College Grad Crystal Ball: What You Will Earn


For college students seeking private loans, and there are more of you now than ever, your credit score according to the Fair Isaac Corporation (Stock Quote: FIC) is a vital figure.

But unlike SAT scores which are easy to accumulate, a FICO score requires a credit history before it can be accurately calculated, and many young students just don't have enough.

Even student loan lookers with what was an acceptable FICO score last spring, say 620, now may need a 650 to 730, according to published reports. The good news is there are other options.

One loan company is using a new online calculator to judge a student's credit worthiness, the Human Capital Score, which factors mostly academic data such as your high school, SAT score, college, grade point average and academic major.

Pegging a Student Investment

The new rating system comes courtesy of People Capital, a matchmaker for non-institutional lenders (think peer lenders) and borrowers, whose Human Capital Score projects your potential annual income each year for up to 10 years after graduation.

Beyond rating an engineering student based on how much they’ll make as an engineer for example, the Human Capital Score’s algorithm, based on research from the Wharton School at the University of Pennsylvania Insurance Department, considers a number of variables in determining possible income after graduation and one’s ability to pay back a student loan, according to Alan Samuels, Chief Product Officer of People Capital.

“Traditional credit metrics don’t work” when you’re considering lending to a new college student, says Samuels. “All students have poor [credit] scores because they just don’t have a history."

Passing Judgment

The Human Capital Score, which then could become the basis of your loan application, lets any prospective peer lender use an estimate of your potential income “path” to decide whether you’re worth an investment. Bidding on borrowers will begin when the tool officially launches this fall.

Prospective lenders can choose to lend to students at big-name college or those pursuing a specific area of study. That means if a science major is considered a safer bet, there might be less to go around for art students, for example. Thwarting the exclusion of humanities majors, however, is a risk-reward payoff.  Lenders choosing a safer bet will earn a slightly lower interest rate, Samuels says.

"The secret for lenders to find the candidates that are less risky than other people think they are,” Samuels says.  For example, an English major at Harvard may be more of a risky investment than an engineering student at a no-name school, Samuels says.

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