There are just over one million international students in the United States, accounting for 5.2% of the 20 million total U.S. student population. Many of the international students hail from China, India and Korea and oftentimes pursue a program or major in a STEM background. In the past, these students have had difficulty in attaining funding options for their education as they are not U.S. citizens, have no credit history and usually don’t have access to a U.S. cosigner. Traditional banking has not served this demographic due to their traditional underwriting models.
International students contributed $35.6 billion to the U.S. economy in the 2015/2016 academic year. A financial ecosystem has begun taking shape to serve these students as lenders and other financial institutions are recognizing the opportunity of serving such a significant part of the economy. In the past few years, international students are beginning to see additional options that were not available to them before. Options such as a student loan without a cosigner have become a reality for many international students. The introduction of new lenders and innovation at existing lenders has resulted in novel underwriting models to allow new education funding options for international students.
One of the issues that an international student faces with acquiring financial products is that they have no credit history. This can make it very difficult to take out a credit card or auto loan. However, innovation has led to companies offering these products specifically for international students. Credit card companies may start with a lower credit amount to allow an international student to begin building their credit. After exhibiting good credit behavior, international students may find that more financial options become available to them. Online credit providers as well as traditional banks are creating credit cards specifically for international students who are attending university in the United States.
Many international students will take out auto loans. Over the 22-month period of December 2012 to October 2013, Chinese international students spent $15.5 billion on new and used vehicles in the United States. For comparison, American students spent $4.7 billion during the same period. A significant portion of those students financed their vehicle in some capacity. The opportunity to serve these students has led to new online lenders to enter the auto loan space to specifically serve international students.
International students are required by the U.S. government to be covered by health insurance during their studies in the United States. Many universities and colleges offer student health insurance plans to their international students. However, depending on the visa type and university, students may be able to search for private student health insurance plans. There are numerous companies that offer such plans, both from traditional insurers to insurers that specifically cater to international students studying in the U.S. or abroad.
Another issue that international students face is finding renters insurance. Many landlords will require their lessees to have renters insurance or a guarantor. International students can face the same issue – the inability to find a U.S. cosigner – as they do with other financial products. Financial institutions have sprung up that offer renters insurance to international students as well as an option to become their cosigner on the lease if it is needed.
International students face difficulty finding funding sources and other financial products during their studies in the United States. Traditionally, financial institutions would not serve them. However, online lenders and others are recognizing the potential of serving these international students and have begun creating innovative ways to underwrite and serve them. These financial firms are looking to expand and continue to grow to serve the international student demographic in the United States.
Nathan Treadwell is the VP of Business Development at Nomad Credit. Nomad Credit was created to help reduce the barriers to credit for international students and workers in the United States and the world.