Types of loans available

 Students studying in Foreign Schools are not eligible for grants from the US Federal government, but may apply for loans. There are three main types of loan:

  • Direct Subsidized Loans are loans made to eligible undergraduate students who demonstrate financial need to help cover the costs of higher education at a college or career school.
  • Direct Unsubsidized Loans are loans made to eligible undergraduate, graduate, and professional students, but eligibility is not based on financial need.
  • Direct PLUS Loans are loans made to graduate or professional students and parents of dependent undergraduate students to help pay for education expenses not covered by other financial aid. Eligibility is not based on financial need, but a credit check is required. Borrowers who have an adverse credit history must meet additional requirements to qualify.

In addition some commercial lenders may be willing to offer private loans at commercial rates subject to credit rating and often requiring a co-signor.

Education Loans (Direct, PLUS and any private loans) are to cover the primary costs of education (tuition, student accommodation, books/supplies, commuter travel). Loans are not intended to cover other expenses, not directly related to study. You should plan a budget and make sure you have enough money for your time of study.

a)         Direct Federal Loans:

Subsidised Loan - is a federally subsidized loan, which means that there are no interest charges while you are enrolled at least half time, and for six months after you leave school or drop below half time. This six month period is called a grace period. 

Unsubsidised Loan - is not based on financial need. You are responsible for payment of interest for the full period of the loan. Whilst studying at least half time, or during deferment or grace periods you have the option of paying the interest or having it capitalised and added to the total value of the loan.

b)        Graduate PLUS loan for Professional Students.

 Students will be subject to a stringent credit check.  Title IV rules apply as do audit requirements.  Students must have exhausted all their Direct loan options both subsidised and unsubsidised before applying for a PLUS loan

 For Graduate PLUS loans a graduate borrower automatically receives an additional six month deferment after the borrower ceases at least half time enrolment

c)        ParentPlus Loan

Parents of dependent undergraduates can take out a ParentPlus Loan under their name. Parents can borrow up to their child’s cost of attendance, as calculated by the Foreign School. These loans start repayment while the child is in school.

If you're a parent PLUS borrower, you can defer repayment of Direct PLUS Loans while the student for whom you obtained the loan is enrolled at least half time, and for an additional 6 months after the student graduates or drops below half-time enrollment (half-time enrollment status is determined by your child's school). You must separately request each deferment period.

Interest that accrues during these periods will be capitalized if not paid by the parent during the deferment.

d)        Private loans

Very few private lenders remain in the market offering loans to US students attending University overseas. For those that do, students can borrow up to the total cost of attendance less any Direct or PLUS loans already taken out but no more, (subject to credit rating). Borrowers may be required to have a co-signer. You are advised to carefully check the terms and conditions of any private loan offered by a commercial lender prior to taking out the loan.

Students studying on degree programmes, PGCEs and other certificate programmes and study abroad programmes should be eligible for a private loan.

Before applying for a private loan, students should always exhaust all of their federal loan eligibility. Parents may also want to consider using federal parent loan funds before co-signing a private loan for a student.

The University of Manchester encourages students and families using private loans to apply for one full academic year at a time rather than on a per-term basis. This prevents multiple credits hits on borrower credit report and ensures that a student has a way to cover their costs for a full academic year.

We recommend that students apply for a private loan with a co-signer. A co-signer assumes responsibility for a loan should the borrower fail to repay. Having a co-signer on the loan often results in a lower interest rate and reduced fees.

Lenders

Below is an example of a lender, offering private educational loans that are commonly utilized by the University of Manchester.  Each lender's loan programs may have different requirements. Be sure to check with your lender regarding the loan programs you qualify for that best suit your needs:

Sallie Mae Private Loans

Interest rates and charges

For full details of the interest rates associated with US Federal loans please refer to https://studentaid.gov/understand-aid/types/loans/interest-rates.

In response to the COVID-19 emergency relief period, the interest rate on all Direct Loans has been temporarily set at 0% until at least September 30, 2021. Once the COVID-19 emergency relief period ends, the rates as described below will be in effect for loans first disbursed on or after July 1, 2021. For Federal loans first disbursed between 1st July 2021 and 30th June 2022 the interest rates are as follows:

The interest rate on a Plus loan is fixed at 6.28%.

The interest rate on a Direct subsidised or unsubsidised for undergraduate students is fixed at 3.73%. For graduate or professional studies unsubsidised loans the rate is fixed at 5.28% 

In addition there is an origination fee for Direct loans, both subsidised and unsubsidised, first disbursed between 1st October 2020 and 1st October 2021 of 1.057%(net), which is deducted at source prior to the disbursement of the loans. The origination fee for Parent PLUS and Graduate PLUS loans first disbursed between 1st October 2020 and 1st October 2021 is 4.228%(net).

Please be aware that private loans will incur a commercial interest rate. Look at interest rates and charges with different lenders. A lender may require someone else with a good credit rating as a guarantor or as a co-borrower.

Borrow what you need, but remember you have to repay it.

Repayment of Federal Loans

Repayment of Federal loans is a very serious obligation. There are a number of repayment options available to help borrowers to meet their obligations.

Remember, you are required to make your student loan payments even if you:

  • do not complete your education
  • are not employed upon completion of your studies;
  • do not find employment in your field of study;
  • feel that the education you received did not meet your expectations;
  • do not receive a bill;

You must make your loan repayments on time or it may have serious consequences. It may:

  • damage your credit rating, which could impact your ability to borrow
  • refer your account to a collection agency
  • incur collection costs
  • cause garnishment of your wages
  • cause withholding of your state or Federal treasury payments (including federal tax refunds, Social Security benefits, etc.)
  • cause a civil lawsuit, including court costs and legal expenses
  • cause loss of deferment and forbearance entitlements and flexible repayment options
  • cause loss of eligibility for further financial aid
  • suspend your professional license

Repayment options

There are a number of repayment options available. You should discuss them with your lender to determine which will be the best for you:

  • Standard Repayment
  • Graduated Repayment
  • Extended Repayment
  • Income-Based Repayment
  • Pay As You Earn Repayment
  • Income-Contingent Repayment
  • Income-Sensitive Repayment

For full details see the Department of Education Repayment webpages