A few weeks ago, I wrote an in-depth look at the macroeconomic fallout following the Biden administration’s landmark decision to write off half a trillion worth of student debt.
Then, last week, I stumbled upon the news that 8B Education Investments had partnered with Nelnet Bank to launch the first-ever US bank lending program to African students as part of the Clinton Global Initiative, which helps African students succeed at global universities to start who are enrolled in American universities.
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The amount — $111.6 million — is huge, and it caught my eye after recently evaluating the forgiveness plan and doing fairly extensive research into the American student loan and tuition space. Nelnet is also the largest provider of student loans in the US, with around 42% of students managed through the company.
So I interviewed Lydia Bosire, CEO of 8B Investments, to get some of her thoughts on the initiative and some broader questions about the US student loan environment.
Invezz (IZ): The press release mentions that “8B’s use of innovative credit enhancement guarantees losses incurred by Nelnet for the duration of the lending program.” How exactly does this work?
Lydia Bosire (LB): Hard to explain without a really long email, but in short……8B raised funds that act like an insurance product to protect the lender from defaults. Should they occur, 8B will repurchase the loan and work with the student to pay off the debt.
IZ: What do you think of the loan forgiveness plan recently announced by Joe Biden? What do you think of the criticism that it might be unfair to those who have already paid off student loans?
LB: While it doesn’t directly affect international students, I personally don’t think the loan forgiveness addresses the real problem of US student debt. Massive tuition increases and poor graduation rates hurt everyone.
Combine that with a federal loan program that provides easy access to debt with no proven ability to repay, and you have an ongoing recipe for disaster. Rather than paying off a select number of student loans, I’d much rather wish for more tax benefits for students and even greater incentives to graduate.
Paying off debt is a quick fix, but unfortunately it doesn’t solve the long-term problem.
IZ: Do you think the initiative will help or prevent the long-term problem of overpriced education in the US? Could it make students more likely to take on debt in the hopes of it being forgiven, pushing education prices even higher?
LB: Assuming this question relates to our 8B loan program and not US student debt… No, we are working to solve gap funding issues for African students and do not expect to be the primary source of funding for 100% of their education. By helping to close the gap, we open doors to more opportunities, drastically reduce dropout rates and increase much-needed completion/graduation rates.
IZ: How much harder is it for African students to go to college in the US?
LB: While the quality of education at top schools remains high, the cost of a US education is also very often one of the most expensive. This cost is a barrier, but many universities are aware of this and tend to offer solid tuition and scholarships to high-performing African students.
IZ: What other work is 8B doing as part of the Clinton Global Initiative?
LB: At this point, we focus exclusively on the current initiative. While it’s still a little early to know for sure, we expect to expand the scope of our goals, which will hopefully keep us in close working contact for many years to come.
IZ: What would you say to those who see the debt-ridden system in general – as well as the recent debt relief discussed above – as a symbol of the growing injustice in American society?
LB: Would like to discuss this over the phone. In fact, the US has for so long touted a formal four-year college education as the best route to high income and success that it’s now backfiring.
Access to a top quality education is so readily available and we simply assume this is what you must do to ensure yourself a successful career path. Honestly, that’s just not true.
We definitely have a growing injustice problem, but convincing people to go after formal education without a clear path to redress makes it that much worse. Community colleges are an excellent first step that can cut average debt in half for those who need it most.
If we start preaching this as an admirable path, rather than giving the appearance of agreement, we can quickly level the playing field.
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