Extending education capital with MPOWER Financing
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What
MPOWER finances international students as well as students with Deferred Action for Childhood Arrivals (DACA) status in the US. It offers student loans without the need for cosigners or collateral. In 2022, MPOWER is financing approximately $150 million in student loans.
To Manu Smadja, MPOWER’s Co-Founder and CEO, the company is first and foremost a data company. “The reason we're able to underwrite these students versus other companies with traditional banks without a cosigner or collateral is not because we have magical powers or we're taking undue risk,” Smadja said. “It's really because we just have massively more data.”
That framing explains why MPOWER is the only student lender worldwide that scrapes both US and Canadian credit histories as well as home country credit histories. “Because we're future potential oriented, we add on education data, employment data, financial data, details on how they’re paying for a degree, and so forth,” Smadja added.
MPOWER is a step between an originator and a marketplace insofar as it takes lending applications and underwrites them, but it also works with a bank in order to originate loans nationwide; it has its own lending licenses as well, and typically buys back loans from its bank partner.
Why
Without a US citizen to cosign a loan or family contributions, international students face an especial lack of access to capital for studying in the United States. Smadja experienced this himself 23 years ago as an international student at the University of Virginia. “The social intent [for MPOWER] was there from the start,” Smadja said. “To empower historically left out socioeconomic groups to have access to higher education.” Research by MPOWER suggests 85% of the students borrowing from them would not be able to finance their education without a product like MPOWER; that rate rises to 93% for female applicants.
Extending loans to DACA students came a year after launch. Though they don’t fit a traditional international-student profile as long-term US residents, they also lack access to capital, including private student loans, in part because their parents often lack credit histories.
In addition to economic empowerment, MPOWER sees job-market fulfillment as part of its mission. “We're more and more focused on not just financing international students and bringing that socioeconomic diversity, that gender diversity, and situational diversity, but also playing matchmaker to what the US market really needs,” Smadja said. With shortages of tech talent, medical talent, and other gaps in the US job market, MPOWER can help shore up the ranks.
How
MPOWER research unveiled that nearly 75% of students were applying from their smartphones, which presented a set of specific UX and UI needs. Because of potentially limited internet speeds for applicants, MPOWER’s online application avoids “fancy images or platforms” and solves for speed and efficiency and quick server access.
MPOWER also lets students upload documents via their phones, using automation and OCR to capture documents to solve for speed. MPOWER considers convenience and expediency as two unique selling points, giving an initial answer to a loan application within 30 seconds, and a conditional offer within 30 minutes.
In part as a means to ensure the success of its customers, MPOWER also helps clients establish credit histories in the US. It’s designed its loans to have touch payments during school with linear 10-year amortization, and processes automatic ACH from US bank accounts, which avoids the uncertainties of exchange rates and, by building a credit history, opens access to credit cards and more housing options for students.
For DACA students, MPOWER has matched its rates to be as low as those for US citizens at 6.49%. According to Smadja, MPOWER has never had a DACA student default on their loans. Citing MPOWER’s 2022 Impact Report, Smadja said students have reported going into politics, or securing patents to their names, or starting businesses. “We find it fairly fascinating, the ripple effects of what we do,” Smadja concluded.
