WHY COST IS NOT AL­WAYS A HUR­DLE

CityPress - - Business & Tenders -

Ac­cord­ing to fig­ures pub­lished by the Con­sumer Credit Panel in the US, a stu­dent who leaves col­lege with a $100 000 (R1.3 mil­lion) stu­dent loan is twice as likely to re­pay that debt than a stu­dent who leaves with less than $5 000 in debt.

Karan Goel, CEO and founder of GetSet, an on­line plat­form that con­nects univer­sity stu­dents en­coun­ter­ing chal­lenges with those who have re­cently over­come the same is­sues, says the con­text be­hind these fig­ures is that a stu­dent with a larger loan is more likely to have com­pleted col­lege than one who has a lower loan amount.

With­out a qual­i­fi­ca­tion, the stu­dent is less likely to be able to re­pay their loan.

Speak­ing at the 2017 Fi­nan­cial Lit­er­acy Sum­mit in Chicago this month, Goel said the de­bate of free ter­tiary ed­u­ca­tion is, in many re­spects, the wrong con­ver­sa­tion.

“What is the point of free col­lege if peo­ple don’t graduate?” he asks.

The chal­lenges faced by stu­dents in the US are sim­i­lar to the South African ex­pe­ri­ence. Even if stu­dents re­ceive fund­ing, they of­ten do not even start col­lege, or they fall out of the cour­ses early. The is­sue is com­pounded if they have bor­rowed money to at­tend ter­tiary ed­u­ca­tion – leav­ing them with debt but no job prospects.

Ted Gon­der, a Chicago-based so­cial en­tre­pre­neur who was at the Sum­mit, says: “In the US, 40% of stu­dents who are the first in their fam­ily to en­ter col­lege do not graduate.”

His on­line plat­form, Money­think, is aimed at pro­vid­ing rel­e­vant fi­nan­cial ed­u­ca­tion to high school pupils who want to study fur­ther.

The low grad­u­a­tion rate could be due to a range of fac­tors, but it is of­ten closely tied to so­cioe­co­nomic is­sues. Stu­dents from lower-in­come groups of­ten have more fi­nan­cial re­spon­si­bil­i­ties, for ex­am­ple, the money that was meant to go to trans­port to get to univer­sity is sud­denly needed for a fu­neral or for a fam­ily mem­ber’s med­i­cal bill. Of­ten, the im­me­di­ate needs of the fam­ily re­quire the stu­dent to drop out of for­mal study and take on a low-pay­ing, un­skilled job to make ends meet. There is also no safety net or com­mu­nity net­work to tap into.

Goel says he re­alised that what is needed is a re­fram­ing of the con­ver­sa­tion to make it less about the cost of fees and more about the real cost of grad­u­at­ing.

“What does it take to earn the cre­den­tials that al­low one to have a ca­reer and fi­nan­cial suc­cess? That’s what GetSet’s sup­port plat­form de­liv­ers – sup­port right when stu­dents need it.”

Through GetSet, Goel hopes to im­prove grad­u­a­tion rates, which will be good for stu­dents as well as their credit providers that will stand a bet­ter chance of hav­ing their loans re­paid.

Gon­der is fairly dis­mis­sive of gen­eral fi­nan­cial lit­er­acy pro­grammes at schools and uni­ver­si­ties be­cause, he says, most stu­dents are not that en­gaged with the topic.

“We tend to ro­man­ti­cise the idea of ac­cess to fi­nan­cial ed­u­ca­tion, but peo­ple of­ten don’t know what in­for­ma­tion they need or how to ac­cess it. While de­vel­op­ing our tech­nol­ogy, we re­alised how un­in­ter­est­ing stu­dents find fi­nan­cial con­tent, so the chal­lenge is how to make it rel­e­vant.”

Gon­der’s plat­form pro­vides real-time ad­vice at key fi­nan­cial mo­ments, such as when you open your first bank ac­count or get your first pay­cheque.

This high­lights one of the key chal­lenges around de­liv­er­ing fi­nan­cial ed­u­ca­tion.

A fi­nan­cially lit­er­ate pop­u­la­tion is as im­por­tant for so­ci­ety as it is for the in­di­vid­ual mak­ing the choices. But how do you give peo­ple the in­for­ma­tion they need, when they need it?

Tak­ing on debt is a good ex­am­ple – how many peo­ple un­der­stand that if they only pay off the min­i­mum bal­ance on their credit card, it will take them 20 years to pay back R10 000? Or if they fi­nance their car over 72 months, it will be worth less than what they owe on it for the first five years?

How do we in­form our­selves at that crit­i­cal time and who do we trust with that in­for­ma­tion? Do we trust the bank, which will earn a 20% re­turn on the credit card? Do we trust the car dealer, who can sell you a more ex­pen­sive car (and earn more in in­ter­est) if it’s funded over 72 months?

Fi­nan­cial tech­nol­ogy is cre­at­ing the op­por­tu­nity to make gen­eral fi­nan­cial ed­u­ca­tion as well as spe­cific in­for­ma­tion avail­able when you need it.

Imagine an app that can sense when you walk into a car deal­er­ship, and so au­to­mat­i­cally sends you the ap­pro­pri­ate in­for­ma­tion and ques­tions to ask be­fore you sign on the dot­ted line.

While one-on-one en­gage­ments are still highly val­ued by peo­ple who want to make fi­nan­cial de­ci­sions, de­vel­op­ments in tech­nol­ogy could pro­vide broader, cost-ef­fec­tive and more fre­quent ac­cess, es­pe­cially if they are able to pro­vide the rel­e­vant in­for­ma­tion at the right mo­ment.

Fisher-French par­tic­i­pated in the 2017 Fi­nan­cial Lit­er­acy Sum­mit spon­sored by the Chicago Fed­eral

Re­serve and Visa. She was a guest of Visa

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