the presence of a creditworthy co-signer who is a citizen or permanent resident of the lending country.

2. School loans

Certain universities and colleges may also administer their own school loan programs to assist students in funding their education. These institutional student loans may feature distinct terms and conditions compared to federal or private alternatives.

Information regarding these school loan options is typically available on the university's website or through direct contact with their financial aid office.

A school grant is a form of financial aid awarded to students. Having a grant means that you don't have to pay the money back, unlike a student loan.

School grants are frequently need-based and allocated based on a student's demonstrated financial circumstances, although some may also consider academic merit or specific program enrolment. This makes school grants similar to scholarships. However, grants often place a greater emphasis on financial need, whereas scholarships typically prioritise academic achievement, talent, or specific eligibility criteria.

Nevertheless, the biggest advantage of both is that you don't have to worry about repaying the funds. But it's important to note that some grants may have other requirements, such as maintaining a certain grade point average or fulfilling an obligation to other commitments, like working in a specific field after graduation.

Unlike securing student loans, identifying potential school grants for overseas study requires more proactive research as they are not always as widely advertised. Here are some key avenues to explore:

1. Online databases

Official government websites, particularly those about education or financial aid in your intended study destination, are valuable starting points for exploring government-issued schooling grants. Additionally, you can also explore specialised platforms dedicated to grant listings and university databases for more targeted searches based on academic discipline, nationality, and other relevant criteria.

2. University financial aid offices

You can also directly contact the financial aid offices of your prospective universities. These offices frequently maintain comprehensive listings of school grants and scholarships specifically available to their enrolled students, including international applicants. They can also provide detailed information regarding eligibility requirements and the application procedures.

3. Professional organisations

Professional organisations that align with your intended field of study can also offer grant funding. Many such organisations provide grants to students pursuing degrees within their specific disciplines to foster future talent and support relevant research.

However, as mentioned above, most of these opportunities will generally involve some form of commitment, such as a bond to work for a specific period within the organisation or industry after graduation.

While this may not be ideal for some students, it also presents a valuable opportunity for many to gain relevant work experience and build valuable connections within the industry or organisation. This could help students secure a stable career path in the long run.

Embassy and consulate websites

You might also be able to consult the official websites of the embassies and consulates of your intended study destination within your home country. These websites could have country-specific grants or financial assistance programs offered by the foreign government to international students.

When deciding between pursuing a student loan and seeking a school grant, you must carefully evaluate the respective advantages and disadvantages of each option. Here is an overview of the key factors to consider when making this decision:

Pros and cons: student loans

Advantages of student loans:

• Accessibility: Lenders generally make student loans more readily accessible than school grants, particularly for students who may not meet the often-stringent eligibility criteria associated with grant funding.

• Higher Funding Limits: Lenders generally allow student loans to cover a more substantial portion of your educational expenses, encompassing tuition fees, living costs, and other related expenditures.

Disadvantages of student loans:

• Repayment Obligation: The primary disadvantage of a student loan is your legal obligation to repay the borrowed principal, along with the accrued interest.

• Potential for Long-Term Debt: Accumulating significant student loan debt can have long-term financial ramifications, potentially influencing your future financial decisions and overall financial stability.

• Interest Accrual: Interest typically begins to accrue on most loans from the point of disbursement. Consequently, the total amount you repay throughout the loan can significantly exceed the original principal amount.

Pros and cons: school grants

Advantages of school grants:

• Non-Repayable Aid: The most significant advantage of school grants is that they do not require repayment, providing crucial financial assistance without contributing to your future debt.

• Reduced Debt Burden: Securing school grants can minimise your reliance on student loans.

Disadvantages of school grants:

• Limited Availability: School grants are often highly competitive and have specific eligibility requirements based on financial need, academic merit, or demographic factors.

• Potentially Smaller Amounts: While highly beneficial, individual school grants may not cover the entirety of your tuition fees and other educational expenses. The availability of scholarship grants for college students can also be limited.

Ultimately, funding your education depends on your individual financial circumstances, academic objectives, and eligibility for various forms of assistance. Whether you are considering the best universities in Canada or aspiring to attend the top universities in the UK, loans, grants and scholarships are available to help you achieve your study abroad goals.

If you would like support in exploring your funding options, we recommend connecting with IDP's study abroad consultants. Aside from providing advice on how you can work out your finances, our education experts will also take you through every step of selecting a study abroad program and even the intimidating visa application process.

Book a counselling session today with a counsellor at IDP, a global leader in study abroad services, to begin your journey towards achieving your international education dreams.