Graduate school is almost always a good idea – studies consistently show that attaining a Masters degree significantly increases lifetime earnings. But, graduate school education isn’t cheap. Whether you’re pursuing an MBA or another Masters Degree, you’ll probably need a loan to finance your studies. Fortunately, you’ll find educational loans are readily available.
With all the financing options available, you’ll need to conduct your own, in-depth research when choosing a student loan. After all, the differences in repayment amounts can be quite stark. And, you don’t want to negate all those future earnings.
But, every loan is different – and with all the variables listed in the student loan terms and conditions, you’ll need a few metrics to compare financial products properly. Here are five factors you should consider when deciding which loan is best for you.
You should use APR (Annual Percentage Rate) to compare multiple loan offers. APR is a legally-mandated number that takes into account all of the costs associated with financing your degree, including any upfront or one-off fees, plus the effects of compounding interest.
It’s important to look at each loan’s APR regardless of the loan considered (education, housing, or vehicle loans). Advertised interest rates might be low, but this percent doesn’t account for all of the fees; the APR could be higher because the loan has admin or other hidden fees.
The US and the UK calculate APR slightly differently –it’s true that it might not be enough to make a huge impact, but it’s worth considering while doing your research. As perhaps the most important metric for loan comparison, it makes sense to learn more about APR.
Rupees, dollars or pounds? The currency ofyour loan will usually be the currency that you use for repayments. But, it’s worth researching the inflation and lending rates in varying currencies. That makes it a little difficult to compare loan products across varying currencies.
You should consider your post-grad plans – if you’re looking to settle in US, it might make more sense to take a loan in US dollars for repayment ease. While it’s difficult to make comparisons across currencies, you can use them to guide your final decision.
Loans usually have grace periods. During this time, students are exempt from making any payments. Typically, grace periods last until after graduation as it gives new graduates a better chance of a healthy financial start.
While students are exempt from making payments during this period, interest does still accrue on your loan during the grace period. It’s worth considering how much time you’ll have before you’re required to start repayments. And remember, that some loan products don’t include grace periods; you may be required to begin repayments while still completing your degree.
The duration is the amount of time you’ll have to repay the loan. Some loan companies allow lower monthly repayments, but lock you into longer repayment schedules, and you may actually end up paying more over time. As long as the loan amount covers costs, graduates are usuallyin a better position if they repay their debt as soon as possible.
Much like the grace period, it’s important to check if your loan provider will penalize you for early repayments. International graduate student loan provider Prodigy Finance, for example, never penalizes early repayments, and borrowers only pay interest on the outstanding funds payable. And, most of the students they work with repay their loans in full within five years after graduating.
Unfortunately, international students usually aren’t eligible for all graduate student loan products available in the country of study. Even among the loan products actually available for international students, often applicants need a local co-signor or guarantor to support loan applications.
If you’re looking to secure an education loan from India, you’ll likely be asked to show assets as collateral – something you may or may not have. As a community lender, Prodigy Finance understands that, as a Masters degree student, you’re likely to significantly increase your salary after graduating, and assesses your loan-worthiness on the basis on your expected financial status. This understanding allows Prodigy Finance to offer loans without collateral, co-signers, or guarantors.
Doing your research on loans and making an informed decision about which one suits you and your needs most is an important part of planning for graduate education. Sure, APRs and grace periods aren’t as exciting to consider as all those enthralling elective courses, but if paying attention now means saving a couple of thousand down the road, it’s well worth it.
Author Bio: Rishabh Goel is an Associate Relationship Manager at Prodigy Finance. He studied Economics & Engineering at BITS & Masters at London Business School. He has helped Indians excel at GMAT/GRE and mentored students to attend top schools globally. Rishabh is passionate about borderless FinTech, previously working at TransferWise. He is a Sachin Tendulkar fan and would do (literally!) anything to have a coffee chat with him.