New Refinancing Option Offers a Reprieve from a Student Loan
Photo: Anupam Tetu Packing up and moving your life halfway across the world to further your career can cost a lot. Of course, an advanced degree is often the key to that career growth and the tuition for that degree likely represents the biggest cost. To meet those costs, people often turn to student loans secured in their home country.
Such was the case for Anupam Tetu, who had completed his bachelor's degree in India and landed a good job in his home country. But Tetu had even greater aspirations. More than three years ago he moved to the United States to begin his studies in a master's degree program at North Carolina State University.
After completing his master's degree in engineering, Tetu found a job in the US. All was going as planned, except that Tetu was saddled with an unfavorable student loan for the equivalent of $45,000.
"I had to secure my student loan from India and pay for it in Indian rupees," explained Tetu. "The interest rate was fairly high at 12.5% and had to be paid over a 10-year term. Maybe the worst thing about it was that my parents had to be cosigners on the loan, using their house as collateral."
As a solution to the issue, Tetu considered refinancing the loan. Refinancing involves taking out a loan from another bank or financial institution to pay off the original loan, which is usually set at a high-interest rate while the new loan offers a lower interest rate. Tetu knew this made financial sense, not just because the refinancing would give him a lower interest rate: It would also give him the flexibility to shorten the loan's term from ten years to just three. But Tetu had neither US citizenship nor green card status to secure a refinancing loan with most US financial institutions.
"I knew refinancing could be a solution because it would offer me a lower interest rate," said Tetu. "I never planned on making payments for 10 years on my loan, I just wanted to pay it off quickly and invest in other ways. It did not seem possible to do it because every bank I checked with required a US citizen as cosigner."
Just when Tetu had resolved himself to being stuck in his current loan situation, he learned from his girlfriend, who had taken a student loan from Prodigy Finance, that Prodigy Finance was now refinancing student loans originating with foreign banks.
After six months at his new job in the US and without citizenship or a green card, he successfully applied for a refinancing loan from Prodigy. In less than two months from the time he made his initial application, Tetu refinanced his loan. His interest rate dropped to from 12.5% to 9% and he was able to remove his parents as cosigners.
"The reduction of my interest rate by 3.5% was a big deal," said Tetu. "But knowing that my parents' house is no longer collateral for the loan has been a big relief for me and my family."
The longest part of the entire process was coordinating the transfer of funds from Prodigy Finance to his lender back in India. Tetu said he remained involved in the process simply to ensure that communications were running smoothly.
"I had concerns about coordination between my Indian bank and Prodigy Finance and potential money transfer issues," said Tetu. "Prodigy has a good service team and they were responsive to my questions and concerns, so it wasn't that big of a hassle."
Tetu says that he has enthusiastically recommended this refinancing avenue to some of his friends and colleagues who have found themselves in similar circumstances. He believes that if there is a greater awareness of this option for recent graduates, who have found jobs but are still saddled with unfavorable loans from their home country, it would alleviate some hardships for these people.
Tetu added: "I think Prodigy can extend their reach by establishing partnerships with foreign-based consultancies that provide GRE/GMAT coaching. Alumni associations and a presence at career fairs would help too."