Making higher education more accessible to Pakistani students | MIT News

Taking a loan to go to college is your future investment. But unlike the United States, students in Pakistan are not easily able to obtain university loans. Instead, most families must be subject to higher interest rates for personal loans that may require collateral, such as land or home. As a result, for many students, colleges are not available. This is one of the reasons why only about 13% of Pakistani students go to college.

Now, Edufi, founded by Aleena Nadeem ’16, is offering lower student loans to the wider Pakistanis. Edufi is the abbreviation of “education finance” and uses an AI-based credit scoring system to directly qualify borrowers and pay directly to the university. The borrower then pays Edufi monthly, with a service fee of 1.4%, which is much lower than the available fees for most students today.

“For the average middle-class person nowadays, the cost of college is extremely affordable,” Nadeem explained. “Through our ‘research, payment now’ system, we divide this huge upfront cost into installments, which makes it more affordable for existing college students and a group of newcomers who never thought of higher education.”

Edufi started paying loans to people in Pakistan last year after it was founded in 2021 and received regulatory approval. In the first six months, Edufi paid more than $500,000 in loans. Since then, the company’s inclusive approach to qualified applicants has been verified: Today, there are less than 10,000 of these loans.

As awareness of Edufi grows, Nadeem believes the company can contribute more broadly to the modernization and development of Pakistan.

“We are accepting more people who don’t have access to bank loans,” Nadham said. “This makes more people go to college. The impact of giving cheap and fast credit to the education sector on developing countries like Pakistan is huge.”

Better credit

No one entered the Ivy League school at the meeting at Nadeem, a British international high school. This made her accept MIT’s recognition.

“Thus far, this is my first choice,” Nadham said.

When she arrived on campus, Nadeem took classes at MIT, teaching her about auctions, risks and credit.

“In the work I’m doing now with Edufi, I’m applying what I’ve learned in the real world,” Nadham said.

Nadeem worked in the credit department of Goldman Sachs in London after graduation, but the barriers to accessing higher education in her home country still plagued her.

In Pakistan, some targeted programs provide financial support to students with seniors, but the vast majority of families must find other ways to fund universities.

“Most students and their families must obtain personal loans from Standard Banks, but this requires them to open a bank account, which can take two months,” explains Nadeem. “The fees in the education sector in Pakistan must be paid shortly after sending the request, and the payment may have been late when the bank accepts or rejects you.”

Private loans in Pakistan have much higher interest rates than student loans in the United States. Many loans also require borrowers to use the property as collateral. These challenges prevent many promising students from simply not being able to attend college.

Edufi is using technology to improve the loan eligibility process. In Pakistan, parents are the primary borrowers. Edufi developed an algorithmic credit scoring system that takes into account the financial history of borrowers and then pays directly to the university on their behalf. Edufi also works directly with the university to consider student grades and payment history.

The borrower repays the loan at a monthly installment fee of 1.4%. No mortgage required.

“We are the first promoters in student loans and currently have the largest student loan portfolio in the country,” Nadham said. “We offer a lot of people extremely subsidized interest rates. Our interest rates are cheaper than bank alternatives. We still make money, but we are impact-focused, so we make money by paying more people, rather than increasing profit margins per person.”

Nadeem said Edufi’s approach can enable more lenders to get loans and be faster than banks. This makes it easier for students across Pakistan to access universities.

“Banks charge high interest rates to people with the best credit scores,” Nadham said. “By not adopting collateral, we do open up credit spaces to new friends who cannot get bank loans. Easier credit allows the average middle class individual to change the lives of their families.”

Help the country by helping people

Edufi received a non-bank financial license in February 2024. The company gained early appeal last year through word of mouth and soon opened to borrowers across the country. Nadeem said many have since gone to Edufi’s headquarters to confirm that it was a reliable action. Nadeem also regularly receives messages from Pakistani students, thanking Edufi for helping them in college.

After further proof of this year’s model, Edufi plans to expand to Saudi Arabia. Ultimately, it plans to provide loans to students throughout the Middle East, and Nadham believes that using Edufi’s approach can improve the global student loan system.

Nadeem said of the large financial companies, “Edufi is modeled in the form of Sofi in San Francisco, which first offers student loans and expands to mortgages, credit cards and other banking services. “I’m trying to build sofas in Pakistan and the Middle East.” But it is indeed a combination of Sofi and Grame Bank (in Bangladesh) which extends credibility to low-income people to lift them out of poverty. ”

By helping people expand their education and reach their full potential, Nadham believes that Edufi will one day accelerate the development of the entire country.

“Education is a core pillar for a country to stand on,” Nadham said. “You cannot progress as a country without the education that makes education as accessible and affordable as possible. Edufi does this by directing capital to a hungry education sector, frankly.”