Published on 2014/09/04

Loyalty Points En Route to Replacing Student Loans

AUDIO | Loyalty Points En Route to Replacing Student Loans
Higher education institutions must focus on finding funding sources for non-traditional students that serve as an alternative to student loans, which can be financially crippling in the long term.

The following interview is with Suzanne Tyson, founder of HigherEdPoints, a company that allows students to redeem loyalty program points to cover their tuition costs. Tyson’s work stems from the desire to help the “middle 60” percent of students to find their pathways into higher education and towards a credential. In this interview, Tyson shares her thoughts on the biggest impediments to completion today, discusses the value of alternatives to student loans as funding sources for students and sheds light on the most significant issues facing college affordability for today’s non-traditional students.

1. What are some of the sources of higher education’s “unexpected costs” for non-traditional students?

Most of the media coverage on the expense of higher education talks about the tuition cost as the big factor. It’s not the tuition in a lot of cases that’s hard for students to cover; it’s all of the other expenses that go along with it. Not having income while you’re attending school, the transportation costs, the food costs, are incredibly expensive.

2. How do these “unexpected costs” impact postsecondary accessibility for the “middle 60” percent of students?

A lot of students can probably make it through their first year in their program at college or university, but the number one reason for discontinuing studies is lack of funds. What will happen is students may have some financial aid available to them, they may have saved some money personally, they may have help from a family member or a parent or a relative but, in their second year, they’ve actually used all of those funds and don’t have access to new funds.

At HigherEdPoints, we actually had a couple of situations where we had two $250 transfers available to us and in speaking with the financial aid officers at our participating institutions, they were very easily able to find students in need of just deposit money. It was between $150 and $200 that students needed to be able to continue their studies. They were eligible for financial assistance but they didn’t have the cash available to actually make the deposit, which sometimes financial assistance won’t cover.

3. Where do financial aid and scholarships miss the mark when it comes to helping students with their education?

When a company is putting scholarship money into the marketplace, they’ll use the same criteria. It’s generally undergraduate students entering higher education for the first time, the citizenship requirements are usually that of wherever the scholarship is issued, so it automatically excludes anybody international or anybody without permanent residency in the country.

The corporate scholarships are for that first-year entry student because that’s where the biggest bulk of students are coming through, and the corporate objectives include some sort of return on investment of the student. What they often forget is that students, when they get into third or fourth year, would actually have much higher loyalty to the corporation helping them pay for school than those in first year because there’s enough money available for that first-year student based on all the different sources of funding. The traditional scholarship criteria really don’t include the non-traditional student.

4. How does HigherEdPoints work?

Based on my experience in the scholarship market and my previous work in the loyalty industry, I recognized the fact that there are millions of people participating in loyalty programs and collecting millions and millions of loyalty points that often go unused. The ability to convert those loyalty points into something as useful as paying for education was something that had never been done before. We launched in Canada with Aeroplan as our inaugural loyalty partner. Aeroplan’s one of the largest loyalty programs here in Canada.

We define the “middle 60” as those students that have family income too high to make them eligible for financial assistance but [who do not] have averages high enough for them to qualify for merit-based awards. HigherEdPoints helps students in that middle 60, but also all of the other students as well. Anybody can use their Aeroplan points to help a student pay for their education.

5. The value of HigherEdPoints for prospective students is relatively clear, but it requires partnership among a lot of other parties, including the university itself. How do universities benefit from participating in this partnership?

Universities will benefit because their number one concern is making sure students who enter their programs are able to graduate from those programs. If the number one reason for discontinuation of study is financial need, hopefully this is a solution that will show them another way to help the students [find] those funds. The benefit to the university financially is that students that come in with additional sources of funding will require less in terms of financial aid or emergency assistance. They’ll hopefully be able to work fewer hours while attaining their degree and be able to complete their studies a bit faster.

6.When you look at the marketplace for this program for HigherEdPoints, do you see much opportunity to enter the American market?

The American market is definitely the next step for us because there are many loyalty programs in the United States that people would be participating in, particularly the airline programs. In the United States, it’s even more difficult for students to pay for school because the cost of it is so much higher than it is in Canada. The American market is a place that this would have a nice fit.

As we say here in Canada, HigherEdPoints isn’t the answer to paying for higher education, [but] it’s part of the solution. Every dollar the student can get from a free source of funding like HigherEdPoints is one they’re not going to have to worry about paying back once they graduate. Even $100 or $250 could mean a lot to a student who has to fill that gap before they can find another source of funding for school.

This interview has been edited for length.

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Readers Comments

Jackson Earthwood 2014/09/04 at 3:01 pm

I think the key lesson here is that institutions and governments need to be open to alternate ways to pay off education costs. It’s too early to say whether this is merely a gimmick or if there will be long-term uptake of the Aeroplan points option, but it’s an important conversation starter for the higher ed industry nonetheless.

Neil Parry 2014/09/05 at 9:25 am

This piece just proves the need to bring stakeholders from different sectors together to look at ways of easing the student debt burden and creating a sustainable repayment model. No individual group should shoulder the complete burden of student financial assistance. Instead, this partnership with Aeroplan shows there are opportunities for the private sector, which will undoubtedly employ many of these debt-laden graduates, to get involved in the financing and repayment process as well. Taking more steps in alternative financing could make higher ed more accessible for non-traditional groups.

Kimberly Neil 2014/09/05 at 10:49 am

Tyson highlights a unique idea to target the group of students whose income is too high and marks too low to qualify for financial assistance or merit-based scholarships — a group that likely makes up the majority of students at any institution. By easing the burden on this group to finance and/or repay their education costs, limited financial resources could be better used to support low-income students who would truly have difficulty affording education. The real challenge will be how the different partners (Aeroplan or any other reward program, institutions, governments and other lenders) negotiate their cost-sharing model to the benefit of all.

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