Helping Brazilian Students Achieve Their Dreams

Photo © Jefferson Rudy/Agência Senado. Twenty seven young senators present their projects at the special session of the Brazilian Youth Senate Program.

Ideal Invest Innovates to Help Brazilian Students Achieve Their Dreams

Camila Brandao Macedo knows how it feels to have to compromise her dreams for a career. The daughter of a driver and a public school teacher, Camila wanted to become a lawyer. Knowing she could not afford to study law, she decided to pursue a degree in tourism, a shorter course of study. Once she found a job in the tourism industry, she enrolled in the legal program at Estacio University, and continued working to pay tuition and living expenses.

“I love what I do, and I have the opportunity to work in the career that I always dreamed of,” Camila said, adding that if she had known about Ideal Invest sooner, she could have embarked on her dream career nine years earlier.

Mid-way through the law program, she needed to start a two-year internship, which forced her to give up her tourism job and cut her income in half. She struggled to make ends meet and was unable to get a loan from the scaled-back government student loan program. Fortunately for Camila, Ideal Invest, an innovative private, for-profit, student lending company, helped her finance half of her tuition at a zero interest rate, delaying repayment of the other half until after graduation.

In Brazil, university graduates on average earn two and one-half times more than students who don’t finish college. But tuition costs are roughly half of the average monthly salary, putting a degree out of reach for many people who have the potential to contribute to Brazil’s economic development. Making higher education more affordable and accessible is one way to reduce extreme income inequality in one of the world’s largest economies.

In 2009, IFC invested R$12 million, or the equivalent at that time of $7 million, in equity in the company to help it expand. The investment came at a critical moment as Ideal Invest was serving about 10,000 students and was poised for growth. IFC’s involvement coincided with turbulent times as the global economic crisis was unraveling. Ideal weathered the financial storm and went on to survive strong competition from growing government programs.

At their peak in 2014, government-funded student loan programs helped 730,000 students realize their dream of attending university. However, an economic recession and budget austerity measures have scaled back those programs to just 250,000 in the first half of 2016, forcing many students to postpone or even forgo their studies, or seek alternatives through Ideal Invest.

Carlos Furlan, CEO of Ideal Invest, explains how the company partners with about 475 select universities to provide student loans that make it possible for more students to continue their studies. “We can offer zero interest because the (educational) institution bears part of the cost to help the students.”

In choosing university partners, Ideal Invest considers the quality of degree program and prospects for employment for graduates from that institution. In evaluating borrowers, the company requires the student to have a co-signer with a clean credit record and combined income of at least 2.5 times the monthly tuition.   Non-performing loans are just 4.5 percent, well under half the average U.S. federal student loan default rate of just under 12 percent.

Ideal Invest’s founder, Oliver Mizne, points out that for student lending to be sustainable, all parties must have “skin in the game.”  He invested his own capital, and that of family and friends, so he wanted to align incentives to minimize default risk, which falls on the company, not the Brazilian government.

For universities, the arrangement helps fill empty seats and generate more revenues. With access to their first choice of study, students are less likely to drop out when difficulties arise, giving the university more predictable enrollment and stable income.

For students, the affordable financing options make university accessible and open a path toward socio-economic mobility. Ideal Invest borrowers tend to enroll when they are older—24 years old on average—and almost two-thirds must work while in school to finance their education. Before Ideal Invest began offering its innovative student loan products, students who couldn’t access public financing were forced to take out consumer loans at high interest rates and short maturities.

Today, Camila is well on her way to making her dream of becoming a lawyer come true. She is working as an intern in the legal department of a multi-national fuel distribution company. She hopes to be hired by the company after graduation.

“I love what I do, and I have the opportunity to work in the career that I always dreamed of,” Camila said, adding that if she had known about Ideal Invest sooner, she could have embarked on her dream career nine years earlier.

Read more about Camila and the innovative model for student lending developed by Ideal Invest in IFC's case study Helping Students Afford the Career of their Dreams.

Published in April 2016