Xiaochen Chen
Kavya Dasari
Dana DelMastro
St. John's University
Charles Wankel
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Lumni provides funds to students through income share agreements so that they can successfully complete their studies. Essentially, the company empowers students by providing an easier way to receive education, and then helping them receive jobs thereafter.
Lumni provides higher education financing through Income Share Agreements (ISAs), which strengthen the talent and ensure that the financial gap is not an obstacle that hinders the professional-academic development of talented young people.
Lumni was founded in Chile in 2002 by Felipe Vergara and Miguel Palacios. The for-profit company emerged on the basis of microfinancing, in which it provides small but critical amounts of money that was originally only used for, and successfully so, in helping poor people start businesses, particularly in regions such as India or Africa. They then applied it to helping students pay for college. Lumni, funded primarily with venture capital, opened its U.S. office in San Francisco three years ago. Its name combines "lumen," for light, and "alumni." This innovation relates to their overall mission, which is to finance students so that they can complete their studies.
The original idea came from Oswaldo Sandoval, who is the chairman of Lumni. Oswaldo was a researcher and brought the idea of innovating the traditional student loans to improve their education. Mr. Vergara explained, “the idea kind of connected to my stories growing up in an emerging country where I saw a lot of unique people, who didn’t, couldn’t go much farther in growing their human capital. I saw that this could be a way to contribute and help create more opportunity.” After Mr. Vergara also came on board, together, both Mr. Sandoval and Mr. Vergara, decided to establish Lumni.
In short term, Lumni has funded ten thousand students so far. 80% of these students have successfully completed their studies. Moreover, 50% of these students are women. Lumni finances urban students, as well as students in rural areas.
Here is a student testimonial that manifests the impact of Lumni on his life, which is a story similar to many of the students that have utilized its services:
Daniel Hernández, who is a Commercial Pilot from Fondo 100, Mexico said:
“To me, Lumni meant a radical change in my life. It gave me the opportunity to pursue and finish my studies. If I were to summarize it in one phrase, I'd say it was the brightest light in the darkest hour. Because before I got this opportunity, my future was uncertain. Now, being very close to finishing my studies, everything shines, and I am deeply grateful with those who believed in me and who supported me to carry on.”
Daniel is just one of many students who have been given the opportunity to pursue their education due to Lumni. As a whole, Lumni has become a source of hope for these students.
Additionally, Lumni is also impacting businesses by inspiring other individuals to take on ventures that benefit society. Mr. Vergara says, “somehow what we have done has been an inspiration to other entrepreneurs to start organizations, not-for-profits, social companies in different parts of the world.”
Lumni not only helps students successfully finance their education, but they make a profit whilst doing so. They obtain a servicing fee by designing and managing funds for investors and sometimes they receive a success fee based on students’ success. Lumni has designed impact investment funds to invest in the education of diversified pools of students. Each student then repays his or her obligation as a fixed percentage of income for a set period of time. For each fund, Lumni’s analysts forecast individual students’ income curves and align student selection and contract pricing with stated objectives for financial and social return. Although the salary of any individual student is impossible to predict, Lumni pools these idiosyncratic risks through a portfolio of students and that way they are also able to benefit from the loans they provide to students.
Mr. Vergara thinks that when you fund a student, you are funding a family. The situation of many families are being changed with the help that Lumni is providing by financing higher education of individuals, so that they can acquire better skills and move forward in their careers. Their work is an inspiration for other people in the world to take the initiative to start ventures that will even help more people. Apart from providing financial support for students to complete higher education, Lumni also helps students find employment by partnering with social enterprises.
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