Climb Credit looks to transmute learner lending with a new business model based on graduate success

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Source:   —  April 13, 2016, at 5:57 PM

S. is facing a crisis in higher education. Once the ticket to the center class life at the center of the fabled “American Dream”, the college and Univ experience is presently below attack from all sides. Education has become pricier, while graduates are less prepared for jobs in either the white collar or blue collar workforce.

Climb Credit looks to transmute learner lending with a new business model based on graduate success

The U. S. is facing a crisis in higher education.

Once the ticket to the center class life at the center of the fabled “American Dream”, the college and Univ experience is presently below attack from all sides. Education has become pricier, while graduates are less prepared for jobs in either the white collar or blue collar workforce.

Meanwhile, critics ridicule the cost of a liberal arts education, teachers are underpaid, and unnecessary spending on top-of-the-line recreational facilities, learner unions, residence halls and stadiums is maxing out college budgets in precisely the wrong way.

The learner loan crisis by itself (a response to the rising costs of education) is going to be a drag on the national economy for years to come. In the summer of two thousand fifteen, the collective learner loan debt sat at around $1.3 trillion and that no could double by 2025.

Money that’s used to pay down loans is money that’s being pulled from other places in an economy, namely buying houses, saving for retirement, or, really, anything else. Imagine if that $1.3 trillion was flowing through the economy and what that could imply for the U. S.

The nightmare scenario was laid out in all its bloody details in a Jan article from Allie Conti in Vice:

The worst-case long-term scenario is that their debt will frighten them far from taking out credit cards and building up a excellent FICO score, which will in turn prevent them from purchasing houses. Rents stay high, salary stay low, and money that might've gone into a retirement account or paid down a mortgage has over the years gone to paying for a degree.

A no of startups are trying to ease this burden on learner borrowers by offering them simple ways to refinance loans at lower rates, or ways to get out loans at better rates initially. Companies love CommonBond, Credible, Earnest and SoFi are all helping to reduce the burden of learner loan debt.

Climb Credit, a new entrant into the learner lending market which just received a $400 million lending facility, is taking a different approach.

“We started Climb to fund what we call high ROI education,” says co-founder and chief executive Zander Rafael. “It’s education that actually works and benefits the student.”

The 31-year-old Harvard graduate and his co-founders Amit Sinha and Vishal Garg all saw the problems bedeviling higher education in the U. S.

“Most schools aren’t providing the cost to the students that the students wish and the employers want. Dropout rates are high, which leads to higher defaults, and even if you do graduate you don’t necessarily obtain the skills that you need,” Rafael says.

So Climb set out to modify the model. The company identified schools that were doing things well — from charging lower fees, to directly linking training  to the skills needed for future employment, to reducing spending on things love infrastructure in order to focus on learner outcomes and teacher salaries.

That meant building out a school’s outcome database and using that database to underwrite the loans that the company makes.

“We discover industries that create sense, where we know there’s a lot of demand for employment and we go out and we discover students and judge their outcomes,” says Rafael. Currently, the company is partnered with roughly forty schools that are operating from seventy campuses.

The schools that Climb works with run the gamut from medical training programs, industrial programs, and new undergraduate and masters programs love the Minerva Project.

Coding bootcamps are also another outlet, with Climb providing loans to students enrolling at Common Assembly, The Iron Yard, and Galvanize.

These schools, while successful, have problems with accessibility. Even students who’d wish to enroll in the programs often cant’ because they can’t afford it.

Another twist on the traditional lending model is that Climb has managed to wring from the schools it’s working with an agreement which reduces the quantity of loans a learner has to pay back if they aren’t able to discover a job.

Rafael and his co-founders aren’t new to the learner loan business. The serial entrepreneurs previously founded MyRichUncle. com, a short-lived, much-ballyhooed learner lender that went bust in the wake of the financial crisis in two thousand-ninth. Trying their luck across the pond, the co-founders worked in England to establish FinanceMyFuture (presently Future Finance).

Back in the U. S., Rafael and company set up Climb in two thousand-fourteenth and began laying the groundwork for Climb. “”We weren’t sure we wanted to obtain involved,” says Rafael of the trio’s early exploration of the lending market in the U. S. “It wasn’t until we saw educational opportunities that were actually adding cost to students,” that they began seriously thinking about the company.

So far, Climb has managed to wrap up a lending facility of up to $400 million from an undisclosed top-three global asset manager to create its loans. The company has also raised a small, $2 million venture circular to fund its operations.

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