Responsible Student Lending

Responsible Student Lending Innovation Can Drive Equity and Inclusion

By Angela (Ceresnie) Prince, former Climb CEO

The topic of student lending was popular during the 2020 election cycle — and this provides an opportunity to share forward-leaning ideas on how to improve overall educational opportunities and outcomes. Responsible innovations in student lending and related underwriting can increase education access, reduce bias, and drive positive economic outcomes.

The status quo for consumer credit underwriting, including for education financing, largely relies on a set of long-established metrics such as credit bureau data, income, and the most widely adopted credit-scoring model, FICO. However, these metrics alone are not the best we can do when it comes to reducing bias in consumer lending and expanding opportunities for individuals to invest in their futures through career-focused education. Innovative approaches and underwriting models will be the solution, but they must be responsible and incremental in order to avoid unintended outcomes.

In the context of financing for professional and skills-training programs, the traditional consumer lending model outlined above fails to account for the future economic benefits derived from the education investment. The model is static in that it captures the individual’s creditworthiness at the current point in time, when they may be in a low-paying job or not employed at all.

However, when one takes into account the benefits that can result from additional education, traditional underwriting approaches that would deny a student credit for attending such education programs are both unfair and unnecessarily restrictive.

Innovative approaches to this category of consumer lending hold substantial promise in expanding access, promoting fairness, and driving economic empowerment. But the innovation must be responsible and evolutionary in its approach in order to avoid advancing new forms of bias and discrimination.

One particular area that holds substantial promise in expanding access and fairness is considering the expected future income of a graduate from a well-regarded professional or skills-training program. Much like a lender to a small business will consider the expected growth of a new venture, a lender should consider whether a particular professional or vocational education program is likely to drive a higher income for the student upon graduation. This approach protects the student by ensuring the expected future income justifies the educational investment and by providing capital access when a traditional approach would likely result in a decline.

Take this scenario:*

Responsible Student Lending

In this example, a lender using John’s current income would likely deny him the loan and block his path to gaining skills training. At Climb, we know that this one-month truck driving program is likely to result in a salary increase for John — getting him far closer to that $40,000 range. So we consider that salary when reviewing John’s DTI. And in our version of this scenario, John is empowered to attend the program and get his Commercial Drivers License.

Indeed, consideration of a debt-to-future-income ratio based on the outcomes and track record of educational programs can provide currently underemployed and unemployed prospective students (or those who would not otherwise have financing) with the ability to invest in additional education and training. This approach is aligned with student interests by helping them pursue educational programs that truly expand economic opportunity and professional advancement, while not saddling them with debt and illusory benefits.

The consideration of expected future income when analyzing an ability to repay is an incremental credit innovation, is consistent with existing law, and helps generate additional career outcomes data that can increase transparency regarding school performance and better inform student decisions.

With respect to the incremental and compliant nature of this approach, as noted above, income information — both current and future — is not only a well-accepted underwriting metric, but is critical in determining a borrower’s ability to repay. Considering future income ensures that the debt burden incurred by the student is worth the expected return. It also prevents a student from unfairly being denied credit for pursuing a career-focused educational program.

It is important for responsible lenders in this space to collect, review, and confirm reported graduation rates, job placement rates, and expected salaries. Over time and through the dissemination of outcomes data, students will be in a better position to evaluate the merits of particular professional and skills-training tracks and programs. Transparency of this type can help eliminate programs that over-promise and under-deliver in terms of student outcomes.

Going forward we can do better than the status quo when it comes to fairness, access, and accuracy in consumer lending. Technological advances (a topic that merits its own separate analysis), including with respect to machine learning and quantitative analysis, hold substantial promise in improving lending outcomes across these factors. And as explained here, so does measuring real-world data — especially when it comes to economic outcomes from professional and skills-training programs — in order to better understand expected future incomes. This incremental approach unlocks access and opportunity in ways that status quo approaches simply cannot.

*Assumptions in the example included in this article:

  • John’s gross salary is $24,960, if he works 40 hours a week for 52 weeks out of the year.
  • John’s monthly student loan payment for the CDL program is going to be approximately $187/month (assuming a 6.99% interest rate and 36 month term).

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What to Expect: Realistic Outcomes

Climb’s Comprehensive Access Solution can offer a strategic balance of increased enrollments and upfront cashflows compared to traditional lenders. While no financing solution guarantees 100% collection, our data-driven approach maximizes both upfront cash and long-term repayment rates.

Typical Partner Results:

  • 15-30% of students qualify for Climb Loans with upfront tuition delivered to the school shortly after course start
  • 45-60% of students qualify for 0% APR* payment plans
  • Enrollment increases of 20%+ reported by partner schools**

**Results vary by school and student demographics. This represents performance reported by individual school partners and should not be considered a guarantee of your specific outcomes.

The bottom line: CAS is designed to maximize your net tuition recovery while eliminating the administrative headaches of student financing.

Maximizing Your Results

Pro Tip: Schools that require student deposits and set up automatic payments during enrollment see significantly better repayment performance across all financing options. These simple steps can meaningfully improve your outcomes.

FAQs

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

We use a comprehensive, AI-driven assessment that goes beyond traditional FICO scores to better serve career training students:

  • Climb Credit Score: Over 150 data points specifically designed for vocational students
  • Debt-to-Income Ratio: Reliable predictor of payment performance
  • FICO Score: Used primarily for interest rate assignment

Key advantages of our approach:

  • Soft credit pull until loan funding (no credit impact during application)
  • The majority of students receive instant decisions
  • Students can apply with co-borrowers directly in the application
  • More accurate placement into appropriate financing products

Students are placed into funding brackets (Elite, Standard, Enhanced) based on our AI assessment. Higher-credit students generate higher upfront payments to your school, while students with limited credit are seamlessly directed to our 0% Payment Plan.

These brackets are established using data from over $1 billion in career training loan originations and may be adjusted periodically based on updated repayment trends.

Important note: Regardless of which bracket a student falls into, they are considered fully paid by your school once funded. The student’s repayment obligation exists exclusively between Climb and the student.

Elite Access not available for Computer Science programs. Upfront percentages vary by industry and loan terms.

Once Climb disburses upfront funding for a student loan, that student is considered fully paid by your school. You will not receive any additional payments for that student—the single upfront payment is complete and final.

From that point forward, the student’s repayment obligation exists exclusively between Climb and the student. Your school has zero liability if the student defaults, and you keep the full upfront payment regardless of the student’s future payment performance.

They’re automatically offered our 0% Interest Payment Plan, ensuring no student is turned away while maintaining steady monthly cash flow for your school.

Higher-credit students generate larger upfront payments (75-100% of tuition), while students with limited credit use our 0% APR* Payment Plan for consistent monthly revenue. Both options are risk-free for your school

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Absolutely. Climb complements existing payment options like scholarships, employer-sponsored programs, and internal financing.

Typically, within 5-10 business days after your partnership agreement is signed.

Comprehensive onboarding webinar, continuous partner support via AI-assisted chat and live email—and real-time borrower assistance with our live-chat-available student success team.

No. Climb fully manages the administrative responsibilities—your team simply monitors your school’s performance via our intuitive School Portal.

Your school is fully protected either way. For Climb Loans, you keep the entire upfront payment with zero liability. For Payment Plans, you only receive what students actually pay, with no risk to your school.