5 Common Myths About Engineering Education Loans in the USA – Debunked!

Engineering programs in the USA can involve a significant financial commitment, especially when tuition, accommodation, insurance, travel and other study costs are considered. Education loans can help bridge this funding gap, but engineering students often come across assumptions about easier approvals, collateral, cosigners and interest rates.

The reality is more nuanced. Being admitted to an engineering program can form part of a lender’s assessment, but loan approval ultimately depends on the specific lender and loan product.

Here are five common myths about engineering education loans in the USA and what students should know before applying.

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Do Engineering Students Get Easier Loans?

Not automatically.

A lender may consider your university, program, academic record and future earning potential when assessing your application. However, studying engineering does not by itself guarantee easier approval.

Different lenders use different criteria. For example, SBI’s Global Ed-Vantage scheme considers students admitted to eligible overseas institutions and has separate security requirements based on the loan structure. MPOWER states that it considers factors such as the student’s academic profile and future earning potential for its international student loans. (sbi.co.in) (mpowerfinancing.com)

So, an engineering admit may be relevant to your overall profile, but it is only one part of the lending decision.

Myth 1: Engineering Guarantees Education Loan Approval

Myth: Getting into an engineering program in the USA means your education loan will automatically be approved.

Fact: Admission alone does not guarantee loan approval.

Lenders may evaluate factors such as:

• University and program
• Academic record
• Required loan amount
• Co-applicant profile, where applicable
• Credit history, where applicable
• Collateral, if required
• Future earning potential
• Lender-specific eligibility requirements

The weight given to each factor differs by lender.

For example, an Indian bank may assess the student’s admission along with the co-applicant and security requirements. A no-cosigner international lender may use a different underwriting model that considers academic and career potential.

Bottom line: Engineering can be part of your academic profile, but it does not guarantee approval.

Myth 2: Collateral Is Always Required for an Engineering Education Loan

Myth: You need property or another asset to finance an engineering degree in the USA.

Fact: Whether collateral is required depends on the loan product.

Students may find both secured and unsecured options.

For example, SBI Global Ed-Vantage currently provides collateral-free loans of up to ₹50 lakh for students admitted to select institutions, while secured loans can go up to ₹3 crore. SBI’s terms state that collateral-free loans for eligible institutions are offered with the co-obligation of a parent or guardian.

International lenders can work differently. MPOWER states that its eligible international student loans do not require collateral or a cosigner.

This means students should distinguish between:

• Secured loans requiring collateral
• Unsecured loans requiring a co-applicant
• US loans requiring an eligible cosigner
• International student requiring neither an education loan without a co-applicant

Bottom line: Collateral is not mandatory for every engineering education loan.

Myth 3: A US Cosigner Is Mandatory

Myth: Every international engineering student needs a US cosigner to get an education loan for the USA.

Fact: A US cosigner is required for some education loan to study in USA products, not all.

Certain US private student loan products require international applicants to apply with an eligible US cosigner. The cosigner must meet that lender’s credit, income and residency requirements.

However, this does not apply to every funding route.

Indian banks and NBFCs may instead require an Indian co-applicant. Some international lenders offer loans without a cosigner. MPOWER, for example, states that eligible international students can apply without a US cosigner or collateral.

Therefore, students should compare three separate concepts:

Indian co-applicant: Usually a parent, guardian or other eligible person who joins the loan application according to lender requirements.

US cosigner: A person who meets the US lender’s specific credit and residency requirements and shares responsibility for repayment.

No-cosigner loan: A loan where eligibility is assessed without requiring a cosigner, subject to the lender’s underwriting criteria.

Bottom line: A US cosigner is mandatory only for loan products that specifically require one.

Myth 4: Engineering Students Automatically Get Lower Interest Rates

Myth: Engineering students receive lower education loan interest rates simply because they are studying a technical course.

Fact: Interest rates depend on the lender, loan product and applicant profile.

Depending on the lender, pricing can be influenced by factors such as:

• Loan type
• University or institution
• Credit profile
• Co-applicant or cosigner profile
• Collateral
• Loan amount
• Applicable benchmark rate
• Lender-specific concessions

Some lenders may offer different pricing for select universities or loan categories, but this should not be interpreted as a universal engineering discount.

For example, SBI publishes different rates for its education loan schemes and selected institutions rather than one standard rate for every overseas engineering student. Its rates can also be floating and therefore change over time.

Another common misunderstanding is that a higher interest rate increases the original loan amount. It does not. The principal is the amount borrowed. Interest increases your borrowing cost and affects your EMI and total repayment.

Bottom line: Your engineering program alone does not determine your interest rate.

Myth 5: A High Engineering Salary Makes Loan Repayment Easy

Myth: Engineers earn well in the USA, so taking a large education loan is not a major concern.

Fact: Future salary should not be treated as guaranteed repayment capacity.

Engineering salaries vary considerably depending on:

• Engineering specialization
• Employer
• Location
• Work experience
• Job role
• Employment status after graduation

Students should therefore calculate affordability before borrowing instead of relying on an expected salary.

Consider:

• Total amount borrowed
• Interest rate or APR
• Repayment tenure
• Expected monthly payment
• Moratorium terms
• Currency risk for INR loans repaid from overseas earnings
• Living expenses after graduation
• Possible periods without employment

A higher salary can make repayment more manageable, but it does not remove the financial obligation or uncertainty associated with borrowing.

Bottom line: Borrow based on realistic repayment calculations, not only expected engineering salaries.

What Lenders Actually Evaluate

There is no universal approval formula for an engineering education loan. The factors assessed depend on the lender and product.

Engineering Education Loan Options for the USA

International engineering students can broadly explore four lender categories.

Indian Public and Private Banks

Indian banks offer overseas education loans that may be secured or unsecured depending on the scheme, loan amount and institution.

SBI Global Ed-Vantage, for example, provides overseas education financing for eligible foreign colleges and universities. Its published scheme currently includes loans up to ₹3 crore and collateral-free funding up to ₹50 lakh for select institutions.

NBFCs

Indian NBFCs also provide education loans for overseas study. Eligibility, collateral requirements, co-applicant criteria, interest rates and loan limits differ by lender and applicant profile.

Students should compare the complete borrowing cost rather than only the advertised interest rate.

US Private Lenders

Some US lenders provide private student loans to international students, but eligibility conditions vary.

Certain products require an eligible US cosigner. Students should verify:

• Eligible university
• International student eligibility
• Cosigner requirements
• Credit requirements
• Interest rate or APR
• Repayment terms

Do not assume that one US lender’s eligibility rules apply to another.

International No-cosigner Lenders

Some lenders specifically finance eligible international students without requiring US credit history, collateral or a traditional cosigner.

MPOWER, for example, states that its eligible loans for international students do not require a cosigner or collateral and that its assessment considers academic and future career potential.

Eligibility still depends on factors such as the university, program and lender requirements.

How to Compare Engineering Education Loans

Instead of assuming that one lender type is always better, compare offers based on:

• Loan amount available
• Interest rate and APR
• Fixed or floating rate
• Collateral requirement
• Co-applicant requirement
• US cosigner requirement
• Processing and other fees
• Moratorium period
• Repayment tenure
• Prepayment conditions
• Eligible expenses
• Currency of borrowing and repayment
• Cost of studying engineering

Most importantly, compare the total repayment, not just the headline interest rate.

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How Nomad Credit Helps You Make a Better Choice:

Engineering students may qualify for different loan options depending on their university, required funding, co-applicant profile and access to collateral or a US cosigner.

Nomad Credit helps students:

• Compare education loan options
• Explore Indian banks and NBFCs
• Check international lender options
• Explore US cosigner loan options
• Compare collateral and non-collateral funding
• Understand loan terms and repayment
• Find financing based on their study abroad profile

Comparing options before applying can help you identify a loan structure that better matches your funding requirements.

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