Loan across borders
Trying to finance a course in a US college? Michael J. De La Merced talks of a lending company students may approach
- Published 24.10.17
As American universities' interest in courting international students intensifies, an online lender that caters to them has drawn significant new financing.
Prodigy Finance, the lender that makes loans to international postgraduate students, said recently that it had raised $40 million in new equity financing. It also said it had secured a $200 million credit line from an undisclosed bank.
The new financing comes at a time of keen interest in international students among US universities - and a decline in applications from those students that has begun to unnerve educators.
Students from abroad brought more than $32 billion to the US economy during the 2015-16 academic year, and that figure has shown steady growth. Last year, the number of foreign students at American schools rose above 1 million for the first time.
But there are signs of trouble with the international student population. A survey of 250 institutions by the American Association of Collegiate Registrars and Admissions Officers found that nearly 40 per cent of the responding schools reported a decline in applications from international students, particularly those from West Asia. Many respondents cited concerns about the Trump administration's immigration policies.
Nevertheless, the appeal of international students has underpinned the investment in Prodigy, which was founded in 2007. International students often cannot get loans for their education because they lack credit histories. But Prodigy says it looks most closely at applicants' earning potential, allowing it to ignore their lack of credit history, guarantor or co-signer. For much of the company's history, it has focused on business school students.
Much of the financing for Prodigy's loans comes from crowdfunding; investors buy stakes in debt that supports the loans. The company said it had lent more than $325 million to more than 7,100 students to date.
"Students from emerging economies such as China, Brazil and India face challenges in accessing financing for education, even with high credentials and excellent credit quality," Cameron Stevens, Prodigy's founder and chief executive, said in a statement. "We believe in financial inclusion and talent mobility and look forward to continuing to help international students break the funding barrier and further their education at a top school." The new investment in Prodigy was led by Index Ventures, along with Balderton Capital and AlphaCode.
"Prodigy Finance is opening the doors of the world's top universities to students who were previously shut out because they couldn't fund their education," Neil Rimer, a partner at Index, said in a statement. "Every decade, the number of international students doubles, and our hope is that Prodigy Finance will help accelerate that growth. Our planet sorely needs more educated citizens of the world."