Is it possible to get an education Loan for MS Abroad Studies without Security (collateral)?
It’s completely possible and here’s why.
Education varies between countries. In Germany, for example, most universities are free. Yep, free. But only as long as you can speak the language and have certain minimum marks in high school.
You’ll find a similar situation in Sweden. Universities are essentially free. You wouldn’t expect the majority of Swedish students to graduate with any debt, right?
Wrong. In Sweden, anyone over the age of 18 is considered an adult. And, adult children in Sweden don’t rely on their parents for financial support. It’s not done. At 18, you become financially responsible for yourself.
In the United States, the federal government provides citizens with subsidised loans based on need. Only if their parents can claim them as a dependent, will the family’s financial situation be taken into account.
You will also find government subsidised loans in Australia. Students there don’t worry too much about the initial outlay of attending university. The government foots the bill, and loan repayments are deducted from their pay cheques – as long as they’re earning a certain minimum amount.
These norms contrast heavily with the way educational loans are handled in other parts of the world. Indian students, for example, are flabbergasted by the availability of collateral and family-free loan products on offer.
Banks in India operate according to a different set of regulations. Family co-signers are almost always required, and loans over a certain amount necessitate collateral backup. Students not only need to ask their parents to co-sign on their educational loans, they also need to put the family home on the line too.
It’s a tough spot to be in. And, yet, it doesn’t mean that educational loans in India need to be considered any more carefully than those in Sweden or the United States. A loan is a financial obligation anywhere in the world. Whatever degree you pursue… and wherever you pursue it, education loans are a big deal.
As great as it may sound to receive free college education as a Swedish student in Sweden, taking loans so you can afford to study has just as many ramifications as Indian students studying in India.
No one, anywhere in the world, wants to borrow more money than they need. It’s true for MBAs, and it’s true for MS Engineering students.
If you need a loan to pursue an MS Engineering degree or any other diploma, the return on investment (ROI) of that degree must be carefully considered. And, that’s before looking at a single financial product or bank loan.
Will a domestic degree provide you with the expected ROI? Will you get a job? Will you earn enough to pay off that loan before you or your parents need to sign or co-sign for another loan? Will you be able to support yourself and save for retirement?
It all depends on the field of study and the job market, but it’s becoming increasingly difficult to answer yes. But, don’t panic yet; there are other options.
There are, of course, students that pursue domestic degrees taking domestic loans (with or without collateral and family co-signers) in just about every country in the world.
Some countries, like Luxembourg, don’t have the population to justify huge university programmes. Other countries, such as Niger, don’t have the financial backing to make it possible. Where there aren’t many colleges to choose between, study abroad becomes a natural choice.
But, they’re not the only students choosing to study internationally. Some degrees, especially MS Engineering programmes, are better pursued abroad. The structure of education, the specialisations available, and the expected ROIs are simply higher for MS degrees in some countries, like the United States.
And, since ROI is the first question you should be asking when considering a post-graduate degree, you may have to look at universities abroad.
If you don’t want to borrow more money than you need for your education, then, surely, you don’t want to consider an international degree. That will cost you (and potentially your parents) so much more, won’t it?
Except, there’s something else you need to know. The ideal student loan debt should total less than your expected annual income after graduation. If you take a loan for the full $70,000 estimated spend, your annual salary should be at least $70,000.
According to the statistics on Payscale.com and Huffington Post, that’s not hard to achieve. If you’re sitting with an MS Mechanical Engineering degree from an American university and/or working with an MS degree in the US, that’s about the minimum annual salary you should expect.
And, rather surprisingly, more than 20 percent of engineering students in the United States aren’t American. But, that’s beside the point, isn’t it?
The real question is how you’ll find that $70,000 to fund your studies? Could you really ask your parents to put their future on the line for you to pursue an international MS Engineering or MBA abroad?
You may not have to.
Remember that Swedish students would never ask their parents to co-sign on a loan. And, think back to all those American graduate-level students that don’t rely on their families. They receive loans without co-signers, securities, or collateral. And, they’re not the only ones able to take these loans.
Once you break out of the financial norms of your home country (as any MS abroad student does by default), the possibility of tapping into global financial structures is higher. You’ll find that many American universities are so certain of their grads’ successes and job stability that the school itself acts as a co-signer for US loans.
That’s not the only option for funding MS abroad studies either. Because it’s not abnormal to find loans that don’t require co-signers or collateral in many countries, global lenders exist that operate with the same principles.
Believe it or not, international loan platforms exist for MS Engineering loans. And, yes, these are available to Indian students who are used to requiring their parents’ signature as much as they are for Swedish students who wouldn’t dare.
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.