March 2025
Friends,
Tough times bring focus to essential work. In these turbulent days, I cope by returning to what drives me—(and/or some dark chocolate…)
- Post-secondary education and skills development make economic mobility a reality for lower-income Americans; however
- Your parents’ income/assets and education level determine the likelihood that you will complete post-secondary education.
- We’ve got to fix number #2, so #1 can happen
Economic mobility happens faster when we reduce the delta between out-of-pocket expenses plus lost income from time outside the workforce compared to the economic gains achieved through degree completion and career progression. Many innovators are helping to bridge this divide by developing affordable pathways, such as Campus and Craft Education.
We should celebrate progress. Yes!…and recognize that more work is needed to achieve large-scale change. One such area is access to responsible funding for ‘last gap’ expenses to avert dropout and enable completion of higher education, particularly for low-income and first-generation learners enrolled and achieving in 4-year degree or higher level certification programs. In many fields, such as health care, these degrees significantly boost earnings from associate certifications, which net around $70k – to $115k with a 4-year equivalent degree, plus more opportunities for advancement and salary increases.
Even when delivered efficiently, these programs cost more, making them most likely to result in funding gaps. Employer tuition benefits for longer-form degrees are on the rise. Yes! And…the majority are for repayment, which doesn’t help the student who dropped out just short of completing.
- 14 million undergraduate students in the US utilize $140-160 billion annually in a combination of loans and credit cards to cover their education costs after grants, scholarships, and savings.
- Also, each year, 3 million students who have completed multiple semesters drop out before graduating due to a lack of funding. These students are overwhelmingly low-income and first-generation students.
When lower-cost pathways and skills-based hiring take hold, we might optimistically project that 50% of those students will not need loans or credit cards. However, $70-80 billion in need would remain, likely by low-income students. Low-income students in particular, need more -and more equitable – solutions.
Unfortunately, lending to undergraduate college students is often done poorly or harmfully, or, as is most often the case for those who need it most, it is not done at all. Almost 35% of low-income college students use high-interest credit cards to pay for, on average, $3900 of school expenses annually, with African American students carrying the highest balances in comparison to their peers. No. But…that is not a solution to celebrate.
Relatively few innovators have tackled this problem/opportunity, and, many whose initial financing products served students in longer form programs like a 4-year degree, have pivoted to other areas. They have introduced fabulous products for shorter term programs or employer-sponsored financing. Yes! And… Why? From my seat in the weeds, I know this is a complicated problem that presents unique risks. But, as any number of successful entrepreneurs and investors will attest – only those willing to take risks, particularly in a market that holds such promise to change the lives of millions of people, are those who will reap the greatest returns – measured financially and by social impact.
So, Funding U is scaling and taking on a huge human and market opportunity with our last-gap loan without a co-signer requirement. We base our credit decisions on predictive behaviors that indicate a student will graduate and earn enough to repay that loan while living, eating, and thriving as employed adults. Critically, we offer this loan at an affordable rate nationally because we only work with financial institutions and other partners mandated to support low-income students. And, interestingly, our lending technology and compliance infrastructure are now also used by a range of education and workforce development projects that game-changing forms of education financing. Our partners plug in our critical technology ‘plumbing’ to enable loans as low as 0.00% APR for programs ranging from 16 week cybertech certifications to 8 year medical degrees, many with payments that begin only after reaching a certain income, as well as pathways for principal reduction. That’s a huge yes, and!
I’d love to hear about other impact-funded or workforce development financing efforts so I can learn from them. Thanks for sharing.
Warmly,
Jeannie
Disclaimers
