When Gulam Shah*, a Masters-level student of chemical engineering at Dalhousie University, Halifax, lost a scholarship after switching programs, he came perilously close to going back home. It was a private lender that came to his rescue.
“At first I tried getting a bank loan but could not find anyone willing to cosign my loan,” he said. Shah was able to secure a loan from MPOWER Financing, a U.S.-based international student loan company, to complete his program. He currently has a part-time job and says he’s confident he can pay back the loan once he lands full-time employment.
Companies like this are stepping into a gap left by Canadian banks who do not typically lend to those in the country on a study permit. However, they are very selective on who they will lend to, targeting only the most lucrative of professions.
While MPOWER currently serves only international students in the U.S. and Canada, U.K.-based Prodigy Finance is only available to postgraduate international students in Canada at select universities. While there are several private financial companies offering such loans in Europe, international students in Canada typically rely upon loans taken out in their home countries, private financiers or scholarships.
Each year, financial difficulty or poor grades force hundreds of international students to defer semesters, change programs, seek cheaper courses at colleges in strip malls offering diplomas that serve as a pathway for the coveted Permanent Resident (PR) status.
Currently 807,750 international students are studying at Canadian universities and colleges; most work part-time or full-time to cover their living and tuition costs.
Other students like Tawfiq Hasan, an international student from Bangladesh currently enrolled at the University of Alberta, whose parents are fully funding his $39,000 a year program, struggles to balance long working hours with school assignments. “I wish I didn’t have to work like this because it is affecting my grades. It’s the same with my other friends from back home studying here. We were at the 95 percentile back home and here many fail to keep their high grades,” he says.
Like many international students whose families have stretched their finances to cover tuition costs, Hasan is faced with rising living expenses in recent months.
A point echoed by Aurpan Chowdhary, also a student at University of Alberta, who hopes to reduce the financial burden on his parents by working and bearing a larger portion of his tuition. But given high living expenses, he is neither able to fund his tuition nor maintain high grades, which he did in his first year when he didn’t work and focused on his studies.
According to Sasha Ramani, Senior Director of Strategy at MPOWER, 93 per cent of their clients say that a private loan was crucial to continuing their education. The loan was imperative to their ability to study at all. They would not have been able to arrive in Canada or the U.S. in the first place or would have had to drop out mid-way through their programs.
Canadian banks typically do not support international students on a study permit. For example, a spokesperson for the Royal Bank of Canada, said they offer loans or lines of credit only to students who are permanent residents or citizens.
MPOWER on the other hand grants loans to students enrolled in degree and post-degree programs in fields such as business, computers or engineering at elite Canadian institutions. “We don’t require students to have a co-signer or collateral at all, nor do they need to have Canadian credit history. We bet on a student’s future potential earning capability and grant loans from C$2,000 to C$130,000,” adds Ramani.
According to Ramani, MPOWER offers fixed-rate loans over a 10-year amortization ranging from 12.75 per cent to 14 per cent.
MPOWER does not reveal data relating to the number of students who have defaulted on their loans. Students have a six-month grace period after the completion of their program to pay only the interest portion and 10 years to pay off the entire loan. However, MPOWER states that it isn’t uncommon for many of their business and engineering students who land high-paying jobs to pay off their loans sooner.
Geovanny Lopez, an international student from Colombia enrolled in a Masters program in Cybersecurity at New York Tech, Vancouver, ran into a cash crunch after his first term. “I was desperate to find financial aid to help me cover my two remaining terms which cost $6,000 and $7,000. I make interest-only payments of $300 a month and when I complete my program, I [will] pay $400. This allows me to focus on my course and not have to overwork,” he said.
While the cost of tuition has jumped in recent years, colleges are aware of the precarious financial situations facing many of their international students.
Sheridan College in Brampton is among the Canadian institutions that are looking for ways to support international students, including through work study programs. Its work study program is open to international students, who also gain “Canadian experience” during these stints, according to Meagan Kashty, Manager of Communications and Public Relations. But Chowdhary points out that he knows of several international students who have not been able to maintain their grades in their degree programs and have had to settle for cheaper diploma programs at colleges. “These were brilliant students who had to compromise their future earning potential by settling for a diploma.” He counts himself among the lucky ones.
*Editor’s note: One of the interview subjects, has been referred to with the pseudonym Gulam Shah, to protect their identity at their request.
Pradip Rodrigues began his career as a journalist at The Times of India, Mumbai. Since moving to Canada in 2000, he has written for several media outlets both here and in India on a variety of issues. Prior to joining NCM, he was at CanIndia newspaper for eight years.