All you need to set up a student loan software

Financing education is as old as time. Many Nigerians from Gen X and even some millennials got through school with the help of family members who lent them money. 

It’s a common story of family members coming together to support their loved one’s dreams. In most advanced countries, student loans are the norm, allowing almost everyone to attend university. Sadly, that’s yet to be the case in Nigeria. 

While some banks offer specialized loans for students, there’s still plenty to be done regarding expanding credit access to Nigerian students. Luckily, an individual lender can decide to support education by providing student loans, and we’re more than pleased to guide you through setting up shop. 

The first step is to decide what type of student loan you want to offer. For this article, student loans are categorized into two tiers:

• Student loans for tuition and school supplies
• Student loans for non-academic or personal needs

Today, however, we will focus on the former: setting up a loan software that provides loans specifically to cover tuition and school supplies.

Featured read: All you need to know about the new student loan law

Business development: partnering with learning institutions

As a lender looking to enter the student loan market, choosing a suitable business model is essential. 

This requires partnering with reputable and high-quality educational institutions. Some things to consider when partnering up with schools include: 

• Employment prospects: Ensure that graduates from these schools are highly likely to secure valuable jobs, increasing their ability to repay their loans.
• Disciplinary standards: Evaluate the schools’ disciplinary policies and only partner with institutions that enforce consequences for misconduct. This reduces the chances of students intentionally defaulting on their loans, as they would fear penalties such as being barred from exams or having their results withheld. These disciplinary measures act as collateral.
• Verification of identification: Partnering with schools allows you to verify prospective borrowers’ identification documents, such as proof of paid school fees or current academic year status.
• Direct loan disbursement: Collaborating directly with schools allows you to disburse loans directly to the institution, minimizing the risk of diverting funds for other uses.

This part of starting a lending business focuses on business development, particularly setting up software for student loans.

Technology: integration with Lendsqr’s loan management software

Now that you’re done with the boring but necessary bit of setting up a student loan software. We’ll move on to the more exciting bit: technology.

Instead of spending 3 to 6 months building your tech infrastructure from the ground up, Lendsqr’s cloud-based loan management software can kickstart your operations within minutes. It covers everything from loan origination to disbursement to collection.

When you sign up for Lendsqr, we’ll help you set it up so you can integrate it with the school system (if available). If not, Lendsqr can still help you by setting up a custom platform. This platform will include a back office to host your custom data, make configurations, and monitor loan processes.

While the backend is designed for you to customize and modify as needed, the frontend—specifically, the platform through which parents can apply for your student loan product—will typically be either a web app, a mobile app, or both.

Featured read: 5 reasons why a digital lender must have a loan app

Now that your loan software has been set up and parents can apply for a loan for their ward, we strongly advise that your primary method of disbursement and payment collection should be authorized direct debit. This method ensures prompt and secure transactions, benefiting your loan business and borrowers.

Featured read: How direct debit is simplifying payment collection

Key considerations for student loan approval

When a parent applies for a loan for their child, there are two important factors to consider before loan approval:

• The authenticity of the parent’s information encompasses their biodata, identity card(s), workplace details, and other relevant documentation.
• Evidence demonstrating the parent’s willingness and ability to repay the loan promptly when it falls due.

Most of the time, school fees are often paid in bulk and typically occur once or twice a year. Consequently, parents frequently repay them gradually from their salaries. 

For instance, consider a university student whose annual school fees amount to 500 thousand naira, while the parent’s monthly income is 300 thousand naira. In such a scenario, it may be challenging for the parent to cover the entire fee upfront while managing other essential household expenses such as rent, food, and medical needs. This is where student loans come in handy, offering a solution to such dilemmas.

Moreover, as a demonstration of their commitment, parents could be encouraged to make an equity contribution. This entails them depositing a certain percentage of the loan amount they seek. For instance, using the previous example, they could contribute 20% of 500 thousand naira, which amounts to 100 thousand naira. This gesture signifies their determination to fund their child’s education and assures prompt repayment of the loan.

Fund dreams one loan at a time

Finally, test, test again, and test once more to ensure that there are no hitches at any stage of loan application, disbursement, or repayment. Why is this so important? The last thing stressed-out parents facing financial burdens need is to encounter bugs or glitches that could complicate their situation further.

As Nelson Mandela famously said, “Education is the most powerful weapon you can use to change the world.” Dear lender, now that we’ve provided you with everything you need to set up a student loan software, are you ready to change the world? Start here.