A few weeks ago, I wrote a deep dive on the macroeconomic fallout following the landmark decision of the Biden administration to forgive half a trillion worth of student debt.
I then came across news last week that 8B Education Investments, under the Clinton Global Initiative, which helps African students succeed at global universities, partnered with Nelnet Bank to launch the first ever lending programme by a US bank to African students enrolled in American universities.
The amount – $111.6 million – is huge, and it caught my notice having recently assessed the forgiveness plan, and having researched the area of American student loans and tuition costs quite heavily. Nelnet is also the largest student loan provider in the US, with around 42% of students administered through the company.
So I interviewed Lydia Bosire, CEO of 8B Investments, to get some of her thoughts on the initiative and some wider questions on the student loan environment in the US.
Invezz (IZ): It is mentioned in the press release that “8B’s use of innovative credit enhancement guarantees losses incurred by Nelnet for the duration of the loan program”. How exactly does this work?
Lydia Bosire (LB): Sort of hard to explain without a really long email but in a nutshell……8B has raised funds which acts like an insurance product to protect the lender against defaults. Should they arise, 8B will purchase the loan back and work with the student to cure the debt.
IZ: What do you think about the loan forgiveness plan recently announced by Joe Biden? What do you think regarding the criticism that it may be unfair to those who have already paid off student loans?
LB: While it doesn’t directly impact international students, I personally don’t feel loan forgiveness targets the actual problem with US student debt. Massive tuition increases and poor completion rates hurt everyone.
Pair this with a federal loan program that allows easy access to debt without any proven ability to repay and it’s created a continuous recipe for disaster. Rather than paying off a select number of student loans, I would much rather see increased tax benefits for those attending university and even greater graduation incentives.
Paying off debt is a quick fix but unfortunately won’t solve the long-term problem.
IZ: Do you think the initiative will help or hinder the long-term problem of overpriced education in the US? Could it make students more likely to take out debt in the hope it will be cancelled again, hence pushing education prices even higher?
LB: Assuming this question is about our 8B loan program and not US student debt……No, we are working to solve gap financing problems for African students and do not expect to be the primary source of funds for 100% of their education. By helping bridge the gap we open doors to increased opportunities, dramatically reduce dropouts and increase much-needed completion/grad rates.
IZ: How much harder is it for African students to attend 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 priciest. This cost is a hindrance but many Universities are aware and tend to offer high-performing African students solid tuition discounts and scholarships.
IZ: What other work is 8B doing under the Clinton Global Initiative?
LB: At this point we are solely focused on the current initiative. While it’s a bit early to say for certain, we do expect to increase the scope of our goals which will hopefully keep us in close working contact for many years.
IZ: What would you say to those who label the debt-laden system in general – as well as the recent debt cancellation discussed above – as a symbol of the growing inequity in American society?
LB: Would love to discuss this one by phone. Being honest, the US has pushed a formal four-year university education as the best path for high income and success for so long it’s now starting to backfire.
Access to a top education is so readily accessible and we simply assume it’s what you must do to secure a successful career path. Frankly, that’s just not true.
We definitely have a growing inequity problem but convincing people to chase a formal education without a clear path to compensation makes this far worse. Community colleges are a terrific first step which can halve the average debt for those who need it most.
If we begin preaching that as an admirable path rather than the appearance of settling, we can quickly level the playing field.
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