Turning the Student Loan World on Its Head

Turning the Student Loan World on Its Head

Sean remembers the day that his parents made their last student loan payment. A thin letter arrived in the mail, alerting them that, after more than 20 years of making qualifying payments for their combined undergraduate and graduate programs, their debt was finally paid off.

The moment was worthy of celebration—the freedom, both cognitive and financial, that accompanies paying off a long-standing loan was unparalleled. As Sean stood in the kitchen, watching his parents celebrate, he tried to imagine what it would feel like to finish paying off his own loans. Unfortunately, his own time to celebrate would be delayed significantly.

Sean took out over $150,000 in loans to fund his undergraduate and legal education. At the time that he volunteered for such a massive cost, it seemed eminently reasonable. The degrees he pursued were necessary to get the job he wanted to have the greatest degree of impact. What he neglected to understand when enrolling in school and the subsequent loan programs was just how many opportunities would not be afforded to him as a result of his debt.

While Sean is pursuing a career in public interest law, and forgiveness programs for public service exist, data from the Department of Education show that less than 2% of applications for loan forgiveness have been approved. Realistically, Sean knows he must seek alternatives to the as much as 7.6% interest rate on his unsubsidized student loans.

Alleviating The Student Loan Burden

Impact Capital Funds is designed to harness investor capital in order to alleviate student loan burdens by lowering interest rates for university alumni and their parents, as well as generates scholarships for financially under-resourced individuals.

As a triple-bottom line social enterprise with the potential to impact three generations, Impact Capital Funds will not only generate financial returns for investors, but it is also concerned with outsized social impact for alumni and future students.

Less Student Debt: Measuring The Impact

That is, can consumers like Sean experience more economic freedom and thereby have access to greater opportunity as a result of refinancing their loan with Impact Capital Funds? Can Impact Capital Funds disrupt the student loan debt industry by putting more money in an individual or family’s pockets? Can Impact Capital Funds level the playing field for borrowers by decreasing overall interest rates and the time it takes to pay back student loans, as well as lead the industry with integrity, responsibility, and transparency?

We can ask these questions, but it’s also incumbent upon us to consider how we measure our impact, which requires distinguishing between short-term, easily quantifiable outputs and longer-term impacts.

We can and should track the number of loans repaid, the dollar amount associated with repayments, the percentage of student loan interest saved, the number of scholarships generated, and/or the dollar amount associated with those scholarships, but, again, these are only signals of success.

This is not the only story we want to tell, and it doesn’t inherently convey whether someone’s life has changed as a result of our service.

Making an Impact by Improving Lives

What is less easily quantifiable, but arguably more important, are the ongoing benefits associated with Impact Capital’s work. This includes the percentage increase in individual or family assets (such as home purchases, increased savings, or a child’s educational funds), and other longer-term indicators of financial health, such as retirement savings.

And what of mental health? 53% of respondents to a survey initiated by Student Loan Planner shared that they have experienced depression as a result of their student loan burden. Can Impact Capital Funds improve overall mental health as a result of the decreased anxiety and stress associated with debt? This is our fervent hope, among others.

In addition, do individuals now have increased opportunities to make alternative career decisions without worrying about their debt burden? Another Notre Dame alum shared that he has been plugging away on his student loans since his graduation from Notre Dame. He paid off the last couple of thousand as a 30th birthday present to himself.

While this alum now feels more financially secure to consider grad school, the “elephant in the room” is his parents’ debt burden. In a 2018 Brookings article, “at least 3.4 million Parent PLUS borrowers owe $87 billion,” which at that time was about 6% of all outstanding federal student loans. And interest rates are higher for Parent PLUS loans, including an origination fee and an interest rate of 7.6%.

Impact Capital Funds is not only interested in working with student borrowers, but their parents. The collective debt relief for parents, who may be stalling their own retirement contributions or making alternative decisions for other children, should be tracked as well.

Generating Scholarships For Future Generations

And what about those who are just starting college or university? As previously mentioned, Impact Capital Funds believes it can impact three generations, including investors, borrowers, and prospective students. As part of its triple-bottom line, Impact Capital Funds will extend scholarships to financially under-resourced students, so that they don’t have to carry the same financial burden as Sean and other men and women like him.

Accredited Investors can now invest in refinancing prime student loans held by borrowers that graduated from top American universities. To learn more about the student loan asset class click on the button below to download our free eBook.

Download the eBook