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Student loans aren’t easily accessible for international students in the US, and a partnership wants to fix that

  • Around 763,760 international students currently enrolled in universities in the country arrive as "credit invisible".
  • A partnership between Earnest and Nova Credit aims to solve this issue and ease access to student loans for international students aiming for a Master's degree in the US.
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Student loans aren’t easily accessible for international students in the US, and a partnership wants to fix that

The freeze on student payments has lifted and borrowers are expected to start making payments again in August.

But for those who arrive in the US in hopes of gaining access to higher education, student loans are a completely different ball game. For US natives, taking on a student loan is a question of approval and having the right credit. But for international students, demonstrating a credit history is not straightforward. 

Credit history from a student’s home country doesn't necessarily translate into the US credit system, making international students “credit invisible”. This impacts the 763,760 international students currently enrolled in universities in the country. And in absence of access to private student loans, international students turn towards personal savings, family funds and work-study programs to fund their education. Of these  international students, 50.4% are graduate students, and it is this segment that a new partnership is targeting. 

Stacked bar chart showing the number of international undergraduate, graduate, non-degree students in america since 2004/05 academic year to 2021/2022 academic year. The number of graduate students is steadily increasing since the start even though the number of undergraduate students fell during the pandemic era.
Source: Statista

Partner up: Nova Credit and Earnest are easing access to student loans for international students

For those who don’t have a credit history in the US, the alternative route to accessing student loans requires a US-based co-signer. “If a US-based student has some amount of credit history, you wouldn't require a cosigner,” said David Green, CEO of Earnest, which provides education financing products like student loan refinancing and private student loans. But international students don’t have credit history in the US, which is where Nova Credit comes in. Nova Credit is a consumer credit bureau that is focused on immigrants. The company allows immigrant borrowers to translate their credit histories from their home countries to the US.  

The two companies have recently partnered up to extend their capabilities to international students in the US applying for a Masters degree. With Nova Credit’s Credit Passport, borrowers can connect their home country credit history to Earnest’s loan products, gaining access to student loans without needing a cosigner.  

“Half of the students of any major graduate program in the US consist of international students, and 100% of that half, will tell you some version of I can't get access to credit or loans,” said Misha Esipov, CEO of Nova Credit. He added that while there are international students who can’t access credit, many more aren't even able to enroll because of a lack of financing options. 

Although nearly every major economy has a credit bureau, these credit bureau’s don't share a common language. “The reality is that every one of those credit reporting systems is nationally siloed,” he said. Currently Nova Credit connects to 25 different countries, allowing their consumers to apply for credit cards, auto loans, and student loans. But the partnership between Earnest and Nova Credit does not extend to all 25 countries that the credit bureau is connected with. Instead, it is starting small and aiming to build up. Currently students from South Korea, Mexico, Canada and India can access student loans for programs like MBA, LLM/JD and MS in engineering programs at select schools. 

Both Green and Esipov agree that they want to extend the reach of this partnership, include students from more countries, and broaden the scope of eligible programs and schools. “You have to start somewhere. We felt this was a great place to get this off the ground and learn about what works and how we can best serve these students,” said Green. 

Looking under the hood

International students going through Earnest’s student loan UX flow will be prompted to utilize the Nova Credit offering within the flow, triggering an email that would ask consumers to complete their credit history transfer process with Nova Credit. The partnership has been brewing for about one year but “we really started working on it in earnest, no pun intended, two quarters ago,” said Esipov. 

While embedding Nova Credit within Earnest, the companies paid attention to convenience, to ensure that the UX flow was easy to use. “If it's too hard, then people don't do it. Which defeats the purpose, you're not actually helping people get access to the funds that they need,” said Green. 

Strategy

When Nova Credit wants to add a new country to its coverage, it has to undertake a “long diligence” process. The company has a questionnaire that they take a credit bureau through and the firm has to confirm that the data quality is reliable, and that data privacy laws as well as other regulations are favorable, which will play a part in how many countries it is able to support. 

Earnest entered the private student loan market in 2019 and Green added that the need for an international facing product became apparent early on. Similarly, Nova Credit’s focus on immigrant focused offerings lent itself to this partnership. “There continues to be an overwhelming demand globally to be able to attend some of the best universities in the world here,” said Esipov. For Nova Credit this partnership may also serve as a way to funnel non-US native consumers into its other products like credit cards, checking accounts, auto loans and apartment leases. 

Tearsheet Take

With the Earnest and Nova Credit partnership, international students with a credit history in their own country will hopefully be able to make good credit habits count towards their higher education ambitions. This means that more international students will be able to access higher education in the US. 

But no one partnership or product is a silver bullet for financial inclusion. The Nova Credit and Earnest solution is only available to those with a credit history. And even now, many don’t have one. For example, in 2022, TransUnion CIBIL estimated that 20% of India’s population is currently credit unserved. Bringing these 164 million people into the financial ecosystem will not only improve their financial wellbeing but also open up opportunities that would otherwise be out of reach. 

Table showing the number and percentage of people who are currently credit unserved and underserved in regions like the US, Canada, Colombia,  Hong Kong, India, South Africa.
Source: TransUnion CIBIL

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