The Economics of LRAPs in Your Financial Aid Arsenal

ABOUT THIS EPISODE

Peter Samuelson, President at Ardeo Education Solutions, joins the podcast to walk through the economics and enrollment impact of loan repayment assistance programs (LRAPs).

... low, we will help you repay your loans. They get to go to the college they want to go to. The college could see increased enrollments the student goes to their preferred college. It's just a great win. You're listening to enrollment growth university from Helix Education, the best professional development podcast for higher education leaders looking to grow enrollment at their college or university. Whether you're looking for fresh enrollment growth techniques and strategies or tools and resources, you've come to the right place. Let's get into the show. Welcome back to enrollment growth university, a proud member of the connect e Tou podcast network. I'm Eric Olson with Helix Education and we're here today with Peter Samuelson, president at our Dayo education solutions. Peter, welcome to the show, Eric. Thanks for having me appreciate it. Really excited to talk with you today about incorporating loan repayment assistant programs in your institution's financial aid arsenal. Before we digin, can...

...you give the listeners a little background on our day of Education Solutions? Sure, we help students go to colleague by making a really powerful promise that if the students didn't come after graduation is low, will help them make their loan payments. And the reason this is so powerful is there are so many students and families to who are really worried about student owns these days. They get admitted to a college they want to go to, they get excited when they get that ad it and fletter and then they get the financial late award and they look at the loans they have to borrow and they say, wow, just not sure I want to borrow that much in student debts. and Our promise really helps them get comfortable. We just say if our if your incomes low, we will help you repay your loans. They get to go to the college they want to go to, the college gets increased enrollments, the student goes to their preferred college. It's just a great win. I love the creativity that's happening in the financial aid space right now. Peter, before we get in the details, maybe to kick us off, can you just give us a high level overview and origins toory of loan repayment dissistance programs,...

...l wraps. Happy to I also love the creativity and financially right now there's a lot going on. I wish I could take credit for l wraps, but the story starts with Steve The end all at Yale law school several decades ago. And Yale was taking the challenge that they didn't have enough money to keep up with all the other top law schools right they wanted to better leverage their limited financial resources. They wanted students to feel comfortable with the increasing amounts of student loans they were taking out, and so steve the handle came up with this concept of an l wrap, a loaner gate assistance program that. Ye Know, they call it something else, but most law schools now offer l raps and they call them generally l raps. So I want to Ye law school back in the S. I love the program. It took the yell and stead. It's to a different school. Really, let me go to my first choice law school, which is fantastic right. So I personally felt that freedom the gave need to just pursue my passions, to go where I wanted and not make a choice that we've driven out of fear, driven out of concerns, except us of way about debts. And then after law school, I had the freedom to go to human rights work over in China,...

...over it's to day end, because you always making my own payments, which was fantastic. Before I came back to wall streets and just add a traditional legal career before becoming a consultants. That's what I had the idea that I should take this and make it available to underranted students. My Mom thought of the small college, you know, the very different student profile, and you know law school, but I thought they have the same challenge. They work so hard to get students to apply and then they admit them. Everyone's happy at that point. The financial later words go out and so many students just decide I just can't support it, and that's unfortunate because usually they can afford it, they just don't want to borrow the loans. Yea Peter, we mentioned the the hyper creativity happening right now in the financially space, so much so that it is often hard to understand. Wait, what are the difference between these things that? Can you help us understand how l wraps differ from income share agreements, income insurance programs other alts like that? Sure happy to so. There's a lot of creativity and some of you know a lot of the different ideas. The income share agreements, income insurance, just like...

...you mentioned l wraps as well, all come back to the idea of an Income Bay street payments. So traditionally you basically repave in just like any other loan, like your mortgage, like your car loan, all the amount he borrowed. What happens with an Income Bay Street peayment is that the amount you take back varies and changes based on what your income is after graduation. So if you're lucky, you have a great income, you pay a little more and if you're on unfortunate have a lower income, or if you choose the altruistic line of working in the Public Sector doing nonprofit work, you pay back a little less. So I think the really big difference between income share agreements and what we do with l wraps, think they're almost apples and oranges in the way they affect students, is l wraps help students take advantage of loans that are already widely available. There are a group of students who truly can't get enough loans to cover the cost of attendance, and income share agreements isasas can be very helpful to fill that last dollar. So really, when we look at it, students use them in quite different ways and we think of...

...them as being quite different, even though they're both originating for the same idea of income, BA streeting ideas. God, it's super, super helpful. Can you walk us through an example so we can understand how the numbers work here? So let's say a partner university you work with that's a fiftyzero income bar for a certain degree program where does the L wrap come into play if the students next job post degree only pays fortyzero a year, or if they're out of work all together? Sure, so let's start with the students. Who's applying the college. There has it did come? The college gives them the l wrap for free and the college pays us and it's an insurance back program. So we're going to collect a little bit of money from a lot of different students and then help those few students who really need help. So when the student graduates, there's really three key conditions for the students. They have to attend the college who gives our up to them, they have to graduate and then they have to be working. So if they're unemployed. This is not unemployment insurance. They need to go work at starbucks or wherever they...

...need to work, and then they'll get the assistance. So there's two income thresholds that come into play. If their income is below a lower threshold, usually Twentyzero, we would reimburse them every quarter for one hundred percent of their long tayments. So they make the loan payments, we reimburse them. It works that way to just to make everything simpler and we also don't want to be chasing down people who we paid in advance and they sent the money somewhere else on a fancy TV or something right, and then as their income goes up from that Twentyzero to the upper thousand, upper threshold, Fiftyzero, an example when you gave the benefit phases out. So if their income was at Fortyzero, they would be two thirds of the way up to the threshold. They would be paying two thirds of their loan payments and we would be paying one third of their long payments for reimbursing them one third of their one fails and that will continue forward until their income goes above that Fiftyzero upperings and threshold for a full year or until their loans are repaid. Allow that makes total sense. So let's talk about the economics here, the outcomes here on the...

...student success side, on the institutional success side as well, and in terms of being a really impactful and powerful part of the prospective student sales pitch, as you mentioned. What are some of the results that you've seen from your partner institutions? We've worked with about two hundred schools across the US. They put about twenty Fivezero students through and over were all. The result is that this really change is no tos. It changes that hesitancy to borrow to a very sometimes very excited yes to come to the school. And so we see schools who increase their freshman enrollments. We also see colleges universities who use it in a very targeted way just to rebuild a major that they want to rebuilt, to start a new major, new program to increase out of state students. Really, when you think about the university strategy for enrollments, they have a lot of different segments of perspective students, though, reaching out to and some of those segments they have very low yield. So any segment where they have low yield they can use l rapt to increase that yield. If they give l rep to every incoming freshman. We seen schools increase enrollment over twenty...

...percent, often over ten percent. So it can be a really big boost to their enrollments overall. Or they can use it more narrowly just to target certain segments where they really like row yield. It's really interesting. You mentioned the two hundred institutions you partner with. How do you choose which institutions to partner with or which individual programs at those institutions makes economic sense for you to ensure and for them on their side as well? We look at every school individually. We underwrite them. We've got an underwriting teams built a, you know, proprietary complex model here that projects what all this is, how the numbers are going to work right, and so we're happy to work with any institution that is accredited, that's in good standing, that is title for eligible. Now the pricing is going to vary. Some schools with really low graduation right are going to pay more. Other schools that are more successful with higher graduations are going to say a little less. Where we set that other upperring from threshold is really a marketing question for the college. What do their students and families expect in order to be excited about it sending that collegue? So...

...we'll work with any traditional accredited college across the US. We work with publics, we work in private universities and we look. We can work with any major. They have thinking program, they have some schools. We work across every program, every major. They have some schools and Darrow it just down to one. We engage in the discussion with that college of the VP of enrollment, usually, although sometimes also the director financial aid, the CFO, about what are their targets, what are their strategic priorities? How can we help them grow yield in a way that it is going to strengthen their enrollment, strengthen their finances and really strengthen that promise they're making to the student press, strengthen their value proposition to bring those students in Peter's fastening stuff. Finally, leave us with some next steps advice. Prinstitutions listening to this excited about the creativity coming out of out of this space right now, especially in the L rap. How do they think about incorporating this is part of their financially strategy. The first thing they should do is contact us. My email is Peter at our Dail Education Dot Org. They can also go to our website.

Are Dao education dot org. And really what most institutions do when they first use us is they pilot us. You can pilot us with a small number of students and they can talk to those families and they can go the first he and taste there really firstand experience of how powerful this promises and how it really changes the feeling in the thinking of families and we move that anxiety about student loans. It makes it possible for the injured roll at their institution and we'd welcome to chance talk to any school. Peter, thanks so much for your time today. You mentioned your email. Any other best place for listeners to reach out to you or your team if they have any follow up questions? Yeah, I'm happy to feel the emails and all directed to someone else on the team and of course they can see all the information they oft to our website. Eric, really delightful to be on your podcast. Thanks for having awesome Peter, thanks so much for joining us today. Thank you so fun attracting today's new post traditional learners means adopting new enrollment strategies. Helix educations data driven, enterprise wide approach to enrollment growth is uniquely helping colleges and...

...universities thrive in this new education landscape, and Helix has just published the second edition of their enrollment growth playbook with fifty percent brand new content on how institutions can solve today's most pressing enrollment growth challenges. Downloaded today for free at Helix Educationcom. Playbook. You've been listening to enrollment growth university from Helix Education. To ensure that you never miss an episode, subscribe to the shown itunes or your favorite podcast player. Thank you so much for listening. Until next time.

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