Fintech startup Study Loans looks to help students fund vocational education and training
Apart from the lucky few who went to university during the Whitlam years, the rest of us who have pursued tertiary education have been billed tens of thousands of dollars for the privilege.
While the Federal Government’s educational loan schemes mean many students are able to study now, pay later, cuts to the vocational education scheme put into place earlier this year have affected others.
Founded by Brett Shanley, Mark McCoach, and Rhett Simonds, Australian startup Study Loans is looking to help and ensure these students have solid options to fund their education.
“Unfortunately, some of these people turn to high credit interest options to pay for their studies,” Shanley said.
“My two cofounders have over 15 years of experience in the educational business space…we ultimately felt it was about time a private company stepped in to provide a more a superior offering.”
Rather than providing funds directly to a student, the startup works with the educational institutions to have tuition paid to the organisation as a student progresses through their studies, like the government study loan programs.
The main focus, Shanley said, is to make it easier for students to gain access to funding for their education so they don’t rely on other high interest credit options.
The service is selective in terms of both the educational institutions it partners with and, of course, the students it lends to.
According to Shanley, institutions must have “a long history in delivering education in a specialist manner”. In assessing them, the startup looks at their history of compliance, the average completion rates of courses, and the job outcome rates from courses.
“Ultimately, we only want to work with institutions who are providing a real outcome for their students. In our mind, an outcome must be gaining a job, gaining a promotion, gaining a pay raise or gaining the ability to move into a new industry,” he said.
Given the vocational training and education sector bringing in $10 billion in revenue, the market is significant; however, the quality of some institutions in it has been called into question over the last few years. However, with registered training organisations (RTOs) collecting VET FEE-HELP funding from the government for each enrolled student, stories emerged of private colleges collecting hundreds of millions in funding despite students cancelling their enrolment.
Launch partners of Study Loans include General Assembly, the Academy of Makeup, and Real Estate Academy Australia.
For students, being eligible for a loan requires, first of all, clearing a key hurdle: studying an approved course from a partner institution. From there, there are credit bureau checks, ID verification, and serviceability checks.
“The good thing about Study Loans is that a student doesn’t necessarily have to own any assets or have a long credit history to be eligible for a loan, as most banks require. This is usually a big hurdle for young people when applying for credit,” Shanley said.
“Our main lending criteria requires a student to earn $20,000 per annum and have a minimum 75 percent completion study rate, to ensure we adhere to responsible lending practices. As most people work alongside study this isn’t a great barrier.”
Interest is calculated according to a risk-based model, with rates starting at 12 percent and increasing up to 18 percent. Also charged is a one-off establishment fee of $200, a monthly management fee of $2.50, and a drawdown fee of $25 per tranche payment.
The startup has launched with a $5 million loan book, raised through investors Simonds Group and RMY Corp, while also raising $2 million in seed funding.
While the likes of payday loan providers could service students, Shanley doesn’t see any direct competitors in terms of the specialised service the startup offers.
Another startup looking at funding education, though at the school level, is Sydney’s Edstart, which allows parents to receive a loan for their child’s school fees that they can pay back over a period of 1o years or more.
Over the next 12 months, Shanley aims to build to a $30 million loan book, or 3,000 loans worth $10,000 each. The maximum loan amount is $15,000.
“At the end of the day though, our main focus is helping students through the most critical part of their studies and career development.”
Had enough of all the startup buzzwords? So have we. That’s why we’re asking the startups we chat to to send us a video where they pitch their business in a way that’s easy enough for even the most technophobic of grandparents to understand:
Image: Brett Shanley and Mark McCoach. Source: Supplied.