6 Ways to Get Funding to Study Overseas, and One Way Not To

Alan, a U.S. citizen studying at the University of Kassel in Germany, asks:

"I am growing quite desperate. I am looking for any type of aid that I can find.... I have an available cosigner with good credit, yet so far I have been unable to find any private loan. My school is not able to receive federal funds. After countless hours of searching and asking, I have found nothing. I am also not the only person in my situation. There seem to be many Americans abroad who face the same financial issues due to the current economic troubles. We are running out of options and have nobody to help us. Well, frankly...it sucks."

While the financial situation is looking a little grim for U.S. citizens studying at overseas schools that are not approved by the Department of Education, it is not entirely hopeless. Students who are willing to transfer, or get creative, might find ways to finance an overseas education.

Generally, though, Alan's right. If a school is not on this Education Department list, the federal government will approve neither students' applications for low-cost Stafford loans nor parents' applications for federally backed PLUS loans. (The U.S. also won't send any grant money, such as Pell or SMART grants, to any overseas school, whether or not it is on the list.)

Like Alan, I, too, couldn't find any U.S.-based banks that would make private educational loans to schools that haven't been approved by the Education Department. Sallie Mae, one of the few big lenders still making private educational loans, said it would approve a private loan only if the school was approved by the Department of Education and the borrower was a U.S. citizen with good credit.

So what can students who want to study overseas do?

1. Ask. The first and best place to start searching for aid information is your college. The folks in the finance office may very well know of aid programs for people just like you.

2. Search. Students also can check out a few websites that compile overseas scholarships, like this one created by the Institute of International Education and this one created by the University of Minnesota

3. Go American. Instead of enrolling directly in the foreign school, students can enroll in an accredited American school with an approved study-abroad program. This is one of the simplest alternatives, because such American schools typically handle the aid hassles for students.

But there are some downsides. The overseas school you're interested in might not have an American partner. American schools typically don't approve study abroad for more than a year, disappointing those who may want to spend more time overseas. And this can be a costly option, since most American schools charge higher tuition than most foreign schools. (Though that may be offset by higher living costs overseas because of the dollar's recent weakness against other currencies.) And while some students like having lots of American support and friends when they are abroad, others feel some of the American programs don't sufficiently immerse them in the host country's culture. Students can contact the overseas school they are interested in to see if any American schools have preapproved study-abroad programs there. Tools to search among study abroad programs can be found here, here, and here.

4. Transfer. As this official list shows, hundreds of overseas schools are approved to receive federal educational loans. Overseas students who need access to federal loans can transfer to one of the schools on the approved list.

5. Persuade your school. If there are lots of American students at your overseas school, or your school is interested in attracting more American students, it pays for the school to get approved by the States. There are lots of forms to fill out and lots of hoops to jump through, but hundreds of other international schools have done it. Information for overseas school administrators can be found here and here. The downside: This isn't a quick solution. It can take a school a long time to earn U.S. approval.

6. Alternative loans. If a student has an adult with good credit willing to take on the debt responsibility, the adult can take a second mortgage or other loan and then have the student agree to pay back that loan through contracts such as those executed by Virgin Money. A growing number of students—many without cosigners—are trying out the new social network lending websites, such as fynanz.com or greennote.com.

And one thing not to do:

1. Avoid charging it. It might be tempting to just charge overseas tuition or living costs to a credit card. Tempting, but dangerous. Credit cards tend to charge high interest rates. They typically demand payments every 20 or 25 days. And they charge big penalties to those who are just one day late. In addition, most credit card companies won't let students borrow very much. So while credit cards can be useful in an emergency, they shouldn't be a college funding mechanism.