Editor’s note: Each season we help many Indian (and a few international) applicants crack into the best universities in the world. But not everyone is able to attend those programs. This year we saw 2 such cases where the international applicants (from the UK and Africa) got into good programs, but lost the opportunity to join due to funding issues.
Two years back, we had an impressive Indian applicant settled abroad who got into INSEAD. She had very little time to arrange for the funding, and couldn’t attend. She applied again this year and got in (here’s the story of how she got into INSEAD twice). She graduated this year and joined one of the top top management consulting firms. All ends well for her.
However, the fact remains – studying abroad comes with a lot of challenges. After getting an admit from a top university, the next big hurdle is getting a student loan. Most Indian and international students underestimate the complexity involved and assume things will fall in place automatically.
Our INSEAD friend had mentioned about Prodigy Finance. They offered an interesting alternative to the education loans given by Indian banks. Prodigy’s USP is that they offer education loans to Indian applicants for postgraduate study abroad, without any collateral requirements.
After hearing about them from some other folks as well, we thought apart from the Admission committees that we’ve featured on our site, it might be helpful to invite another team that’s equally important in the international student’s journey.
– Sameer Kamat | Founder, MBA Crystal Ball
In this Q&A post with Chloë Foden, Head of Marketing from Prodigy Finance, we try to find out more about what they do, how they do it and what Indian & international students can do to get the right amount of loans approved in time.
The Prodigy Finance FAQ on the official site has many student questions listed. For the sake of completeness and convenience, we include some of those and add a few more relevant ones.
MBA Crystal Ball: Compared to traditional loans by banks, Prodigy’s community finance model is pretty innovative and seems to have overlaps with the microfinance lending model (depending on social pressure to avoid default). Can you please explain how that works?
Chloë Foden: Prodigy Finance is not a bank and we don’t want to be. We offer community funded loans to international postgraduate students attending top business schools. The loans are funded by a combination of business school alumni investors, high net worth individuals, the business school community and institutional investors who have an interest in higher education.In many cases, Prodigy is providing funding for students who would otherwise not be able to afford their postgraduate degree.
The funds are disbursed directly to the business schools. After the study and grace periods (dependent on school and course) students start repayment. Each student’s repayment status is visible to the investors.
Why does this work?
Prodigy Finance combines innovation with industry best practice, to ensure exceptional performance: 99% repayment to date. Banks cannot price foreign risk nor enforce repayment across borders. Traditional lending models only assess historical indicators (e.g. past salary or current assets), ignoring likely salary increases after business school. It’s a win win for the parties involved:
MBA Crystal Ball: Indian banks have limits on student loans that generally fall short of the financing requirements for studying abroad. Does Prodigy finance have such limits?
Chloë: The amount that a student can borrow varies depending on the cost of tuition for the program that the student is attending. In most cases, the student can apply to borrow up to the full cost of tuition. However, this does also vary depending on the profile of the individual applicant.
MBA Crystal Ball: What kind of programs do you cover & exclude? Apart from the MBA loan, does the loan cover the cost of living as well?
Chloë: The largest portion of Prodigy’s lending portfolio consists of MBA and Executive MBA (EMBA) students. However, Prodigy Finance does offer loans for other courses at some business schools, for example, Masters in Finance at London Business School and postgraduate engineering degrees at Cranfield University.
Whilst the loan amount is often capped at tuition, the loan can be used for both tuition and/or living expenses.
We can currently offer loans to students attending any of the following schools:
Education loans in USA
|Carnegie Mellon Tepper School of Business|
|Columbia Business School|
|Cornell University Johnson Graduate School of Management|
|Dartmouth College Tuck School of Business|
|Duke University Fuqua School of Business|
|Georgetown University McDonough School of Business|
|Harvard Business School|
|MIT Sloan School of Management|
|Northwestern University Kellogg School of Management|
|New York University Stern School of Business|
|Rice University Jones Graduate School of Business|
|UC Berkeley Haas School of Business|
|UNC Chapel Hill Kenan-Flagler School of Management|
|University of Chicago Booth School of Business|
|University of Virginia Darden School of Business|
|Wharton Business School|
|Yale School of Management|
|Berlin School of Creative Leadership|
|Cambridge Judge Business School|
|Cass Business School|
|Cranfield School of Management and University|
|ESADE Business School|
|European School of Management and Technology|
|IE Business School|
|IMD Business School|
|London Business School|
|Manchester Business School|
|Oxford University Said Business School|
|Rotterdam School of Management|
|SDA Bocconi School of Management|
|Vlerick Business School|
|Ivey Business School|
|Rotman School of Management|
|Schulich School of Business|
|NUS Business School (Singapore)|
|University of Cape Town Graduate School of Business (South Africa)|
MBA Crystal Ball: The interest rate in India for education loans is quite high. How does it work with Prodigy loans for Indian (and international) students?
Chloë: Prodigy Finance will always try to provide as competitive a rate as possible and should be lower than rates available in India for international postgraduate study.
Various factors are considered in calculating the interest rate relating to both the applicant and the quality of bureau information obtained from them, their course and school of choice, their affordability and other market rates they may have access to.
Prodigy Finance applicants receive interest rates above a variable base rate. The variable base (Euribor, Libor or US Libor, which are the interbank lending rates in Europe, UK, and the US) is dependent on the currency (Euro, Pound Sterling or US Dollar) of the school loan.
Representative example of how this could look for a €35,000 loan for a MBA at INSEAD:
Loan size: €35,000
Interest rate: 7.5% above Euribor (variable over the duration of the loan).
Representative APR: 8.51% APR variable, factoring in all fees and the effects of compounding interest.
Fees: Application fee of 2.5% x €35,000 = €875. (€437.50 paid up front, balance added to the loan). Therefore total credit = €35,437.50
Duration: 100 months, including a grace period of 16 months (study period plus 6 months).
Total amount payable: €50,681.10
Amount of each monthly repayment: €598.14
MBA Crystal Ball: This is unusual for Indian students who are more accustomed to fixed rate student loans from Indian banks. Doesn’t the fluctuation add uncertainty?
Chloë: While this may be unusual in some regions it is a typical loan product that has a number of benefits for borrowers, the most important being that in an era of low base rates this means that borrowers can immediately gain from these low rates. In addition, transparency of the standard measurement such as Euribor, US and UK Libor rates are easily communicated.
MBA Crystal Ball: Are there any key similarities or differences in the modus operandi between how Prodigy’s credit committee evaluates student applications vis-a-vis Admission Committees of universities?
Chloë: The focus on the loan application at Prodigy is affordability and credit worthiness; there are a number of factors that are used in this assessment such as employment, salary, GMAT score and a few others. We also require a credit bureau report to check if there have been any significant payment or default issues in the past. Universities tend to focus on a larger scope for assessing a student candidate, ranging from GMAT score to industry experience to demographics.
MBA Crystal Ball: Prodigy’s predictive model relies on the future earning potential of the student. Most applicants (specially MBA students) are hoping to change careers after graduating. Keeping that uncertainty in mind, what specific parameters does your credit committee take into consideration while making a decision?
Chloë: A number of input factors are considered in the model, which develops future earning potential while overlayed with a credit policy to determine affordability. In order to manage the uncertainty (which is always an issue when developing models) we constantly update and refine the parameters and weightings, this is done by using real data and then measured against a host of statistical tests.
MBA Crystal Ball: What’s the percentage of Indian, Chinese and other nationalities in the client pie chart? What are the typical reasons for rejecting applications?
Chloë: Indian Nationals make up approximately 20% of our portfolio with China in at just over 4%. We have a diverse portfolio of countries with a long ‘tail’ that accommodates over 90 nationalities. We don’t subscribe to generalist thinking though – even within nationalities there is an amazing diversity of issues to consider for e.g. age, residence, education, mobility, etc.
We decline giving a loan to an applicant in a relatively low number of cases considering that they’ve done a lot of the hard work by getting into a top global university. When applicants are declined they tend to fall into one of two categories: 1) over-leveraged, meaning that they have too much debt already in place or 2) Affordability, which means that a significant budget shortfall has been identified. In a very small number of cases a credit report indicates a poor repayment history in which case we investigate further.
MBA Crystal Ball: With your track record of 99% repayment, it appears that you’ve been able to evaluate the candidate’s placement potential better than many Bschools. Any tips that you might want to share with Admission Committees across the world and with international applicants to maximize their chances of getting a good, high-paying job after graduation?
Chloë: Our repayments are as good as they are because the right candidates attend the right business schools. Admissions Committees at the schools we work with do a noteworthy job of selecting candidates. Which is our first filter and part of the dynamic relationship we aim for. Their success in candidate selection assists with our success too.
We value communication and strive to work with each school, and their individual candidates, to find a way forward whilst adhering to our responsible lending criteria as agreed with our investment community. Communication and constructive feedback are two important elements for anyone to consider and incorporate when planning for the future– learning from your experience and being able to apply and share those learnings as you take the next step.
Bio: Chloë Foden is the Head of Global Marketing at Prodigy Finance and joined the company in September 2014. Chloë is particularly interested in driving social value and community building, and looks to grow Prodigy Finance into the leading global option for international student loans.
Apart from the general reviews about Prodigy Finance that are available on the internet, the team to shared this review by an Indian student who has taken education loans from Prodigy Finance.
Also, get in touch with folks that you might know (friends of friends) who’ve gone through the loan approval process to find out whether this option will work for you.
If you have questions for the Prodigy Finance team, post them in the comments section below.