What Happens to Your Education Loan If Your Student Visa Gets Rejected?

Studying abroad often comes with challenges. It involves steps such as securing an Education loan, getting a visa, etc. However, what if everything does not go as planned? A visa rejection could sometimes feel like a major setback, especially when the Education Loan is already sanctioned or disbursed.

In such cases, students and their families are left with many unanswered questions, such as what happens to the Education Loan? Do they need to pay interest even after the loan is not disbursed but sanctioned? Can the Education loan be cancelled or deferred? Etc.

In this blog, we will break down all the questions related to the effects on Education Loans after visa rejection. We will also explore available options in such situations.

Common Reasons for a Student Visa Rejection

Before understanding how visa rejection affects an Education loan, let us look at some common reasons for rejecting a student visa.

1. Incomplete or Improper Documentation: Sometimes improper documentation or not duly filled forms lead to visa rejection. 
   
2. Insufficient Finances:  Often, students fail to provide sufficient financial evidence to demonstrate that they have sufficient funds to support their stay abroad. This may also lead to visa rejection.
3. Poor Academics:  The visa officers also consider the academic backgrounds of the students for visa processing. They do this because poor academics can raise questions about the student's ability to face the academic challenges in the respective country. This could be one of the reasons for visa rejection.
4. Health issues:  Students are required to meet certain health standards prescribed by their respective countries. Students failing to meet the medical requirements of a country can lead to visa rejection. 
5. Criminal records: Any criminal records would potentially lead to visa rejection. Students have to make sure that they are clear of no criminal background to avoid visa rejection.

What to do with Education Loans if a Student's visa gets rejected?

First things first, if a student visa gets rejected, the immediate follow-up is to evaluate the reasons for the visa rejection. Students are required to carefully examine and identify the reason why their student visa was rejected. Then work on the reasons why the visa was rejected. This will help students build a strong profile and enhance the chances of visa approval the next time. Reapply for a student visa immediately after rejection.

Does Visa rejection affect your Education Loan?

Yes, in many cases, visa rejection could have a significant impact on students' Education loans. This depends on many factors, such as the country the student is going to, the status of the Education loan, whether the loan is disbursed or not, etc. Read further to learn more in detail.

What happens if the loan is sanctioned but not disbursed?

If your Education Loan is sanctioned but not disbursed, and for some reason, the visa got rejected.

• No Financial Liability yet: since the Loan is not disbursed, the student is not required to pay the interest. The interest liability starts after the disbursement of the Education loan.
• Request for a Deferment period: The sanction letter has a validity of six months, which means the loan can be disbursed any time during this six months upon students request. The student can demonstrate a valid reason for visa rejection and can request a deferment period with the lender.During this period the student is not liable to pay the interest as the loan is not yet disbursed.
• No applied charges: students are not required to pay any charges for the deferment period, especially if the student explains the visa rejection.
• Reapply for a Visa: since the student has a deferment period and a sanction letter valid for six months, students can analyze the reasons for the visa being rejected and reapply immediately with a strong profile this time

What happens with the Pre-visa disbursed Loans if the Visa is rejected?

For countries like Australia, Ireland, Germany, and New Zealand.  A pre-visit disbursement is mandatory. This is because the embassy wants to make sure you have enough funds, which are accessible to the student for living expenses usage when the student lands in their country, so that the student does not have to do part part-time job while studying.

Request to Freeze the account: In this case, the disbursement is already done, but if the visa is rejected or delayed for some reason, the student can request that the provider freeze the loan account until the visa is approved. 
Interest applies: After the loan is disbursed, the student is required to pay the interest even if the loan is rejected.
Repayment Begins: The student is likely to be responsible for repaying the loan even if the visa is rejected. because the disbursement has already been made.
Communicate with the Lender: It is highly recommended to communicate with the lender transparently and explore the available options. Because some lenders are flexible with the repayment policies and terms,however this defer from case to case.

What happens if the Loan is disbursed and the Visa is rejected?

If the visa is rejected and the loan is disbursed, the student is liable to repay the loan and the interest as per the agreement.

• Inform the lender: as previously discussed, any change in the plans needs to be informed to the lender to reduce the financial risks. A proactive approach and clear communication are essential to mitigate the financial burden.
• Request for refund from the university: Some universities may issue a refund if the admission is cancelled within a certain period. Demonstrating the visa rejection, the student can request for refund from the university.

Other Possible Options

Below are the other alternate options to handle visa rejection

Change the country: If the student visa gets rejected, and is not confident about the visa getting approved, the student can explore other options. A student can opt for another country or another course and reapply for a student visa for the different country.
Update loan details: if the loan is already sanctioned and the visa is approved for another country, the student can request the lender to update the sanction letter with the new country and course details.
Loan cancellation: If the student has decided not to proceed further with the education plans. As a final option Student can request the lender to cancel the loan. If the loan is not disbursed, cancellation of the loan is a straightforward process. However if the loan is disbursed cancellataion becomes complex and some charges are applicable as per the lender norms.

Conclusion

Though visa rejection is a setback ,it can be managed effectively with proper planning.In this blog, we have explored the possible options when the student visa is rejected even after the education loan is approved. We have covered detailed questions about how visa rejection can impact the Education Loan that has already been issued.

However, many students face various issues, including disbursement issues, even after their Education Loan is sanctioned. This is why at WeMakeScholars, we have a dedicated post-sanction team that helps students resolve such Disbursement issues in no time. Request a callback to contact our team and get a stress-free student loan journey.