When an internationally reputed university has admitted you into their top ranked MBA program after a grueling admissions process, why don’t international student loan providers keep it simple and approve the entire loan that you requested for?
If you’ve been denied a student loan, chances are that the lending company behaved like a responsible lender and did it in the interest of multiple parties – the student, the education loan company, and the broader economy.
In this guest post, Chloë Foden, Head of Marketing at Prodigy Finance, talks about the student loan debt crisis and how responsible lending policies and practices can help in mitigating the risks.
The US student loan debt crisis has been in the spotlight for some time – but why is the situation so bad, and how did it get to this point?
Suze Orman – author, financial advisor, speaker and TV host – sheds light on the problem in this insightful interview with Daniel Roth, Executive Editor of Linked In.
The problem, she says, stems from the fact that many lenders in the US, both private and the government, simply aren’t lending responsibly.
Students are allowed to take on tens of thousands (and sometimes hundreds of thousands) in debt, with no real evidence that they’ll be in a position to pay it back after they graduate.
This doesn’t benefit the lender, and it certainly doesn’t benefit the student borrower.
Lenders need to be more responsible. By definition, the meaning of responsible lending extends to policies and practices that go beyond profit maximization.
Suze says that student loan amounts need to be limited, and ought to be based on their degree of choice as well as their ability to pay back the loan.
The good news is that there are responsible lenders out there – and Prodigy Finance is one of them. Prodigy Finance is the pioneer of P2P financing in the international student loan space. (We did an interview earlier with MBA Crystal Ball about our collateral-free education loans.)
So what do we at Prodigy Finance do to ensure that we’re a responsible lender? For one, we do exactly as Suze Orman suggests, and cap our student loans at an amount based on the student’s degree of study, and their ability to repay the loan.
At Prodigy’s Finance’s inception in 2007, we were lending to MBA students exclusively. Why MBAs?
Because the prevailing data shows that most MBA graduates experience, on average, a salary jump of up to 57% (students earning a pre-MBA salary of less than $50K p.a. can experience a post-MBA salary jump of well over 100%) enhancing their ability to pay back their loans.
But, Prodigy Finance has now expanded to provide international student loans for other postgraduate degrees, including EMBAs, Masters in Finance degrees and Masters in Management degrees at certain top business schools.
Of course, our methodologies still apply for these degree programmes, ensuring that our responsible lending model is intact across all loans we offer.
In addition to lending based on degree, Prodigy Finance considers the individual affordability of each student we lend to. This is done through the use of a customized predictive scorecard developed based on thousands of data points from previous graduates doing similar degrees.
This predictive model allows us to assess a student’s affordability, or ability to pay back their student loan, more accurately than if their current salary and credit record are the only considerations.
Since we strive to be a responsible lender, some applicants may not get the full amount that they initially request. While this may be frustrating for the applicant at the time, we are trying to offer a loan that is in our customers’ best interest.
There are, however, a few things that applicants can do upfront that will aid their application process:
It’s no surprise that loan applications can take time to be 100% completed and finalized. With Prodigy Finance, here is an idea of a realistic timeline to expect when applying for a loan. For some steps, the speed is very much dependent on the applicants themselves:
If you’re seeking to do an MBA, or other postgraduate degree, abroad at a top business school, you might want to consider Prodigy Finance as an option for financing your degree. Since Prodigy Finance is a responsible lender, you’re more likely to be in a position where you can afford your repayments after you graduate.
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.