Studying outside of the country of your nationality or residence can present many benefits to prospective MBA applicants. See the world, improve language skills, expand horizons, learn first-hand how increasingly global the business world has become. And yet, one major hurdle can sometimes prevent ambitious, talented prospective MBA applicants from pursuing their education abroad. That pesky little detail of funding.
Traditional banks are reluctant to lend across borders because tracking and enforcement of those loans suddenly becomes more difficult. Many U.S. banks, for example, won’t lend to foreign students without a U.S. co-signer, someone local the banks can go after to recoup their debt if the borrower fails to repay.
A New Way for International Students to Finance Their MBAs – with No Co-Signer
Cameron Stevens, a South African who had been living in Malaysia, was delighted to be accepted to study at INSEAD, only to confront exactly the funding challenge outlined above. Despite this, he managed to make his way to INSEAD, where he discovered that quite a few of his classmates had similar problems. Together, he and two other INSEAD students came up with a solution, and in 2007 Prodigy Finance was born.
How Does Prodigy Finance Work?
“Go Fund Yourself!” reads the company’s playful advertising line. In fact, that’s exactly how it works. Prodigy Finance is based on a community-funded model in which international students attending MBA programs abroad receive loans made possible by investments from alumni of the school they attend. For instance, alumni who attended INSEAD will invest in a bond to fund current INSEAD students. Additional investors often include the business schools themselves, the school community and other investors or institutions interested in higher education or social impact. By investing in these current international students, they are also investing in the value of the given school’s MBA program.
Application Process, Interest Rates and Eligibility
As for the borrowers, each applicant receives an individualized interest rate, which will apply over a floating base rate. Students’ individualized interest rates are based on a number of factors having to do both with the applicants themselves, as well as the quality of bureau information Prodigy Finance is able to obtain for them. Their affordability and other market rates they may have access to, as well as the average target rate that Prodigy must achieve for the alumni investors and the portfolio of students are also taken into account. “The rates that we quote are anywhere between 6 and 12 percent above the base rate, and in general, the APR sits between 8 and 9 percent,” says Liz Reid, Prodigy Finance’s Student Brand Manager.
To qualify for a Prodigy Finance loan, applicants must provide proof of acceptance to a participating school. The entire 20-minute application process takes place online, beginning with the applicant stating how much he or she hopes to borrow. Within 2 business days, applicants receive conditional approval, their interest rate and their loan amount. Once conditional approval is in place, the borrower can accept the terms, pay an administration fee (which ranges from between 2.5 and 3.5 percent of the approved loan amount, depending on the length of the program), provide supporting documentation and be on their way to the MBA program of their dreams. Once they arrive at school, they will digitally sign the loan agreement, and funds will be disbursed directly to the school. In instances in which a student’s loan amount exceeds tuition, additional funds for living expenses will be deposited directly into the student’s bank account.
Students from more than 150 countries are eligible as long as the school they hope to attend is outside of their country of nationality or residence. (U.K. students are an exception; because Prodigy is U.K.‒based, students from that country can take part even if they plan to attend a U.K. school.)
Furthermore, with a Prodigy Finance loan, there is no need for guarantees, co-signers or collateral, and borrowers don’t have to start repaying until six months after their study period has ended, as long as they are full-time students.
Prodigy Finance: From Inception to Today
Stevens and his co-founders began Prodigy Finance to fill the funding gap faced by many international applicants across the globe. In the eight years since, the program has grown to 41 schools across the United States, Europe, Asia and Africa, including Columbia Business School, London Business School and CEIBS, to name just a few. (Click for a complete list of participating schools.) The company plans to expand to even more schools in time. As for the investors, so far Prodigy Finance’s community-based funding model is working beautifully. “In terms of repayments, we have over 99 percent repayment rates to date,” says Prodigy’s Reid. “The main reason we believe repayment rates are so high is because of our community-funded model.” The students know that the money is coming from alumni who were students once themselves. They don’t want to let that community down by defaulting on their loans. They also know that the investors can see their repayment status. “It’s almost like a ‘social pressure’ in a way,” Reid adds.
Prodigy Finance investors earn up to 5 percent annually through a low-risk investment that allows them to support students at their alma mater. Talk about a win-win.
Learn more about Prodigy Finance.
Prodigy Finance is an advertiser on the Clear Admit site. This piece appears as part of the company’s sponsorship package. For more information about sponsorship opportunities with Clear Admit, contact us here.
