Company offers loans on earning potential
A new finance company, Thrive Cash, is banking not on Dartmouth students’ credit history, finances or national identity, but instead on their future earnings.
Cofounded just over two years ago by Stanford graduates Siddharth Batra and Deepak Rao, Thrive Cash reaches out to students at both private and public institutions in 31 states, offering cash loans meant to fill the void left by inadequate student aid, such as summer housing before starting a new job. The company specifically aims to provide loans to traditionally “under-funded” demographic groups such as first-generation students.
According to Rao, the “extremely transparent” financial model is simple. With the presentation of a job or internship acceptance letter, Thrive Cash offers a student 25 percent of the internship salary or 25 percent of the first three months’ salary.
Rao also said that high repayment rates — around 99.8 percent — on the loans, which averaged 10 percent interest last year, demonstrate the security of the model.
Representatives of Thrive Cash have been messaging Dartmouth students over LinkedIn and email. However, some of the practices of the company — such as including a Dartmouth logo on its website — are not endorsed by the College.
College spokesperson Diana Lawrence wrote in an email that Dartmouth does not endorse Thrive Cash. She noted she is not aware of any relationship between Dartmouth and the company, and that the College is getting in touch with the company to confirm that it will remove the Dartmouth logo from their web page.
Rao said that outreach methods vary from campus to campus, while certain strategies are used at all institutions. It begins, he said, with finding marketing personnel.
“It is a simple start,” Rao said. “You hire people who are looking for marketing experience.”
Rao said the company then reaches out to certain groups which might find Thrive Cash more appealing, namely groups such as international student associations or Questbridge scholars. These are the students, according to Rao, who might benefit most from the easy-access cash which the Thrive Cash model provides.
According to Rao, students who would otherwise locate interim funding between university studies and a new job from parents or other connections would not use Thrive Cash’s services. Instead, Rao said the pool is self-selecting, largely by students with less financial means.
Rao said his inspiration for Thrive Cash came from his own experiences as a low-income international student in the United States from India. He noted that applying for credit cards or small loans was difficult or even impossible. For this reason,Thrive Cash does not consider credit scores, citizenship or other financial information — instead banking on the “future” earnings of loan applicants.
Gordon Phillips, a professor at the Tuck School of Business who specializes in finance, wrote in an email that Thrive Cash falls in the growing category of online consumer credit.
“This one could be appealing in its speed of execution and simplicity,” Gordon wrote. “Based on $7 per month for $1000 which is stated in their website, this works out to $84 per year total interest. At this rate it works out to 8.4 percent simple annual interest if there are no additional fees.”
Gordon wrote that the Thrive Cash model could be attractive for those who face higher rates of interest in credit cards. But, he cautioned students to be careful about overextending themselves with “too much additional debt,” given they may also have student loans to pay.
Batra and Rao found much of their seed funding from the support of their former bosses at Twitter, according to Rao. He said other investors took a bet on the founders’ compelling stories and the fact that problems faced by under-funded students like Rao are widespread.
Rao said that it would be a misconception to assume Thrive Cash targets students only at schools like Dartmouth, Stanford University or New York University, where services were first rolled out. He noted the repayment rates between private and public university students are the same, and that top employers like Amazon or Apple recruit the bulk of their students not from Ivy League institutions, but from schools like the University of Washington.
Rao said that student borrowers do not need to use all of the money allocated in the loan. Instead, students “unlock” a certain amount, which they can then access either as a lump sum or in a dispersed set of withdrawals. He said no payments are due until a student starts their job or internship — another reason he attributed to the high repayment rate.