Innovative Student Loan Solutions Development: Where to Start

August 25, 2021  By HES FinTech
Innovative Student Loan Solutions Development: Where to Start

Student loan platforms are no longer mainstream, they’re a part of a college tuition anti-crisis program. It’s trite but true that continuous tuition hikes force people to take students loans. Instead of drowning in overdue debts to banks, students choose simple student loan solutions from third parties.

As 65% of all jobs in the U.S. and abroad require Bachelor’s or Master’s degree, the demand for student loan software will continue to rise. It’s important for lenders to come up with top-notch student lending software to help pay for tuition and existing debts. In doing so, we decided to explore the importance of student loan management solutions in battling the tuition crisis. In the article, we’re figuring out what student loans solutions are in the market and how to develop effective software to win over the majority of debtors.

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Why Invest in Student Loan Management Software

Even before the coronavirus pandemic, student loans have seen almost 157% in cumulative growth, as states Bloomberg. While the average college tuition cost has dropped in the 2020-2021 academic year, and the average tuition and fees at private ranked colleges have fallen by about 5%. Analysts still worry that after the crisis the trend of year-over-year tuition hikes will be back. The next generation of graduates might default on their loans at even higher rates than it was supposed earlier.

The average college student graduates around the age of 21 and can expect an average annual salary of about $ 50,000 for a full-time job. While the average monthly student loan payment is $ 393. Depending on the degree and average debt, graduates need up to 20 years for repayment. It inhibits their abilities to save money, increases credit card debt, as well as damages credit history in case of a delay.

Once student loans hit people when they have lower income, they are unable to pay off debt quickly. This also damages their attitude towards loan service providers in the future. Statistically, 72% of millennials consider owning a house a number one priority, after traveling, marriage, and having children, as Bank of America states. But student debt delays millennial homeownership for seven years, according to the National Association of Realtors.

The private student loan market stands at $130 billion today and has grown more than 70% over the last decade.

So, for alternative lenders students and graduates can be a tidbit — the opportunity to support the future generation and build long-lasting relationships with them. Financial institutions can be trusted allies for people managing their first debts and helping them achieve their financial goals including future expenditures on house ownership, travel, car purchase, etc.

Options for Student Loan Solutions

As more young people are being required to pony up academic fees, student loans solutions have become much more popular and mainstream. The increased demand for online student investing is about the ease of use and the process transparency.

There’re lots of online student lending software solutions in the market, such as UpStart, LendKey, Achieve Lending, SoFi, and many more. Some of the platforms are direct lenders, others are comparison tools, where a borrower checks and compares the best rates across small lenders; there’re also P2P investors and refinancing companies. Let’s highlight the technical components they require for effective crediting.

Direct lending software

With the increased competition among lenders and rising student loan default rates, private student lenders have been forced to update their solutions to student loan debt. Lenders need a fresh approach to their business backed up with executed technology solutions to serve their customers and partners.

Here at HES, we strive to automate every step of a lending process to let clients outperform their competitors first. What we offer to consider while developing configurable student loan management software:

Personalized customer onboarding

Understanding your target audience is the way to figure out what parts of your onboarding processes need improvement. What do students know about loans? The majority of them lack knowledge of finance and lending features. Start with your website:

  1. Guide students through your services. Explain how student lending works, what payment opportunities you have, how they can pay off debts, and what’re the consequences of overdue loans.
  2. Focus on communication channels you have and highlight them — chatbots, mobile phones, email addresses, a mobile application, and FAQ page. Everything should be at hand.
  3. Figure out something to let you stand out over competitors. For example, offer a 0% interest until September + no payments until October. Students lack money, and a good offer is what they’re looking for.

Leaving clients with a feeling they’re familiar with your services and student lending, you increase the chances they’ll build up a habit of coming back for more. While our solutions to student loan debt can automate every onboarding step, reduce time to response, and help you find loopholes in your onboarding process.

Feature-rich personal accounts for students

A personal account provides borrowers control over their loan operations and helps them visualize their debts. Borrowers can track past, active loans, or rollover loans. They can monitor payment schedules and receive notifications in terms of delays. Personal accounts not only drive customer experience but help decrease non-performing loans (a little bit) by reminding users about their responsibilities.

Considering students, we recommend creating mobile applications with custom student cabinets. Based on the statistics, about 75% of millennials and gen z use mobile banking applications. While these generations cherish technologies and software convenience, simple student loan solutions allowing to keep every operation under control in a smartphone are in demand. It’s the greatest way to attract users and build long-term relationships with them.

Student loan refinancing

Student loan refinancing is when a private lender pays off an existing loan and provides a new credit term. Students with high interest rates usually opt for these services to reduce monthly payments.

Student lenders like SoFi prefer to combine direct lending services and refinancing. And attract their customers with better refinancing offers. For example, having $ 50,000 in loans with a 10% interest rate, students pay $ 660.75 per month for the next decade. But applying to a private lender (you) that offers student loan refinancing, they can get a more favorable rate — say 6%. That would reduce their monthly payments to $ 555.1.

Working with historical data, loan companies can get a comprehensive understanding of students’ financial health. At HES FinTech, we develop solutions to predict all possible risks for lenders and automate debt collection processes.

Alternative credit scoring

AI-powered credit scoring already gained popularity in Europe due to its flexibility and accuracy. Since we develop student loan software, a traditional scoring system will hardly find these people reliable borrowers (without long credit history). But it doesn’t mean that they’re as they seem. Unlike traditional scoring, the AI approach builds prediction models based on the company’s experience — historical data. Experimenting with models and scored parameters, every company can find the most accurate approach for the business. The system tells you the chance that a student will pay back or not. Moreover, modern credit scoring software needs seconds to score applications. So, it’s a great chance to automate risk management and increase market reach.

Intelligent debt collection and notification system

Debt collection is a process that requires dozens of repeated manual actions. Using a student debt solution can help a company reduce bad debt write-offs, reduce manual errors, collect money faster, and maintain good relationships with borrowers. The software allows monitoring your borrowers by importing data from various sources and storing them in a single format.

To follow the millennial and gen z centric approach, we recommend customizing notifications and set trigger events. You can easily arrange the auto-calling of debtors, send SMS and messenger notifications, provide fast follow-ups — everything in one debt solution.

Introducing an automated student debt solution makes debt collection more cost-effective and accurate in tracking customer payment transactions, collecting them, managing overdue debts, and documenting agreements.

Peer-to-peer investing

Peer-to-peer lending platforms connect borrowers and lenders, who invest money in up-and-coming projects or loans to qualified applicants. It’s an alternative to borrowing money from banks and online lenders that is relatively new in the student loan market. Each platform sets rates and terms and provides transaction lines. The best P2P lending platforms usually offer multiple types of loans (not only student ones) and provide competitive incest rates and low fees.

Marketplace features

Unlike other lending platforms, P2P companies require marketplace lending software to match borrowers and investors. Our marketplace module with a matching engine automatically matches users taking into account borrower and lender-specific settings. You can create fully custom rules to reflect borrower risk parameters, minimum and maximum lender bid size, loan size, and other possible terms significant for your P2P business. In addition, the auto investment solution allows investors to set up their funding terms and invest in target projects without physical engagement in the process.

Security and borrower verification

No matter what student loan software you develop, the security of your loan platform and customers is your foremost responsibility. Using an identification solution by HES means that users have to provide identity document details. The solution supports lots of verification approaches, like ID, driver’s license, facial match to capture the face biometrics and matching it with the passport, etc. A provided document will be checked for forgery by scanning, as an example, for visible irregularities or incorrect positions of elements of a document.

Here at HES, we provide secure solutions to manage user permissions by implementing role-based access control features. You can build rules to allow and block access by device ID. Full compliance with KYC and AML policies to understand customers’ motives as well as the ability to detect and prevent fraud and money laundering.

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Wrapping it Up

Student debt solutions are a great opportunity to build a good credit history for millennials and gen z. HES FinTech offers 20+ modules to develop successful software, including online marketing, CRM, document management, BPMN, data validation, and more. Whether you need full-cycle student lending software or simply want to integrate the existing platform with a third-party solution, the HES team is ready to help. Working with HES, you get a reliable partner dedicated to lending, and fond of the latest technologies.

Looking for innovative student loan solutions? Request a live demo tour throughout HES solutions.