How fintech platforms are making student loans accessible and affordable

Representative image. News 18 Hindi

More students in India dream of studying abroad because of the variety of courses offered and the wide exposure the programs allow. Contrary to traditional norms, higher education institutions are now more concerned with offering holistic education to students, including the use of new age technologies, experiential learning and industry integrated curriculum. However, many aspiring students’ growth is hindered due to lack of adequate funds. The rapid expansion of the Fintech sector has opened up alternatives and possibly better opportunities for students to make use of loans. Here are some of the ways Fintech platforms are making student loans easily accessible and affordable.

Estimate of creditworthiness

Traditional lending institutions and banks find it difficult to collect large amounts of data related to countless colleges and courses around the world, thus making it difficult for them to underwrite applications for student loans based on the student’s future earning potential. Fintech platforms have solved this problem.

These companies are forward-looking and use AI, data science and machine learning to draw actionable insights and devise effective strategies. Credit decisions can be made with more accuracy and precision. Empirical data and the meta-analysis of the potential of courses worldwide have led to more student-friendly loan products that do not require collateral or for parents to be co-borrowers. It will make student loans fair and accessible to all sections of society, especially to those who were overlooked by the previous systems.

Simple planning

Studying abroad requires a lot of planning on the part of the student. An integral determining factor is the availability of finance. To start the process, the applicant needs to know if they qualify for the loan and how much they are likely to receive. Students usually had to visit the bank several times to get this information.

Fintech platforms, through digitization and technology integration, have made this process much faster and easier. Their websites have a user-friendly interface and such estimates can be calculated with a simple mouse click. Automating processes means applicants receive regular reminders and virtual support as they complete their forms.

Risk assessment and efficient underwriting

Fraud detection and risk management are integral parts of offering loans to students. Due to unreliable procedures involved in risk assessments, banks have refrained from offering loans to certain sections of the population. Fintech companies have revolutionized this segment.

Loan defaulters fall into three categories: those who want to pay but cannot do so because they did not get the expected job, those who are financially undisciplined, and those who have no intention of paying. The third cohort is small and requires legal intervention. Fintech companies, however, have proven incredibly useful for the first two categories.

Since the risk assessment is done before the loan is granted using the information obtained from account aggregators and intelligent analysis of academic records, the chances of default due to the scarce availability of funds are reduced. Moreover, flexible EMI options, EMI holidays and changes in EMI structure further help those who are unable to repay their loans.

The bottom line
Fintech companies have revamped the student loan industry. Through a tech-first approach and an insistence on innovation, they have made this field inclusive and accessible. Students no longer have to rely on their parents to help them secure loans. They can pursue their dream of higher education independently and with dignity.

The author is a founder and chief executive officer (CEO) of Kuhoo. The views are personal.

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