The challenges and opportunities of a strong dollar for international students
“Students should also be reminded that loans are only one option to fund their overseas education”
With the US dollar now worth nearly as much as the euro, you might be looking forward to your next Italian vacation. But the same economic trend poses both a challenge and an opportunity for students from around the world.
The Indian rupee has fallen by 6% since January, and the Chinese yuan hit a record low in July. Other countries are experiencing similar trends – though perhaps none worse than Sri Lanka, whose rupee has fallen by half since March. This means that students from these countries could encounter a major financial shortfall when it’s time to pay tuition.
At MPOWER Financing, we see this problem all the time: Students used to have enough money (in their home currency), but currency depreciation affects what they can afford in the US – perhaps during their final semester, final year, or for longer. A strong dollar can thus result in a substantially increased cost of education for students, and leave them stranded when their foreign currency-denominated savings are no longer enough to fund their education.
Fortunately, students have many solutions to these last-minute financial concerns: indeed, a strong dollar can be a blessing in disguise. The first solution is for students to leverage US dollar loans, which are particularly valuable in a strong dollar environment. Students (and their parents) who take out foreign-currency loans are rushing to seek additional loans or top-up funding so that students don’t have to defer their education. But with US dollar funds secured, students can enjoy the certainty that they will have funds available to them when they need to be drawn upon – regardless of the future value of the dollar.
Second, in today’s rising interest rate environment, students should consider a fixed-rate loan. Fixed-rate loans have interest rates that are fixed (pre-determined) for the entire tenure of the loan. These loans have a constant monthly installment, and students can be confident their payments will never increase over time – regardless of what happens with market interest rates. Fixed-rate loans provide predictable payments and enable stronger financial planning.
Third, students should find a lender offering no-collateral, no-cosigner options. The primary advantage of such loans is obvious: A family home is not on the line, and the student’s parents are not liable to repay the loan. But in addition to these benefits, processing times are often considerably faster for no-collateral, no-cosigner loans because there is no need to evaluate another individual’s credit or appraise a family home. Students can complete an application and receive a conditional offer for a no-collateral, no-cosigner loan through a lender like MPOWER Financing in only 20 minutes – even on their smartphone in the dead of night.
Unfortunately, these options tend to be rare around the world: a significant share of Indian students, for example, take out property-backed variable rate loans denominated in rupees. It’s important that university recruitment and financial aid officials in the US are equipped to present students with better options – especially those that don’t require a cosigner or collateral. These can be found through portals like edupass.org, internationalstudentloan.com, and IEFA.org. The strongest institutions have recruitment officials that speak frequently with their colleagues at the financial aid team to share how previous students have funded their education.
Importantly, schools leveraging loan portals like elmselect.com and fastproducts.org should be sure that those suggested organisations have a page specifically designed for an international population available. But this is only a first step: Many lenders ostensibly lend to international students, but only to those who are fortunate enough to have a US citizen as a cosigner – an extremely small share of international students. The “International” page will therefore be full of options which few students can reasonably take advantage of, and will distract students from the few firms like MPOWER Financing and Prodigy Finance which may actually be able to support them without a cosigner or collateral.
Students should also be reminded that loans are only one option to fund their overseas education. Scholarships, for example, should always be recommended as a primary source of funds for students. Scholarship aggregators and portals such as internationalscholarships.com and eduPASS.org can provide targeted scholarship offerings for students based on their unique profiles and characteristics. Furthermore, when their visa allows, many students pursue part-time or co-op employment in addition to loans to fund their studies. A combination of all sources of funding can help students ensure that they are making the best financial decision amid a challenging but opportune economic environment.
About the Author: Emily Herman is the Head of University Relations for MPOWER Financing, which offers scholarships and no-cosigner loans to students from around the world. To learn more about MPOWER Financing, please visit www.mpowerfinancing.com or write to email@example.com.