# Co-Signer for Student Loan



## rohanberi (Jul 29, 2013)

Hello,

I am an International student and will be applying for next fall MBA in United States. 
I have a quick question to get clarified, apologize if the question may seem lame. My uncle, an IT engineer, is living in United States for last 13 years, but he is not a Green Card Holder. Is he eligible for the US Co-Signer role applicable for Student Loan, or one needs to have a US Citizenship for being a co-signer for loans of International students ?

Any help will be highly appreciated. 

Thanks and Regards,
Rohan Beri.


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## twostep (Apr 3, 2008)

That depends on underwriting requirements for the loan.


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## BBCWatcher (Dec 28, 2012)

But no is the general answer.

A collateralized loan, such as a home equity loan, may be possible if you and/or your cosigner have collateral. Check to make sure the interest on this type of loan is tax deductible, either because it is automatically (most home loans) or because all of the loan amount has been used for qualified education expenses.


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## twostep (Apr 3, 2008)

A first mortgage on primary residence is in most cases tax deductible. OP did not go into details as to which visa he will use or what monies/scholarships he has lined up.


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## rohanberi (Jul 29, 2013)

twostep said:


> A first mortgage on primary residence is in most cases tax deductible. OP did not go into details as to which visa he will use or what monies/scholarships he has lined up.


Thanks for the reply. I am not sure if I got that correct. 
Though my uncle is not a Green Card Holder, he has an ongoing mortgage on his home. When I read for the Co-signers definition in different websites, it states "United States banks do not offer private student loans to international students without a cosigner. Many international student loan programs require a cosigner who is a _U.S. citizen or permanent U.S. resident_". So, I was in a slight confusion whether a person who is living in for past decade or so, can act as a US Co-Signer for my role or not.
And what I got from your reply, is, that he can act as a Co-Signer for my study loan. Please help confirm my understanding. 

Thanks and Regards,
Rohan Beri.


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## BBCWatcher (Dec 28, 2012)

No, that's not what I posted.

Most U.S. lenders are not going to provide unsecured student loans to non-citizens/non-permanent residents. A co-signer who is also not a citizen/not a permanent resident doesn't help. He has the same problem you do.

Think of it this way: what assurance does the lender have that you will repay? Not much. What additional assurance does the lender have that your co-signer would pay if you don't? Also not much. Both of you have no permanent right to stay in the U.S., and the lender would have extreme difficulty (at best) trying to collect payment for their loan from overseas.

The lender will want reasonable assurance of repayment. One common solution is a _secured_ loan. A home equity loan is one type of secured loan, and it's probably the most common type of secured loan to help pay educational expenses. If your co-signer has available home equity to borrow against, many more lenders would be willing to lend him money. That's because the lender would have an ownership interest in the home if there's a default, and homes don't need green cards to remain in the U.S. The home is immovable, and lenders like that very much.

Home equity interest rates are low -- probably lower than student loan rates -- so that's good. If your co-signer has a primary mortgage that's fine. A primary mortgage simply reduces the home equity (if any) available to borrow against, and his servicing his primary mortgage is factored into his ability to repay the home equity loan. As I stated earlier, if possible interest paid on the home equity loan should be made tax deductible, either directly (via the mortgage interest deduction) or via the educational expense deduction. Consequently it's important to understand the tax implications of that home equity loan and to maximize available tax benefits as much as possible.


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## twostep (Apr 3, 2008)

rohanberi said:


> Thanks for the reply. I am not sure if I got that correct.
> Though my uncle is not a Green Card Holder, he has an ongoing mortgage on his home. When I read for the Co-signers definition in different websites, it states "United States banks do not offer private student loans to international students without a cosigner. Many international student loan programs require a cosigner who is a _U.S. citizen or permanent U.S. resident_". So, I was in a slight confusion whether a person who is living in for past decade or so, can act as a US Co-Signer for my role or not.
> And what I got from your reply, is, that he can act as a Co-Signer for my study loan. Please help confirm my understanding.
> 
> ...


Take it one step at a time. Why does your uncle not contact his bank to speak about a potential student loan for you? Have you already been admitted to an education institution? If so - have you contacted Financial Aid and International Students to discuss your question with them?


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## rohanberi (Jul 29, 2013)

BBCWatcher - Thanks a lot BBCWatcher. That clears every inch of my doubt. 
Certainly, I will research more on home equity loan and will post my doubts accordingly.


TwoStep - That sounds a better option. I will check in for that. 
I am planning for next fall, so will be applying for schools in next couple of months,


Thanks and Regards,
Rohan Beri.


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## rohanberi (Jul 29, 2013)

*Thanks*

Can collateral loan, such as the home equity one, have installments that can be paid after a particular amount of time, say in my case, after my completion of degree OR does the installment period start from the moment the loan is issued.


I shall be thankful if you could clarify my doubt. Any help will be highly appreciated. 



BBCWatcher said:


> No, that's not what I posted.
> 
> Most U.S. lenders are not going to provide unsecured student loans to non-citizens/non-permanent residents. A co-signer who is also not a citizen/not a permanent resident doesn't help. He has the same problem you do.
> 
> ...


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## twostep (Apr 3, 2008)

Student loans have the lowest rates and most lenient repayment options. Do your research through admissions/finance of the respective schools you are looking at. 
Tax deductible equity lines depend on a number of factors. The potential co-signer's cpa should be consulted before getting hopes up. Please consider that this may have significant impact on the co-signer's credit rating and his ability to satisfy his own future credit needs. No - banks are in the business of making money! Remember - you need liquid funds for the first year (tuition/books/cost of living) and a source for the remainder of your studies. Where will it come from? Who will be making the loan payments for the equity line?


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## rohanberi (Jul 29, 2013)

Dear TwoStep,

Thanks for all the information on Student loans and yes, I have done my research on student loans. And to the best of my knowledge, student loans can be availed in case of two factors :
1) Your co-signer be an American citizen.
2) University you are applying for has some institutional tie-ups with creditors.

Let me just give you a brief synopsis on my case.

And since In my case, no such criteria gets fulfilled, hence, apart from the liquid cash, I would need to get funds from some institution. My concern is if I opt to get funds from an Indian Institution, by the time I would be starting with re-payment of loan with USD, currency rates may vary, to any extent, hence, I may suffer good deal of amount in currency conversion.
Now, having said that, since I am not eligible to avail student loan, I am looking for some avenue that will help potentially save me some funds, which in turn would otherwise be exhausted in currency conversion. And as *BBC Watcher* pointed out, I can avail collateral loan on home equity. So my question is specifically on that particular loan avenue, on how the instalments could be planned. Kindly pour in your expertise in case you are aware about the said avenue.


Thanks,
Rohan Beri



twostep said:


> Student loans have the lowest rates and most lenient repayment options. Do your research through admissions/finance of the respective schools you are looking at.
> Tax deductible equity lines depend on a number of factors. The potential co-signer's cpa should be consulted before getting hopes up. Please consider that this may have significant impact on the co-signer's credit rating and his ability to satisfy his own future credit needs. No - banks are in the business of making money! Remember - you need liquid funds for the first year (tuition/books/cost of living) and a source for the remainder of your studies. Where will it come from? Who will be making the loan payments for the equity line?


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## BBCWatcher (Dec 28, 2012)

Well, assuming a sufficient home equity credit line, one option is to borrow more than needed and use the excess to repay the initial installments. Be very careful about such maneuvers, of course. Some home equity lenders may be able to defer initial payments, but interest will still accrue of course, and you should compare financing costs -- including any tax benefits -- very carefully.

Mortgage rates are still very low, so tapping into home equity to fund educational expenses can actually make financial sense. Just do lots of careful research before taking action.


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## twostep (Apr 3, 2008)

Some relative's home/company will be used to collateralize the project. That person's personal creditworthiness and home/business will depend on payments being made in a timely manner. Depending on the lender it may be possible to go up to 90 days to start monthly payments. And then? Who will pay it? Do not forget - it is a line of credit and may be called by the lender. The relative may want/have to sell the collateral - what then?

Why do you not do your undergrad in India as it is considerably easier to get scholarships/funds for grad work?


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## BBCWatcher (Dec 28, 2012)

Twostep, it's hardly unusual for parents and/or relatives to obtain home equity loans to fund their relatives' university educations. It's downright common, actually. Yes, it's something to weigh carefully and to research thoroughly, but it often is the most financially prudent option, especially considering the recent student loan interest rate hikes (which is not even an option for the poster). U.S. university educations are still yielding strong returns in terms of lifetime income, assuming satisfactory completion of the degree program (and perhaps choice of degree program and institution).

I've never heard of a pre-term "callable" home equity loan (second mortgage). The loan will have a payment period of, say, 15 years. Provided timely payments are made, in full, nobody loses a house. But yes, it is a secured loan, so nonpayment can result in foreclosure. The person taking out the loan must be aware of that risk and be prepared to take that risk. It might make a lot of sense to buy a term life insurance policy, in fact, so that if the poster dies (God forbid) the life insurance proceeds can pay off the loan. Such a policy should be very cheap since this risk is low, but there is a slight risk.


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## twostep (Apr 3, 2008)

BBCWatcher said:


> Twostep, it's hardly unusual for parents and/or relatives to obtain home equity loans to fund their relatives' university educations. It's downright common, actually. Yes, it's something to weigh carefully and to research thoroughly, but it often is the most financially prudent option, especially considering the recent student loan interest rate hikes (which is not even an option for the poster). U.S. university educations are still yielding strong returns in terms of lifetime income, assuming satisfactory completion of the degree program (and perhaps choice of degree program and institution).
> 
> I've never heard of a pre-term "callable" home equity loan (second mortgage). The loan will have a payment period of, say, 15 years. Provided timely payments are made, in full, nobody loses a house. But yes, it is a secured loan, so nonpayment can result in foreclosure. The person taking out the loan must be aware of that risk and be prepared to take that risk. It might make a lot of sense to buy a term life insurance policy, in fact, so that if the poster dies (God forbid) the life insurance proceeds can pay off the loan. Such a policy should be very cheap since this risk is low, but there is a slight risk.


An EAL is an open ended line of credit generally renewable on an annual basis. It is not a loan with a set life span and conditions. There is no "final payment". It is not a second mortgage. Who is supposed to pay for all this convoluted scheme?


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## BBCWatcher (Dec 28, 2012)

Did anybody mention an EAL? I don't think I did, anyway.

Let's be precise: second mortgage (or complete mortgage refinancing). A loan with a fixed term and could have either a fixed or variable interest rate. (I'd probably vote for fixed.) The interest on a mortgage is generally U.S. tax deductible. Educational expenses are generally not subject to U.S. gift tax. _Assuming the university education is a wise investment_ (which means completing it, among other things), a second (or larger first) mortgage is often a sensible way to finance it.

I want to amend something I posted above. U.S. federal direct student loans, particularly undergraduate loans, are a pretty good deal if you have to borrow money for education. I was reading the interest rate tables incorrectly -- they're better than I thought. However, those loans don't seem to be available to the poster. As a second best option, tapping into someone's home equity to secure a loan is a pretty reasonable alternative in general.

Although the cost of a U.S. university education has been rising faster than the rate of inflation for many years, it still seems to be a good investment, at least for students with U.S. employment eligibility. So it can be a very prudent financial decision to tap, say, a 5% cost of money to finance a university degree. Mileage may vary, but this wouldn't be a surprising outcome.


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## rohanberi (Jul 29, 2013)

*Thanks*

Hello,

Thanks for the relevant info. I really appreciate your help. 

I shall dig in for some more info on second mortgage. And I certainly agree with the link that you have posted; spending good deal of money on a college degree from good b-school (provided one completes it) is one of the best options to spend your money on. 

I know that an alien student cannot get student loan from a US federal institution, but do you know any such case or maybe loophole where in an alien student can apply for a US federal loan for his studies. 

Thanks,
Rohan Beri.



BBCWatcher said:


> Did anybody mention an EAL? I don't think I did, anyway.
> 
> Let's be precise: second mortgage (or complete mortgage refinancing). A loan with a fixed term and could have either a fixed or variable interest rate. (I'd probably vote for fixed.) The interest on a mortgage is generally U.S. tax deductible. Educational expenses are generally not subject to U.S. gift tax. _Assuming the university education is a wise investment_ (which means completing it, among other things), a second (or larger first) mortgage is often a sensible way to finance it.
> 
> ...


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## BBCWatcher (Dec 28, 2012)

You can explore the U.S. federal student assistance eligibility requirements for non-U.S. citizens here to see if any categories would apply to you.


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## rohanberi (Jul 29, 2013)

I have browsed in through this link long time back and this link does categorically mention that students on F-1 cannot receive federal aid.

I shall keep my research ongoing on this topic, and at the same time shall be looking forward for your help on the same. 

Thanks,
Rohan Beri.




BBCWatcher said:


> You can explore the U.S. federal student assistance eligibility requirements for non-U.S. citizens here to see if any categories would apply to you.


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## Beauty1 (Nov 17, 2013)

I am a U.K citizen looking to go to University. I am unable to get a loan from the bank as i have only been in the country for one year. I cannot take equity on my home which paid outright, again because i have only been here a year. The only thing i can do is get a co-signer which i refuse to do...so i'm stuffed basically. i do hope you are successful and get something sorted.


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## twostep (Apr 3, 2008)

Beauty1 said:


> I am a U.K citizen looking to go to University. I am unable to get a loan from the bank as i have only been in the country for one year. I cannot take equity on my home which paid outright, again because i have only been here a year. The only thing i can do is get a co-signer which i refuse to do...so i'm stuffed basically. i do hope you are successful and get something sorted.


There is no banking law which says you cannot get an equity loan on your primary residence if you own it out right because you have been in the US for one year only. A number of factors make up the underwriting matrix of every lender.


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## Beauty1 (Nov 17, 2013)

I have looking at all possibilties for myself regards a loan for tuition and there is no chance of me getting a loan. One i dont want to ask my freind who is a citizen to be a co-signer because of the implications to him and two i have been told by my own bank that i will not qualify for a equity loan as i have only been a resident for 1 year. I own my house outright and own one car plus a small amount of credit on the other. i also have a small business. i guess the problem is that at the end of the day i dont have a Green card.
I have now contacted the University to ask if there is any 'form' of student loan that i might qualify for but i'm not hopeful. Also i have read that to qualify for a federal loan i would need to have a Green card or have a student F1/F2 visa..again which i dont have as i have an E2 visa. So i cant win!!!!
It does seem awful unfair that students on the F visas qualify and i dont. If i'm right a student visa lasts as long as your course lasts which could be anything from a year to 4 years. I have a 5 year visa...so there is something not right there.
if i want to do the course that i intially set out to do i will have to be able to pay the large fees upfront.


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## BBCWatcher (Dec 28, 2012)

I think the point is that you may have given up too quickly on the home equity loan. You asked one bank. Have you asked any others? Have you asked any credit unions? Your university, for example, may have an affiliated credit union that could very well be willing to provide you with a home equity loan.

Your basic problem is that you don't have a well developed credit report yet (one year), but that just means you have to work a bit more with prospective lenders to fill out that credit history. If you can supplement your U.S. credit history with an independent, quality non-U.S. credit history, that can help. If you can show a record of timely payments to billers that aren't credit bureau reportable, to supplement your existing credit report, that might also help.

If I might ask, why did you buy a home before keeping enough money on hand to pay tuition? That seems a bit odd. What's past is past, but I'm surprised you're in that particular situation. Did you have someone help you out in buying the home who's now unwilling or unable to provide more?

You could sell the home to raise cash to pay for an education (and associated living expenses). In some parts of the U.S. (e.g. parts of California) even one year of home ownership can be a profitable year at this writing.


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