Are you planning to study abroad by financing the cost using student loan?
In this article, I’ll be revealing some interesting facts about education loans, interest rates, and loan pay-off.
Question: Is it better to get student loans from my bank in India or from the U.S.?
About 70% of international students in the U.S.A. use their personal and family funds for covering the cost of education. That includes both graduate and undergraduate study.
Here, personal funds refer to money from parents and education loan used by students to pay for the expenses.
Question: How can one use money from student loan?
Student loans are usually issued in the form of a bank draft in the name of a university in India.
Another separate bank draft is issued under the student’s name for personal living expenses.
While studying abroad, you might not get any financial aid or scholarship. Managing all expenses from part time job salary is difficult.
Part-time jobs don’t pay a lot. But you might be able to cover your monthly living expenses with income from part-time jobs.
However, the good news is, you will be able to pay your loan when you get a full-time job within a few years. Usually, entry level jobs in software or engineering pay anywhere from $50,000 to $80,000 per year.
Now, let’s assume that after graduation, you will be still left a balance of around $20,000 in your student loan and that’s usual among those who studied in the U.S. I have seen people who have left much more in student loan debt.
There are so many options available here for repaying student loans. However, an international student’s loan will have different payment options.
In general, your living expenses will increase after you graduate. It will be difficult to share one room with 4 people when you’re already working. When fewer people share in the rent, the monthly living expenses will in turn increase. I was paying around $1,100 per month in Florida (as a student) and around $1,300 per month in North Carolina (when I began working).
Here are a few tips on how to settle your student loan much faster:
- Watch where your money goes, categorize your expenses and cut on miscellaneous expenses.
- Avoid spending on luxury items.
- Make a list when you go to a grocery store and stick to the list when you buy items.
- Participate in your company’s 401(k) retirement savings plan.
- Save at least 5% of every pay check for emergency.
Above tips would help you save money and that can be used to repay student loan balances.
Suppose you get $3,000 after tax in your hand, at max you will spend $1,500 per month for living and saving $150 (5%), will give you $1,350 to pay off your student loan.
With this calculation, a student loan can be paid off in 14 months.
But wait, you will definitely need to buy a car to travel to work, unless you are working in metro cities like New York, Boston, etc.
If you buy a car for $20,000, your monthly payment will be around $350 for 5 years. That will delay your student loan repayment period.
But the scenario is different if you earn $80,000 per year, right?
Other articles in Personal Finance Series
- Part 1 – How much money can you save in USA
- Part 2 – Why Saving Money in USA is Difficult with Q&A
- Part 3 – It Can Take UpTo 5 Years to Start Saving Money in USA
- Part 4 – Essential Money Management skills
- Part 5 – New Grad Guide Investing Guide