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Marketing Insights: Education Finance

October 2015

Financial Services Marketing Insights SeriesThe student lending arena is rapidly changing. The change is fueled by the interjection of new FinTech players chasing the student loan refinance business, brought about in part by changes in the federal funding of student lending programs. These new players are competing for niche markets on a national scale, offering enhanced customer experience, digital know-how, transparency, and unique products and features.

On the refinance front, opportunities are driven by increases in the number of students entering the workplace with graduate degrees from major universities. While these students are capitalizing from the recovering economy and improved employment outlook, many are graduating with significant student loan debt. Federal student loan debt represents a unique opportunity as these loans have been priced with limited regard to risk—resulting in higher rates being charged to consumers than available in the private market. This opens the door for private funding to refinance debt, offering former students lower rates and payments.

We are also observing innovation in product design, as well as with features and benefits. We are seeing hybrid lines with fixed rate partitions, as well as one-time approvals for full tuition with draw-downs by semester. Product features and benefits are also being fine-tuned. We are seeing benefits tied to usage and funding for social non-profit organizations, assistance with job searches, and repayment forgiveness for periods of unemployment. Transparency and trust have taken center stage in crafting these solutions that appeal to Millennials.

Finally, unsurprisingly, providers continue to adapt the way in which they interact from a media perspective to appeal to younger, more digitally savvy consumers. These consumers are far more likely to do research online, transact online, and engage in tools to better understand their financial options. To succeed, providers need to consider the full customer journey, designing integrated digital media strategies to engage the student from the research phase through the funding phase. These consumers have grown up in a completely digitally native environment and expect companies to engage across multiple devices and channels. The winners will be providers that can target these consumers precisely using both 1stand 3rdparty data to provide relevant content across all channel interactions, as well as streamlined processes and conversion. This will require investments in technology, digital experience and channel integration. These are exciting times from a student lending perspective and the market is ripe with opportunity for growth and expansion.

Key takeaways from this edition include:

  • While student loan debt remains the most acute financial issue the Millennial generation is facing today, the financial impact is felt by all age groups.
  • Millennials put a high value on transparency and aren’t always trustful of financial institutions, resulting in a greater need for educational tools to build trust.
  • Attracting younger customers requires digital service delivery as well as understanding and meeting their needs, which are unique to their generation.
  • 2015 has been a year of growth and change as new players seek to fix a broken student loan market.
  • These new players are competing for market niches on a national scale, offering enhanced customer experience, digital know-how, unique products and features, and transparency. 

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