Carlos Gomes is a lawyer by trade, but by the time he decided to pursue an MBA, he was working more in business than in law. When the 40-year-old from Sao Paulo, Brazil, learned that he’d been accepted to a top-20 MBA program in the U.S., he started preparations to move his family to Los Angeles.
It seemed like the start of a new chapter. The median starting salary for MBAs from USC’s Marshall School of Business, where Gomes had been accepted, is around $150,000. He planned to work in investment banking in the U.S. after graduating from the one-year, full-time program. His future ticket seemed all but punched.
There was just one problem: money.
While Gomes was able to secure a $50,000 loan from MPOWER Financing, he was turned down by other lenders that drastically tightened lending in the wake of the COVID pandemic and because he didn’t have a U.S. co-signer.
“The payments, for me with my wife and my daughters, it’s almost $200,000,” Gomes told Poets&Quants in April. “All we have are a little value of savings, but not the total amount.”
$100,000 LOAN LIMIT & REFI OPTIONS
To make it easier on students like Gomes, MPOWER – a fintech company providing school loans to high-promise international and DACA students – recently announced two new initiatives: The firm doubled its lending limit from $50,000 to $100,000 this fall, and, just a few weeks later, announced a refinancing option for international graduates working in the United States.
Unlike more traditional student aid lenders, MPOWER does not require a credit score, collateral, or a cosigner. Instead, it provides loans based on a student’s future earning potential.
“The mission has always been very, very personal for me,” MPOWER co-founder and CEO Emmanuel “Manu” Smadja tells Poets&Quants. “I was an international student myself 22 years ago. I came from France over to the U.S., and I did okay academically, but struggled financially. That’s really what planted a seed in my head.”
MPOWER made the moves in response to messages from students indicating that they needed more financial support, Smadja says. “We listened. Following our capital infusion this summer, we’re pleased that we can now offer more monetary resources to make obtaining an education in the U.S. and Canada more attainable.”
The new refinance program is available to international and DACA students who graduated from a U.S. or Canadian university and who have at least three months work experience. OPT, H1-B and a wide variety of other work authorizations are eligible.
“Having the ability to refinance my Indian student loan has been such a relief. Since graduating from the University of Florida, I’ve secured a fantastic job in my chosen field of computer science,” said Aniket Sinha, a recent refi customer. “However, I was still concerned about my loan payment, along with the fact that my parents were still on the hook for the loan. With MPOWER, not only am I saving thousands of dollars each year, but I also have the peace of mind that my parents are free and are no longer burdened as my cosigners as they move toward retirement.”
MAKING A U.S. EDUCATION POSSIBLE
By definition, international students usually don’t have a U.S. cosigner required for federal student aid and other domestic lenders. That means international students have to borrow in their home countries which typically require collateral, often owned by the students’ parents.
It’s a circumstance Smadja knows all too well. The French citizen worked at top financial and consulting companies in the United States, including McKinsey & Company, Capital One, and Vistaprint. But when he wanted to get an MBA at INSEAD, he went through months of a stressful loan application process which ultimately turned him down. He was eventually able to secure another loan, but he had to put his parents’ home up as collateral and the company froze his father’s retirement accounts.
“I thought, ‘Wow. I am a French citizen. I’ve worked in the United States, and I’m going to one of the best MBA programs in the world. You could literally see the money at the other side of it,” he tells P&Q. “It was a huge financial burden on my mom and dad. I thought about how much harder it would have been if I was from a middle income family in India or China or Latin America.”
Smadja co-founded MPOWER at Harvard in 2014, and it now finances international students from 180 countries attending the top 350 universities in the United States and Canada. Half of its students come from Asia, including about 20% from India. They also serve large contingents from sub-saharan Africa and Latin America. The firm uses the word international a bit loosely, Smadja says. Besides financing traditional international students with F1 visas, it also serves refugees, asylum seekers, DACA students, and a few American students who fall through the cracks of the lending system.
Rates for DACA (Deferred Action for Childhood Arrivals) students start at 6.49% fixed, which is competitive with federal rates, Smadja says.
“I think it can be challenging for DACA students to trust a financial entity, especially with all of the noise that’s been going around at the government level over the past few years. And we want to make sure that they understand that we’re an ally,” Smadja says. “They really made it here and had to suffer through all sorts of discrimination growing up, sort of being treated as literally second tier citizens. Meanwhile, all they want to do is study. That’s why we’re very passionate about it. It’s also empowering, they are very bright and hardworking people who just deserve a chance.”
Next page: Why international students matter to U.S. B-schools & A happy ending