With student visa pressures rising and China emerging as a global business leader, the declining enrollment of international students at American universities should create a higher cause for concern than ever. However, while colleges fear losing international students over visa delays, the students themselves have an even longer list of worries when it comes to pursuing higher education in the U.S.
What does this have to do with banks and credit unions, you might ask? One of international students’ main problems is trying to secure credit to pay for education and for living while they are here. And financial institutions are always looking for more business.
Students Face Barriers Just Getting Started Financially
Getting accepted into a school and paying for it is just the first hurdle. International students also need to figure out how to manage their financial lives in the U.S., a task made more challenging by having to navigate what they often see as a byzantine financial system.
Dreams of pursuing an education in the U.S. can also be dashed by a number of financial factors: Students coming to the U.S. lack the resources to set up a new life on their college campus, and obtaining credit to remedy that requires a previous credit history or at least a Social Security number.
These issues are important to me because I experienced these challenges firsthand 20 years ago as a student immigrating into the U.S. from India. I had no idea how to open a bank account. And I couldn’t operate in the U.S. without one. In order to do things like obtain a lease on an apartment or rent a car, I needed a bank account. Once I had an established line of credit, my wife — who was experiencing the same challenges —needed me to act as her co-signer as she went through all of these same hoops.
Being unbanked means that you don’t fully have access to all of the opportunities available in America, or at the very least it makes doing certain things extremely difficult.
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Circular Reasoning Can Keep Students from Getting Started
We eventually settled in and became part of the financial system. However, it grew apparent to me years later that nothing had changed since my first experiences moving here, trying to open a bank account and secure a loan. In some ways, things had grown worse.
Simple basic services were still not available to deserving but unbanked international students. A prior credit score was still a prerequisite to applying for and obtaining financial support in the form of a credit card or loan. Of course, this turns into a catch-22: How does one acquire a credit history when you need a prior history to obtain credit?
But the picture is beginning to change. Just because an applicant doesn’t have a high credit score — or any credit score — does not make them less credit-worthy. Some lenders are beginning to look beyond traditional scores to determine creditworthiness, taking alternative factors such as on-time payment of bills or social media presence into consideration.
With advances in machine learning and automation, being able to underwrite a candidate without a credit score has become a possibility. Today, new technologies provide a way to predict behavior instead of relying on historical records to determine the likelihood that someone will pay their bills. We can create guardrails that will help people refrain from running up their credit and getting stuck with higher interest payments.
Advances in technology have also solved for another challenge banks faced when considering international applicants. Traditionally, this was done by visiting a brick-and-mortar bank branch. With technology, banks can remotely verify an applicant’s identity without having them physically enter the branch. The ability to upload photos, coupled with sophisticated advances in device intelligence, make it possible to easily verify that an applicant is who they say they are.
Looking to the Days After These Students Graduate
In this way, fintech has changed the game for international students looking to study in the U.S. It’s opened the doors to the possibility of achieving credit, independently and without a co-signer, and for the opportunity to become financially literate in the process. And on the flip side, American universities benefit, as the likelihood that international students can come and study in the U.S., thrive financially and stay to give back has greatly increased.
While it remains to be seen how today’s challenges will manifest — it’s safe to say that access to financial resources is no longer a barrier to entry, as it was when I came to the U.S. all those years ago.