International Students: How to Finance Your U.S. Education [Episode 260]
Brian Hoffman started Nomad Credit to primarily work with international students in helping them find and secure student loans, car loans, health insurance, and more. What many don’t realize is how difficult it is to secure credit in the United States if you don’t already have U.S.-based products, many of which you don’t even have access to until you physically move to the country. Brian’s company provides a matching service based on the unique needs of his customers. For example, if you are in India looking to secure a student loan, Nomad helps you narrow down your options and find the best choice. As his business grows, he looks to expand in other countries, both with schools and lending partners.
How can Nomad Credit help an international student navigate the complex credit system in the United States?
Our guest today is Brian Hoffman, founder and CEO of Nomad Credit. Brian earned his bachelors in finance from Indiana University’s Kelley School of Business in 2012. He began his full-time professional career in trading for about two years and then became an analyst for a company dedicated to helping clients optimize the value of data assets. In late 2015 he founded Nomad Credit, a financial marketplace for those underserved by other marketplaces, specifically non-permanent U.S. residents.
Let’s start with the basics. What is Nomad Credit? What services and/or products does it provide? [2:22]
It’s a platform for international students to help them obtain credit, find insurance products, etc. We don’t provide the loans, but we connect them to partners of ours who do. We also help them with some admissions questions.
How did you come up with the idea behind Nomad? What’s the back story? [3:01]
We wanted to get into traditional student lending like SoFi, but realized we needed to have a competitive advantage or niche to compete, so we decided to transition away from traditional student lending to this niche business. What we realized is that someone coming to the U.S. for the first time needs all the credit products – student loans, credit cards, car loans, insurance, and we decided to go that route.
What’s been your biggest challenge in launching Nomad? [4:30]
There are two. The first is cultural – there are different ways of doing business with lenders in other parts of the world. The second is technology, both for consumers who have never seen an online loan application, and also for lending partners who have never put their loan application online.
What is the biggest or most distinctive benefit of getting a loan through Nomad as opposed to just searching the internet or getting one in their home country? [6:49]
For a long time that’s how students got loans – in their home countries. What people don’t realize is that interest rates are often drastically higher in other parts of the world. In India, for example, student loans are going out at 12-13%, and in the U.S. students can get interest rates in the 4-8% range. Also, if you get a loan in India, it has to be transferred, and there are big FX fees on that, so with a loan from here you don’t have those fees as well, so it tends to be much more cost effective to get the loan here.
What are some of the challenges faced by international students when they try to get student loans? What about those on H-1B visas? [8:23]
Financially it is a very expensive journey. It is very interesting working with people to get loans. Many are looking at getting a $100,000 loan over the course of their education, which in many cases is more than their family has made in the last decade. It is a massive investment. Those on H-1B visas probably have a more difficult time. There are a lot of lenders that focus on international students, so it’s a fairly well-developed market. Visa workers moving here have practically no loan options with no credit and just having gotten their first bank account. We have been talking to the biggest lenders in the U.S. about this – the fact that just because they don’t have any credit doesn’t mean they aren’t worth lending to, so we’re working to solve that issue. Unfortunately the U.S. system works around underwriting, and there are many laws that need to be adhered to. Many countries are drastically more innovative than the U.S. around their loan products because they don’t have the compliance and regulatory environment that we do.
How do applicants go about applying for a student loan at Nomad? [11:24]
We don’t source the applications. Students will come to our site and fill out a one minute loan search – where they are from, what they want to study, where they are going to school - and then we can filter to partners that we have across the world to show some options. From there the actual loan application is very different by geography. In India, for example, it is an actual sheet of paper that you turn in; here you go to a website and get a loan approval in minutes. 95% of our business is with student loans.
Do you ever deal with domestic students? [13:10]
Yes, we’ve had some come to our site by chance, but if we are not marketing/targeting them they won’t show up, but we’d love to have them.
Let’s say I’m a college senior and I’m thinking I want to go for a graduate degree straight from college or a year or two later. What can I do to increase the likelihood of getting a decently priced loan? [13:45]
Study really hard for entrance exams (GRE, GMAT, TOEFL, MCAT, LSAT), and try to get the best score possible. Test scores can influence the ability to get a cheaper loan as well as the rank of school in certain countries.
Not having a balance on your credit card or outstanding fees is also really important. While some people think a credit score is a terrible thing, in this instance when there’s smoke there’s often fire. If you aren’t paying your credit card on time, you probably aren’t going to pay your student loan on time. Those blemishes do matter. The premise is that past behavior predicts future behavior.
Are co-signers required for some of Nomad Credit’s loans? [15:50]
We have a couple of lenders who don’t require a co-signer. Those partners are really interested in where you are going to school and what program you’ll be studying, which is why it’s really important to get into good schools to qualify for the best loan options.
Are there preferred fields of study? For example, is there a preference for STEM fields over liberal arts? [16:29]
I would say generally STEM is really popular especially on the grad side due to the demand. There are also lots of opportunities to work here after graduation in the STEM fields. With Optional Practical Training (OPT), you can stay here as long as three more years with extensions.
What about the other services that Nomad Credit offers, like health insurance, car loans, credit cards, etc? Can you touch on those services? [17:46]
It’s a similar process. We connect students to insurers or credit card providers, and we can do a filter for them. You can’t get a credit card until you move here, but you can get health insurance, so a lot of what we do is advisory. We have so much customer service on a daily basis that it is unbelievable. A lot of it is helping folks through the process – never having seen an online loan application, explaining that no one will steal your info, you will get your money, etc.
What do you see going forward for Nomad Credit? [19:34]
We talk with lots of customers in other countries like Canada, Australia, New Zealand, etc., so we’re working on relationships in those countries, looking at schools or partners. India will also be a bigger market for us in the future, too, and we’d also like to partner with lenders in the Middle East
How did you get from your background to a financial marketplace? [20:24]
I tried to be the lender myself, and I realized that as an options trader you are pretty risk-seeking. You can get one trade right and the other 99 wrong and if it’s big enough, it is still reason to celebrate. In lending if you get more than a few out of a hundred wrong, you’re in trouble, so there is huge liability risk you engage in as a lender – it’s like, “let’s roll the dice.” So I decided to take my knowledge and work with lenders who were better off making credit decisions than I was.
I’d like to ask a question about your path. My guess is that you are in your late twenties, a time when many are contemplating an MBA. You have a Bachelors in Business from Indiana, experience in trading and as an analyst. Did you ever consider going for a graduate degree, including an MBA, and why did you decide to start Nomad instead? [23:45]
I fondly remember my college days and would love to do that again. I have contemplated it, but I will say that running a company is a daily learning experience. I would like to get an MBA in the future, though.
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