When you think of student loans, your first thought might not be of the Space Race between the US and the Soviet Union, but that’s exactly where they started. Following the launch of the Soviet Sputnik, the first federal loan program began in 1958 with the National Defense Education Act (NDEA) to serve students studying engineering, science, or education degrees.
Since then, technology has rapidly advanced—both in outer space and right here in the earthly realm of higher education. Interestingly, tech has also advanced in how to finance education.
Continuing our exploration of #EdTech, today we are turning to FinTech in what will be a three-part series. Most of us have probably checked our bank balance online and many are cashing checks with a click of our cellphone cameras. The younger ones among us are transferring funds to each other using Venmo. (You had to pay your babysitter that way just the other week, didn't you?). These same digital advances in FinTech are starting to overlap with EdTech.
The rising cost of higher education is a huge concern for most students and families. Today we explore some of the new financial technologies that allow money to be moved faster, safer, and smarter for the students and families that are eager to attend your institution.
Why is this important?
Knowing what your target audience is into is always important from a recruitment and retention point of view. Is your institution making it easy for students to use the modern financial tools available?
In our FinTech series, we are going to look at new student loan offerings and alternative funding sources for scholarships and crowdsourcing. And while those are helpful on the student end, we will also discuss FinTech solutions for verifying financial details and aid approvals as well as payment management systems.
Quick reminder: This December, the Intead team will be attending the TABS conference in Boston, the ICEF conference in Miami Beach and the AIRC conference in Miami. Drop us an email if you’d like to meet and hear about our latest research. We are releasing 3 new market research reports in the coming months. So much insight!
First up: Student Loans
Even if U.S. student loans have been around since 1958, how much could they have changed? And really, new options aren’t going to change a prospective student’s mind about where they enroll, right?
Well, student loans are getting smarter—in terms of how repayment works, to whom they go, where they lend, and how they calculate interest.
Let’s look beyond loan giants Sallie Mae and Nelnet and see who else is offering financing to your students.
While the amount of student loan debt in the US has grown to outpace both car and credit card debt, one way the student loan landscape has changed is that student loan companies have been getting smaller. Smaller, smarter, and socially conscious—features that speak to today’s generation of borrowers.
FinTech student loan services company CommonBond was described by Time Magazine as using its small size and technology “to keep running costs to a minimum,” so it can, “offer borrowers refinancing rates substantially lower than the federal government or private banks.”
In terms of being socially conscious, CommonBond offers services to those with a degree from a not-for-profit American university—regardless of citizenship. They also provide “one-for-one” financing: for every degree they finance, they pay for a year of school for a child in a developing nation.
Financing opportunities for international students have always been at a minimum, but other companies are also starting to offer pathways to funding.
These are some of those financiers gaining buzz:
MPOWER Financing offers DACA and international student loans, scholarships, and visa support for those studying in the US and Canada.
Stilt also specializes in providing student loans for visa-holders, immigrants, and non-US citizens.
Why is it important to offer student loans to international students? MPOWER CEO, Emmanual Smadja told Inside Higher Ed’s Elizabeth Redden (@ElizRedden), “The bottom line is we need that talent. Socioeconomic diversity is really important. Geographic diversity is really important. We can’t just have the majority of international students coming from two or three countries, or where they have healthy government scholarships.”
What about domestic students who might also be looking for an option outside of a big lender?
SixUp provides low-income students a financial literacy program in addition to their loans and lower interest rates for those with good grades. They also allow students to build their personal credit score if they pay $20 a month toward their loan during school.
Earnest is a company that uses an algorithm that goes beyond credit score and offers interest rates based on students’ savings patterns, investments, and career trajectory.
For those students looking for more repayment options, there’s College Ave, which offers shorter loan periods with multiple options for paying down loans while in school, as well as options for international students.
And for those looking to make a comparison across the board, SimpleTuition, LendEDU, and Credible allow students to compare the loan details of multiple lenders through one application. Now that’s handy. Check them out when you have time.
What’s the takeaway?
The prices and ways to pay for college are different now than they were when many of us earned our degrees. You know, before social media was a thing. (Some of us typed our college papers on a typewriter. IBM Selectric, I kid you not!)
As educational marketers and recruiters, it is important to know the options and help your prospective students explore those options. That helpfulness will be met with gratitude and will build confidence in their decisions.
Pro Tip: On your institution’s blog (or other admissions-focused webpage) identify helpful tips for financing your education, managing your debt, building your credit score, being socially conscious in your financial decision making—all those things savvy students would appreciate. Drive traffic to that content with your social media, email campaigns and other digital and traditional student recruitment marketing.
The first rule of marketing is Know Thy Customer, and by learning how students (or Mom and Dad) are paying for these degrees, you’re doing just that.
Check us out next week as we discuss alternative funding sources. Student loans are not the only game in town.