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Student loan debt is a challenge for millions of students and graduates worldwide. In the US alone, it has reached a staggering $1.75 trillion, affecting over 45 million borrowers.
Most students are forced to carry significant debt along with them because college has gotten too expensive. That makes it quite hard for them to focus on education and future plans. Together with leaving life milestones like buying a home or starting a family, this financial burden affects academic achievement.
Fintech is stepping in to alleviate some of this burden, presenting both challenges and opportunities for traditional banks. On one hand, traditional banks must adapt to stay relevant and compete with fintech firms.
Many have partnered with or acquired fintech startups to enhance their digital offerings. On the other hand, fintech has also provided opportunities for collaboration. Banks and fintech companies work together to create innovative solutions that benefit customers.
Personal finances is one area where fintech has had a major effect. Traditional banks do provide clients with simple management tools to monitor their savings and expenses in the past. However, they are nothing compared to what fintech can do.
This article explores how fintech is changing student finances.
Scholarships have long been the go-to resource for students without the financial capacity to go to college. Fintech makes scholarships more accessible and easier to manage, changing the landscape. In the 2022-2023 academic year, US undergraduates received an average of $12,088 in merit scholarships.
Fintech companies are developing platforms streamlining the application process to make it more efficient and user-friendly. They help students do a lot of stuff online: create profiles, search for relevant scholarships, and apply.
These platforms save students time and effort by consolidating various scholarship opportunities in one place. The scholarship search has never been so easy. To improve their chances of securing scholarships, students should create profiles on multiple scholarship platforms and regularly update their information.
Blockchain technology is being used to ensure the transparency and security of scholarship funds. Through blockchain, organizations can track scholarship disbursements and ensure appropriate allocation of funds.
Blockchain technology acts as a secure, unchangeable ledger that records every transaction, making it much easier to verify the distribution of scholarship funds. Both students and scholarship providers should consider using blockchain-enabled platforms to ensure that transactions are transparent and secure. This helps guarantee that the money is allocated correctly and without any issues.
Below is an illustration of a proposed architecture for the usage of blockchain in scholarship management:
Student loans are a significant component of student finance, and fintech is introducing new ways to manage and repay these loans. Fintechs have captured 45 percent of unsecured personal loan borrowers with a student loan.
While more than half of these borrowers have aggregate excess payment amounts below $300, nearly half are left without any excess capacity after accounting for the expected repayment shock. This precarious situation underscores the importance of effective financial management and support systems.
Let's check out how fintech is changing the landscape of student loans.
Fintech companies offer innovative loan products that provide more flexible repayment plans and better interest rates than traditional loans. For instance, digital banks offer student loan refinancing with lower interest rates and personalized repayment plans. Students should research and compare fintech loan providers to find the best rates and repayment options tailored to their financial situation.
AI and machine learning can more accurately assess credit risk, leading to better student loan approval rates. These technologies help fintech companies offer personalized loan solutions based on individual financial situations.
AI-driven loan management tools can also assist students in tracking their loans, making payments, and exploring refinancing options when necessary. By leveraging these tools, students can stay on top of their financial obligations and prevent defaulting on their loans.
Many students face the problem of balancing work and study. But the advent of fintech has made it much easier to find and manage part-time employment.
These are fintech job matching algorithms that match the students with available part-time job opportunities aligned to their skills and schedules. It analyzes students' profiles and connects them with the best employers in making the process easier.
Students are expected to keep updating their profiles and utilizing resources provided in taking full advantage of these job matching platforms. Among these, they will be the resume building tool and interview preparation tips.
Fintech apps have seriously made it easier for freelancers and gig workers to get work. These platforms provide secure and automated tools for invoicing, tracking earnings, and even sending payments straight to bank accounts or digital wallets.
That is especially useful for students who need part-time work while studying. Apps like Upwork and Fiverr do more than just connect students with work that fits their skills and schedules—they’ve also got built-in fintech features that make receiving payments smooth and easy. Students won't have to worry about how or when they’ll get paid.
Through these offerings, users also gain experience and build a professional portfolio. Moreover, students learn to manage their resources better, acquiring vital life skills.
Fintech revolutionizes student financing significantly and makes personal finance much more innovative, promising even better resources and tools to help in the management of financial obligations between students. That way, while using these modern advancements, most students will then be able to focus more on their education with less concern regarding their financial distress.
