Securing a loan to pursue higher education is a valuable investment in your future. However, unlike in the United States, students in Pakistan face challenges in accessing educational loans. Most families end up dealing with elevated interest rates for personal loans that may necessitate collateral like property or real estate. Consequently, many students find college unattainable. This is one of the reasons why merely about 13 percent of Pakistani students enroll in tertiary education.

Now EduFi, established by Aleena Nadeem ’16, is providing low-interest educational loans to a wider range of Pakistanis. EduFi, short for “education finance,” employs an AI-driven credit scoring system to assess borrowers and transfers funds directly to colleges. The borrowers subsequently make monthly repayments to EduFi along with a service charge of 1.4 percent — significantly lower than what is typically available for most students today.

“The costs associated with college are incredibly unaffordable for the average middle-class individual at this moment,” Nadeem clarifies. “With our ‘Study Now, Pay Later’ model, we’re fragmenting that large upfront expense into manageable installments, making it more feasible for both current college students and a new demographic that previously thought higher education was unattainable.”

Founded in 2021, EduFi received regulatory approval and began issuing loans across Pakistan last year. In its first six months, EduFi disbursed over half a million dollars in loans. Since then, the company’s inclusive strategy for qualifying applicants has been confirmed: Currently, fewer than 1 in 10,000 of those loans are in default.

As knowledge about EduFi expands, Nadeem is confident that the company can significantly aid in the modernization and growth of Pakistan.

“We are accommodating a far greater number of individuals who would have been unable to secure a bank loan,” Nadeem states. “This encourages more individuals to pursue college education. The effect of providing affordable and swift credit to the educational sector in a developing nation like Pakistan is monumental.”

Superior credit

At the British international high school that Nadeem attended, no one had ever gained admission to an Ivy League institution. Hence, her acceptance into MIT was a considerable achievement.

“It was unequivocally my first choice,” Nadeem shares.

Upon her arrival on campus, Nadeem engaged in classes at MIT that educated her about auctions, risk, and credit.

“In the work I’m doing with EduFi now, I’m implementing the knowledge I acquired in my coursework in a practical environment,” Nadeem remarks.

Following her graduation, Nadeem worked in the credit division at Goldman Sachs in London, yet the obstacles to accessing higher education in her native country continued to trouble her.

In Pakistan, some specialized programs provide financial backing for students with outstanding academic performance who cannot afford college, but the majority of families must discover alternative financing methods for higher education.

“Most students and their families resort to acquiring personal loans from conventional banks, but that necessitates them opening a bank account, which may take up to two months,” Nadeem elaborates. “Education sector fees in Pakistan must be paid shortly after the requests are submitted, and by the time banks approve or deny you, the payment might already be overdue.”

Private loans in Pakistan have considerably higher interest rates compared to student loans in America. Many loans also require borrowers to secure the loan with assets as collateral. These obstacles prevent numerous promising students from pursuing higher education altogether.

EduFi is leveraging technology to enhance the loan qualification process. In Pakistan, the parent is considered the main borrower. EduFi has created an algorithmic credit scoring system that examines the borrower’s financial background and then makes payments directly to the educational institution on their behalf. EduFi collaborates with colleges to factor in students’ academic performance and payment records to the institution.

Borrowers repay the loan in monthly segments with a 1.4 percent service charge. No collateral is necessary.

“We are pioneering in student lending and presently manage the largest student loan portfolio in the nation,” Nadeem declares. “We’re providing highly subsidized rates to many individuals. Our rates are substantially lower than banking options. We still achieve profitability, but our focus is on impact, allowing us to earn through disbursing loans to a more extensive number of individuals rather than inflating the margin for each individual.”

Nadeem asserts that EduFi’s method qualifies significantly more individuals for loans compared to banks and accomplishes this five times more swiftly. This enhances accessibility to college for students throughout Pakistan.

“Banks impose high-interest rates on individuals with the most favorable credit ratings,” Nadeem explains. “By eliminating the collateral requirement, we genuinely broaden the credit landscape for new individuals who would not have qualified for a bank loan. Increased accessibility to credit allows the average middle-class person to transform their families’ lives.”

Empowering nations by empowering individuals

EduFi acquired its non-banking financial license in February 2024. The company gained initial momentum last year through referrals and quickly opened its doors to borrowers nationwide. Since then, Nadeem mentions that numerous individuals have traveled considerable distances to EduFi’s headquarters to validate the company’s credibility. Nadeem also frequently receives messages from students across Pakistan expressing gratitude to EduFi for facilitating their college attendance.

After further validating its model this year, EduFi plans to expand into Saudi Arabia. Eventually, it aims to extend its loans to students throughout the Middle East, and Nadeem believes that the global student loan framework could benefit from EduFi’s methodology.

“EduFi is inspired by SoFi in San Francisco,” Nadeem remarks about the large finance firm that began by providing student loans and later expanded to mortgages, credit cards, and other banking offerings. “I aspire to establish the SoFi of Pakistan and the Middle East. However, it’s essentially a blend of SoFi and Grameen Bank [in Bangladesh], which provides credit to lower-income individuals to help them escape poverty.”

By assisting individuals in enhancing their education and achieving their utmost potential, Nadeem is confident that EduFi will eventually expedite the progress of entire countries.

“Education is the fundamental pillar upon which a nation stands,” Nadeem asserts. “A country cannot advance without making education accessible and affordable. EduFi is realizing this goal by channeling capital into what is genuinely a struggling education sector.”