Types of Education Loans to Study in the USA

Funding a US degree usually means combining savings, scholarships, and some form of borrowed money, and the borrowed portion can come from meaningfully different types of lenders with different rules.

Broadly, education loans for the USA split along two axes: whether the loan is secured against collateral or unsecured, and which category of lender is issuing it, an Indian bank or NBFC, a US lender requiring a cosigner, or an international lender that needs neither. This guide walks through all four combinations so you can see what actually applies to your situation rather than treating “education loan” as one single product.

This article is educational and general in nature, not financial advice. Loan terms, interest rates, and eligibility criteria change often and are set individually by each lender. 

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Education Loan Types for USA

Education loans to study in the USA are broadly categorized into 4 based on eligibility and availability. 

• Secured loans: collateralized (property, fixed deposits, or any other acceptable collateral), normally available from Indian banks and certain NBFCs.
• Unsecured loans: non-collateralized, normally determined based on the student’s educational background and income/credit rating of a co-borrower, provided by Indian banks, NBFCs, and some foreign banks.
• USD cosigner student loans: dollar-denominated loans issued by the US lending institutions, decided upon based mostly on the credit and income rating of a US-based cosigner, since the student usually has no US credit record.
• No-cosigner international loans: USD-denominated loans from international lenders that don’t require a US cosigner or collateral, assessed instead on the student’s academic and career profile.

It’s worth being precise about terminology here, since “co-applicant” and “cosigner” get used interchangeably in a lot of loan content, but they usually refer to different things.

An Indian co-applicant (commonly a parent or guardian) jointly applies for a rupee-denominated loan from an Indian bank or NBFC, and their income and credit history are assessed as part of that Indian loan.

A US cosigner is a separate concept, specifically a person based in the United States, generally required to be a US citizen or permanent resident by most US lenders, who co-signs a USD loan issued by a US lender and is assessed against that lender’s own US-based underwriting criteria.

These aren’t interchangeable, and a strong Indian co-applicant doesn’t substitute for a US cosigner requirement, or vice versa.

Secured Education Loans

An education loan that is collateralized means the loan will be guaranteed through some form of collateral, usually land or other kinds of approved financial assets.

In the case of India, a collateralized loan for education abroad would normally adhere to the provisions of the Model Education Loan Scheme formulated by the Indian Banks’ Association (IBA), followed by many of the government as well as privately-owned banks.

As per this scheme, a loan amount of up to approximately ₹4 lakh does not need any kind of collateral or margin money, while loans in the range of approximately ₹4 to ₹7.5 lakh do not need tangible forms of collateral (even if a third party guarantee could be required), and all amounts exceeding ₹7.5 lakh will normally require a form of collateral equal to the loan amount.

Advantages:

• Generally allows for a higher loan amount than what’s available without collateral.
• Often, though not universally, comes with a comparatively lower interest rate, since the lender’s risk is reduced.
• Widely available through public and private Indian banks that follow the IBA framework.

Limitations:

• Must have an acceptable form of collateral. There are different types of collateral that may not be accepted by all lenders, since some may exclude some types like agricultural land, among others.
• Must evaluate the earning capacity of the co-applicant. This is because the collateral is only meant to support the requirement, and not replace it.
• Evaluation of the value of the collateral takes more time than unsecured loans.

Unsecured Education Loans

An unsecured education loan doesn’t require collateral. It’s important to correct a common misconception here: an unsecured loan doesn’t automatically mean a cosigner is mandatory in every case. Requirements differ by lender:

• According to the IBA framework, unsecured loans of up to around ₹7.5 lakh are normally available without any collateral, and this can be under the Credit Guarantee Fund Scheme for Education Loans, which is guaranteed by the government. The Indian co-applicant is normally a requirement.
• Various Indian NBFCs such as Avanse Financial Services and Credila offer loans that are unsecured in higher amounts than those offered through the traditional IBA framework, depending on various factors such as the academic profile of the applicant, university, and the co-applicant strength.
• Separately, a small group of international, no-cosigner lenders (covered in detail below) offer unsecured loans without requiring any cosigner or co-applicant at all, evaluating the student’s own profile instead. This is a genuinely different product from an unsecured Indian bank or NBFC loan, and it’s worth not collapsing the two into one category.

Advantages:

• There is no need to pledge any property, thus removing a big hindrance for applicants who do not have collateral available.
• The process may be quicker than that of a secured loan, as there is no need to appraise the value of the collateral, although this depends on the lender and the thoroughness of the documentation provided.

Limitations:

• The amount you may be able to borrow may be smaller than the one you would be able to obtain through a secured loan, again based on the lender’s discretion.
• In case of lack of collateral, the decision depends much on the co-applicant’s financial situation or on the university program being an approved one for lenders offering no cosigner loans internationally.

US Cosigner Student Loans

US cosigner student loans are USD-denominated loans issued directly by US-based private lenders, where approval is based primarily on a cosigner’s US credit history and income rather than the international student’s own credit profile, since most international students don’t yet have an established US credit history. Earnest and similar US lenders are examples of this category.

Eligibility, based on Earnest’s own published international-student loan information:

• The cosigner must generally be a US citizen or permanent resident, though this specific requirement can vary by lender, so it shouldn’t be assumed to apply identically everywhere.
• The cosigner goes through their own credit check, and both the student and cosigner typically need to submit supporting documentation.
• The student generally needs to be enrolled at least half-time at an eligible, Title IV-participating school.

On interest rates: this is worth flagging directly, since it’s a common source of confusion.

Earnest’s own published rate information varies noticeably depending on when it was checked, recent published figures have shown starting rates anywhere from roughly 2% to over 5% for cosigned loans, and higher for independent (non-cosigned) borrowers, because Earnest’s variable rates are tied to a public benchmark (the 30-day Average SOFR) plus a margin, and are revised monthly.

Rather than quote one fixed number here, which would likely be outdated within weeks, the accurate way to present this is: check Earnest’s current rate disclosure page directly before applying, and expect the actual rate offered to depend heavily on the cosigner’s creditworthiness.

A note on terms: The conditions of loans from US cosigners don’t depend on negotiations. They depend on the underwriting process of the bank, mostly on the credit rating, income, and debt of the cosigner, in conjunction with the loan product and repayment option selected. Two people who have a different profile of cosigners and apply to one bank can have different terms.

No-Cosigner International Loans

This category covers international lenders that require neither a US cosigner nor collateral, instead assessing the student directly, generally based on their university, programme, and future earning potential.

• Prodigy Finance does not require any cosigner or collateral for its standard loan product. The company assesses the student based on the ability to pay back the loan according to the future earnings potential formula related to the chosen university and programme. The lender claims not to require minimum credit score for the applicant. The eligibility is determined depending on whether the particular university and programme are included in Prodigy’s accepted one.
• MPOWER Financing, per its official eligibility pages, also doesn’t require a cosigner, collateral, or an established US credit history. Eligibility centers on admission to or enrollment in one of its partner institutions in the US or Canada (500-plus schools, according to MPOWER’s own published figures), generally being within a defined window of programme completion, and meeting MPOWER’s own assessment of academic and career potential.

Advantages:

• Removes the need to find a US-based cosigner, which is a genuine hurdle for many Indian students without an existing US connection.
• No collateral required.

Limitations:

• Eligibility is gated by which universities and programmes are on the specific lender’s approved list, so this route isn’t available regardless of where you’re admitted.
• Interest rates and fees are set by each lender’s own model and should be verified directly, since they can run higher than a strong, collateral-backed Indian bank loan.

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Which Loan Type Suits You?

A few realistic scenarios, though your actual best option depends on comparing real offers rather than a general guide:

• You (or your family) have collateral available and a co-applicant with strong income: a secured loan through an Indian bank following the IBA framework is often worth comparing first, since it can offer a larger amount and, in many cases, a comparatively lower rate.
• You don’t have collateral, but you have a co-applicant with solid income: an unsecured loan from an Indian bank or NBFC is worth exploring, keeping in mind the loan amount may be capped lower than a secured option.
• You have a family member or close contact who is a US citizen or permanent resident and is able and willing to cosign: a US cosigner loan can offer access to a USD-denominated loan, potentially up to the full cost of attendance at some lenders, but it puts real legal and credit responsibility on your cosigner, which is worth discussing openly before applying.
• You don’t have collateral, an Indian co-applicant with sufficient income, or a US cosigner: a no cosigner international loan might be the most viable option for you, considering that your particular institution and study program are covered by such a lender. It is not available for every programme, especially the undergraduate ones.
• You’re not sure which category actually fits your profile: Instead of guessing which of them you could be based on the description of the requirements, it would be useful for you to get a detailed comparison of all these categories to choose where to apply.

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How Nomad Credit Helps

Since the loan type, the category of the lender, and the eligibility requirements are inter-related, taking out time to compare your actual options can become time-consuming and may not even lead you to find the right loan product that suits you.

Nomad Credit study abroad consultants analyzes your individual profile, university, program, co-applicant/cosigner and collateral, if any, against the available offers from Indian banks and NBFCs, cosigning lenders from US, and no-cosigning lenders internationally, and tells you which lenders you are most likely to get qualified for.

Get connected with Nomad Credit to compare your actual loan options.

Conclusion: Get Started with Your US Education Loan Application

Ready to start your education loan application to study in USA? Join Nomad Credit and get complete guidance for free! From finding the right lender to getting the loan disbursed, our counselors stay beside you and simplify the process. Get started with us today! 

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