Making financial arrangements and figuring out how to pay for your education plays a decisive role when selecting whether or not to study abroad. Due to financial limitations, several students never even conceive of taking a plane abroad.
The majority of parents even see self-funding as a viable alternative to pay for their child’s education by selling off valuable assets or by securing money from friends and family, but not all families are able to do so.
Herein lies the role that student loans play. This article will provide you with a quick overview of the advantages of student loans and why they are preferable to using your own money to pay for your international education.
You can also contrast student loans with self-funding to determine which is better.
Self-funding your international study
Most students find that taking out an education loan to pay for their studies abroad becomes a financial burden, thus they prefer self-funding as the best alternative to incurring further debt.
Students, in one way or another, do not want to be burdened by EMIs when they may pay for everything at once.
What exactly qualifies as self-funding?
In the following cases, you might be regarded as self-funding:
When you are paying for your own studies, requesting financial aid from family, friends, or relatives, and securing funding from an outside source (excluding Government banks or any other education loan lenders).
How can you budget your way through college while paying for it yourself?
1. Budget for travel abroad
Financial planning is crucial for students who want to study abroad because it will help them avoid a lot of hassle and time in the long run. Students should also prepare for any financial emergencies that might arise throughout the course.
2. Find grants and scholarships
Look into different grants and scholarships because they might be a big help if you’re paying for your education on your own. Overall, this will help you pay for your international education and will be advantageous to your international higher education program.
3. Look for a part-time position
Choosing part-time work while you are in school will help you advance financially and professionally. You might take advantage of a chance to hone your abilities and take care of your living expenses while traveling.
You wouldn’t have any financial burdens while studying abroad if you did it this way.
Student loans for international study
Today’s students demand superior education because they are more career-focused than ever. With traditional finances, such as borrowing money from family and friends, it would be nearly impossible to pay for your child’s complete high-quality education with your years of savings.
When they don’t have enough money to cover the high living costs and tuition for an overseas degree, students choose to take out an education loan. One of the main advantages of student loans is this.
Varieties of student loans
There are two distinct loan types:
1. Loan with collateral or a secured loan
Secured or collateral loans are those that are granted in exchange for collateral security. The lender will be partially compensated for any outstanding loan debt when a borrower pledges collateral in exchange for a loan.
If the payments are not made on time, they have the right to sell the property and seize the collateral. In India, the best sources of collateral loans are government and private banks.
2. Unsecured loans or non-collateral loans
Non-collateral or unsecured loans are those that don’t require any form of collateral. In this case, the borrower can get a loan without putting up any security.
Unsecured loans are an option for students who lack the assets to provide security. However, when choosing unsecured loans, criteria such as parents’ income, university ranking, and fees, among others, are taken into account.
Self-Funding Vs Student loans: Which one is better?
1. Save your personal money to save your family.
To pay for your study abroad, self-funding typically entails liquidating all of your money and precious assets like gold, FDs, insurance, flats, and land, whereas an education loan allows you to keep all of your resources and preserve your collateral with punctual loan payments.
Additionally, it would save your family money because they may use it for unforeseen family expenses.
2. Financial advantages
You cannot take advantage of any financial advantages associated with education loans, such as lower interest rates, reasonable payback terms, repayment holidays for students, government subsidies, etc., when paying for your own international education.
This is one of the main advantages of taking out an education loan, though.
3. To secure entrance, provide proof of payment
When you pay for your own education, the university requests a solvency letter to confirm your enrollment. When applying for an education loan, your bank will provide a solvency letter as proof of money, but students must show the university that they have the equivalent of one year’s worth of payments plus 50% more in their accounts.
4. Moratorium period
The main benefit you receive when taking out a student loan from a government bank is a moratorium period. The moratorium period, often known as the course duration plus six months or a year, is essentially a loan repayment holiday during which you are not required to make payments to the bank.
In contrast to those who self-fund their education, students who take out an education loan from a government bank have the option of extending their repayment period by up to 15 years.
5. The quick arrangement of big sums of money
When you pay for your own higher education, you must make long-term plans and save money. The biggest disadvantage of self-funding school is that it may be difficult to secure significant sums of money quickly, but if you take out an education loan, the bank will make periodic payments of the needed amount.
Therefore, if a student needs to arrange significant finances in a short amount of time, they can do it by requesting further loans for their education against the value of their collateral.
6. Several costs are covered
When you self-fund your education while studying abroad, it can be challenging to manage costs like housing rent, tuition, food, etc.; but, when you take out an education loan, all of your necessary costs, including rent, food, laptops, etc., are included in the loan amount.
7. Changes in exchange rates
When there is a shift in currency rates owing to rising inflation, the cost of education also changes, making it difficult for students to self-fund their education. In contrast, your sanctioned education can be very helpful at this time.
Conclusion
Most of the time, it is advised that students take out an education loan rather than pay for their education themselves because doing so has additional benefits.
Students are finding it difficult to secure the cash they need to continue their studies due to the rising inflation. A pandemic, when the nation’s economy has been severely impacted and students are struggling to pay for their education, is the ideal time to apply for an education loan.
