Student loans and access to education can be a huge issue for anyone living in the United States, but for some living outside of the country, it can be even more difficult to access American universities, especially without significant financial backing. One of the people trying to solve this problem for international students everywhere is Manu Smadja, co-founder and CEO of MPOWER Financing.
ABERMAN: MPOWER is a really innovative company, I like it a lot. Tell everybody about it.
SMADJA: MPOWER, in a nutshell, makes loans to international students, and DACA students, who come here to top universities in the U.S.. For me, and for the thirty people that work at MPOWER in D.C., this resonates very personally. So, twenty years ago, I was myself an international student, at UVA, so not too far from here, and frankly, I struggled financially through school. I did well academically, but I had to take a bunch of odd jobs. I was a grader, a tutor for math, physics, computer science, French. I was even an indoor soccer referee, which I joked was like refereeing cage fighting. Ultimately, I pulled through, with the help of my family. But it sort of shocked me, like, why weren’t banks lending to international students?
And after seeing, over decades, too many students, or too many friends of friends, drop out of school, or not be able to come here in the first place, in 2014 I decided to launch a company that would solve this social issue. And today, MPOWER is able to help hundreds of students. We do so in 250 universities across the U.S., and we’re excited, every day we get hundreds of applications for loans from students who don’t have a cosign, or don’t have collateral, but are high potential, high energy, and got admitted a really top university in the U.S..
ABERMAN: I always find it interesting, because many universities really want to have international students, they actively solicit them for a lot of reasons, but yet, they don’t seem to create much infrastructure to help the students pay for it, do they?
SMADJA: The universities try their best, but even the banks fail at it. The banks don’t have the right marketing and sales channel to reach out to these students. For instance, MPOWER has an office in northern India to be able to be on the ground, where a good chunk of international students come to the U.S.. MPOWER has a very different credit algorithm, to make credit decisions. MPOWER has a global servicing and payment infrastructure, so that students can have a seamless experience repaying their loan whether they’re based in New York after graduation, or whether they go back to Mumbai or Shanghai or Paris for instance. I pick on Paris because I’m originally French.
I think there’s a big burden already on universities to provide a great educational experience. Providing the financial part is not really part of their purview, and that’s why we partner with them, and we cover the part of it. And we’re able to bring more international students, and then retain them as well.
ABERMAN: Give me an example of somebody who was able to get a loan through you, that otherwise wouldn’t have been able to get an education.
SMADJA: I hear tons of stories, and you’re right, these students are extremely credit-worthy, it’s just, credit-worthiness is this absolute measure that’s, over time, been confounded with the FICO score. The FICO score works great if you’re a middle aged person, and you’ve gotten a bunch of credit cards, a car loan, et cetera. But when you’re young and starting off in life, it doesn’t work for you. You don’t have an established credit history, but it doesn’t mean you’re a bad credit risk. So, let me give you an example. There is this young woman who was working in Venezuela, she was working as a top notch corporate lawyer, in a big bank, in BBVA. A few years ago, she received death threats in Venezuela. So, she was opposed to the Chavez political party.
She received death threats, and from one day to the other, she had to flee the country. Let go of her job, let go of her car, let go of her apartment, let go of her friends and family, and just flee the country for her life. She decided that the easiest way for her to make it to the U.S., and make something out of time away from Venezuela, was to continue her education. So she enrolled at an LLM program at the University of Miami. Unfortunately, she didn’t have the financials, she didn’t have the 20, 30, 40, 50,000 dollars it can cost for a year’s worth of tuition at one of these schools. And no one would lend to her, despite her credit history, her background, her potential as a hot shot lawyer. No one would lend to her. So, she turned to MPOWER, and we were able to lend to here, and she was able to complete her education. We have hundreds of stories like that.
Students who make it to their junior, senior year in undergrad, and are five or ten thousand short of becoming an engineer, of finishing pre-med education. Some of those students already have a job lined up. Another story that hit me was this French student who was at Columbia University, and had a job lined up in an investment bank, making six figures out of a quick grad degree, and no one would lend to him. Because again, he didn’t have an established credit history in the U.S..
ABERMAN: This business strikes me very much as what I would call a fintech business. There are an awful lot of them revolutionizing different parts of the credit industry. I think of you, I think of SoFi out on the West Coast, approaching slightly differently. Why did you locate the company here, and not go to California, like I’m sure many people told you to?
SMADJA: D.C.resonates very strongly with what we do with our mission. You know, in 2010, I was based in Brussels, and I was working a lot in sub-Saharan Africa. I thought, where do I personally want to be in the world? And I considered Tokyo, Singapore, where I’d spent some time, considered moving to Paris where I’m originally from, considered a lot of different places. D.C. struck me as, potentially, the one place in the world where everyone you stop in the street wants to distort the planet in a positive way. And I thought, there was such a strong admission there that said so much about the people in D.C. that this is where I wanted to live, personally.
And then the same question happened again in 2014. The business MPOWER had been created in early 2014, by mid to late 2014 things were picking up. We started to hire employees, we were starting to get traction with students, and we thought, well, should we go to San Francisco? Some the VCs are telling us, hey, go to the West Coast. This is where it’s happening. But then we thought about it. And we thought, D.C. is a place that has the biggest lender to students overall, in the federal government, that has the biggest private student lender, Sallie Mae, that has an incredible source of analytical talent and financial services, with Capital One just on the other side of the river, and then that has a lot of really highly educated folks that are passionate about making a positive impact on the world.
Why in the world would we go anywhere else? So, that’s why we decided to stay, and it’s been really good. We’re very happy to be happy with the folks that have joined our team over time, and we’re really happy about being in D.C..
ABERMAN: Well, I’m really happy that you took the time to come in and share your story with us today, Manu. It’s great to hear of your progress. Congratulations.