FINAE Student Loans for Higher Education in Mexico

FINAE provides affordable loans for low- and middle-income students to pursue higher education at private universities in Mexico.

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Monitoring and Evaluation Reporting

In Mexico's higher education sector, public universities are overcrowded and private universities are too expensive for the majority. FINAE is a social impact financial institution that aims to promote a generational shift and encourage more youth to continue with their education. FINAE targets low-resource students, a majority (70%) of who are the first in their families to pursue a higher education, and provides student loans for them to attend private universities. 

The model
FINAE partners with individual, private universities to share the costs and risks associated with financing student loans. These universities absorb the marketing and infrastructure costs (FINAE works out of admissions offices) necessary to promote the loan program. Universities also fund a First Loss Collateral Fund in case a student defaults on his or her loans. A small staff, low operating costs, and risk-sharing with university partners permit FINAE to remain sustainable and profitable while providing affordable interest rates (around 15 to 17%) to students. FINAE currently partners with 10 universities in 24 states, totaling 87 campuses and more than 20% of total private enrollment in Mexico. 

The loan program's primary product, ennti, is a long-term payment plan that covers up to 100% of university costs and lasts up to 3 times the duration of studies (for example, if a student spends 4 years in university, he or she would have 12 years to pay back the loan). The plan consists of low, predetermined monthly payments that increase after the student finishes his or her studies. FINAE recently launched the first student loan securitization in Latin America, guaranteed by the Inter-American Development Bank, to cater to the growing number of loan recipients and the extended repayment period. 

FINAE additionally provides limited support for students to find jobs after they complete their studies.

Lessons learned
FINAE originally distributed crédito educativo FINAE, a traditional loan where students paid interest on remaining balances. However, students and their families had a limited understanding of the whole student loan repayment process, so few applied. In 2009, FINAE switched over to a long-term university payment plan, which has since proved popular and accessible to low-resource students.

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