The Lender Who Puts You - The Student - First: Skills Fund - Skills Fund: Revolutionizing Higher Education

The Lender Who Puts You - the Student - First

The Lender Who Puts You - the Student - First

April 30, 2018

With student debt at an all-time high, and more and more lenders emerging onto the market, it can be hard to determine your best option when it comes to selecting your educational loan.

Applying for, and taking out, any sort of debt is a decision that carries a lot of weight - so it should be clear-cut, right? Why do lenders make it so difficult to understand the real cost of a student loan?

The answer is disappointingly simple: their incentives are not aligned with yours.

Skills Fund is education financing done right. We've blown up the expected smoke and mirrors of a student loan to introduce a solution that is simple, inherently transparent, and (most importantly) true to our mission of placing your success first. This is about changing careers and lives, after all.

So we've put our money where our mouth is. Much like a student has a variety of training programs to choose from, often times they need to make a decision on which lender to use as well. Here's how Skills Fund places you and your outcome first - in a way no one else can.

FULLY UPFRONT LOAN TERMS - ONLY WITH SKILLS FUND

What does fully upfront mean? Fully upfront means you know the actual cost of borrowing funds to pay for your program before you use a valuable hard credit check.

With Skills Fund, expect disclosure of your actual interest rate, estimated APR and monthly payment amount before you start your loan application.

Skills Fund is proud to be the only lender to offer one, low, transparent and fixed rate for each loan term to match the cost and length of your program, the same rate to every student (even with a cosigner), and a loan calculator to see your estimated monthly repayment amount - directly on your school's Skills Fund partnership site.

Weighing options between different lenders? You'll find rate, payment and cosigner comparisons below.

RATE CLARITY

Skills Fund: We've made it radically simple: you can see your clear-cut interest rate and estimated Annual Percentage Rate (APR - full cost of borrowing funds) on your school's Skills Fund partnership website before applying.

Our rates are:

8.99% interest rate/11.16% estimated APR for a 3-year loan term
10.99% interest rate/12.51% estimated APR for a 5-year loan term
Each loan term has a 4% origination fee

Please note - Galvanize & Hack Reactor's rates are 8.49% interest rate/10.65% estimated APR (estimated specific to Hack Reactor) and 10.49% interest rate/12% estimated APR (estimated specific to Hack Reactor) with a 3% origination fee.

These rates were last updated on March 6, 2018 and are based upon a 3-month program and 2-month post-program payment period.

Climb Credit: As of March 6, 2018, Climb's website provides a window of possible "fixed rates from 6.00 - 16.80%." There is no disclosure of if this rate is only the interest rate or APR. Most loans come with a 3 - 5 year terms.

Students will only learn of their individual interest rate, APR and associated service fees for their loan upon receipt of loan disclosures. The origination fee varies depending on your school and application, but standard loans typically include a 5% origination fee.

Sallie Mae: As of March 6th, 2018, Sallie Mae's website provides a window of "variable interest rate(s): 5.87% - 12.98% APR*" for 5 - 15 year loan terms. Variable interest rates may increase or decrease throughout the life of your loan and are subject to market index changes, which may result in monthly payment changing over time. Sallie Mae does not charge an origination fee. Students will learn of their individual rate after underwriting is complete and a credit decision has been made.

Meritize: As of March 6th, 2018, Meritize's website offers information on both fixed and variable rates. Your rate range will vary between loan durations and types. For variable-rate loans, a student's interest rate has the opportunity to increase once a quarter (four times a year).

For a Fixed Rate Loan: On a 3-year fixed rate loan, a student's rate can span from 5.2% - 14.7%. On a 5-year fixed rate loan, the rate can span from 5.7%-15.2%.
For a Variable Rate Loan: Loan rates are calculated using 1-month LIBOR + a percentage that can span from the single (2.7% - 3.45%) to double digits (12.2% - 12.95%) depending on the loan term (3-, 5-, and 10-year term offerings).

The variable rate is calculated by adding a margin, assigned by Meritize, to a market-based index. Margins are assigned on the basis of a variety of factors, including your academic performance, credit history and cosigner status.

Meritize uses London Interbank Offered Rates (“LIBOR”) as the index for its variable-rate loans with the 1-month LIBOR rounded up to the nearest 1/8th of a percent, or 0.125%. This index will reset once a quarter, and as a result, your rate may change, moving up or down, a maximum of four times each year. Regardless of your index and margin, the effective annual interest rate on your Meritize loan will never exceed 19.99%.

Just writing this made our head hurt.

Meritize advertises an origination fee of .5% or 3%, which depends on a student's interest rate. A student won't know their actual rate until after underwriting is complete and a credit decision has been made.

PAYMENT CLARITY

Skills Fund: As Skills Fund discloses a student's rate and estimated APR on a school's partnership website, its also able to offer a loan calculator for calculation of a student's approximate repayment amount.

Yep, that's it. No weird math calculations baked with assumptions, where you have to try to figure it all out. Each and every school's partnership website has a customized loan calculator reflecting each program's specific costs.

Climb Credit: Climb Credit offers an example payment amount directly on its site, showcasing a loan amount plus origination fee on a 36-month loan term. Within its FAQs, "How Does Climb Calculate Interest?" it links to a blog post that includes instructions such as:

P = financed amount + (financed amount x .05)
Then, you multiply P by your effective interest rate (J) to get your monthly IO payments:
Monthly IO Payment = P x J
P = principal amount
J = effective interest rate (annual interest rate as decimal / 12)

It's like a trip down memory lane to high school math.

Sallie Mae: Sallie Mae's APRs are variable. Your cost of financing may increase or decrease throughout the life of your loan and are subject to market index changes, which may result in significant monthly payment changing over time (the cost of a 5.87% rate is very different than that of a 12.98% APR). Therefore, there's no real way to predict long-term monthly payments. You can, however, use this "estimated loan calculator" once you have your current rate to see an estimated loan payment. That will most likely change.

Meritize: Much like their interest rates, Meritize's APRs for a variable loan-type, regardless of your index and margin, the effective annual interest rate on your Meritize loan will never exceed 19.99% (19.99%!). In a blog post from July of 2017 entitled "Can I afford my student loans?", students are given a step-by-step way with a number of assumptions, such as your starting salary, to identify monthly costs.

Clear as mud, folks. How do you "protect your self with the facts" if you don't have them?

Cosigner (A.K.A. Co-Borrower) - Dependent Incentives

Skills Fund: If you are empowered to change your life and career with a transformative educational program, shouldn't you be empowered to secure the lowest rate to finance your education on your own? Skills Fund believes you should.

Our low, fixed, transparent rates are the same for all students - even if you opt to add a cosigner. The incentive is on you, not on you finding someone more credit worthy to lower to your rate.

Climb Credit: Under "How to Qualify for a Better Rate" on Climb's homepage, it clearly states "Everything is better with someone else. Apply with a co-borrower and you will likely get a better rate. A co-borrower can be anyone who promises to pay if you can’t, often a relative or someone close to you."

Sallie Mae: Similar to Climb, directly on Sallie Mae's homepage for their Career Training Smart Option Student Loan, "You may have a better chance of approval if a parent, relative, or other creditworthy individual cosigns for your student loan."

Meritize: Similar to Climb & Sallie Mae, within the Student Loan FAQs, it states, "Having a cosigner will improve your loan options, but because Meritize Loans do not rely on conventional credit models, it’s possible you could be approved even without a cosigner."

WHY IS THIS INFORMATION IMPORTANT?

Setting expectations and helping you to make an informed decision is everything in understanding educational ROI - or your Return on Education (ROE). When you're considering making a significant personal and financial investment in a skills training program, it's important to weigh the full cost of financing into your decision.

If you're at the edge of starting your program, and you don't know your interest rate until you receive your final loan disclosures (generally as the last step before program enrollment), you run the risk of being locked into a cost that you aren't prepared for, and ultimately, having to delay or drop-out of the educational journey ahead of you.

If you've completed your program and are forecasting cash flow based on your new salary and cost of living, and you have a variable rate loan, uncertainty lies in your interest rate changing over time. How do you appropriately balance your finances for the life of your loan?

Neither option benefits for you in the short- and long-term and presents challenges in achieving your ROE. Frankly, you deserve more of your student lender, and Skills Fund is committed to playing its part to lead to your long-term professional and financial success.