A.M. Money and the Racial Wealth Gap

We just announced a very generous grant from The Chicago Community Trust to expand our portfolio as a part of their strategy to build household wealth and advance income mobility. This builds upon an initial catalytic grant provided by the McCormick Foundation designed to allow A.M. Money to continue growing our affordable loan portfolio for high-performing, low-income college students who have not had access to traditional student loans. We are exceedingly grateful for this support, and for what it means for us and our work at A.M. Money.

As student debt is undeniably a controversial subject, I wanted to spend a few minutes talking about that work, the racial wealth gap, and the role we play in advancing these pursuits.

First, I think it’s important to outline a few of the core assumptions that we operate under:

1) Higher Education is worth investing in.

We understand it may not be for everyone, or that there may be reasonable alternatives out there for some people. However, our view - which is consistent with a lot of the evidence out there - is that higher education is by far the most effective, and efficient path for individuals, especially people of color, to secure gainful employment and build household wealth.

2) Families, and individuals are increasingly being asked to bear the burden of this investment.

It used to be that someone could work a part-time job during the year, and maybe a full-time job in the summer, to pay for college. Those days are long gone. This means that individuals are forced to finance higher education from their personal wherewithal. As much as we believe this should not be the case, it’s an undeniable fact and we don’t necessarily see this changing.

3) The market, as it exists today, does not support the type of individual investment explained above.

The lending programs offered by our government have their natural limits as they cannot be everything to everyone. As a result, many people need to rely on other lenders, or sources of capital, to finance their education. The market, charitably speaking, is not set up to support this type of investment.

Today’s market relies upon credit scores and parental income in order to underwrite their loans, which means people of color, and others without means, are forced into high-interest rate products or other sub-optimal pathways like using credit cards, payday loans, or in my own personal case, enlisting in the U.S. Army in order to obtain the educational benefits (amongst others) of attending their desired University.

“it’s important to build an organization that is predicated on the fundamental success of students as opposed to the extraction of wealth”

The net result here is either a lack of capital to complete your educational pursuits or an invisible tax (or rent) that is continuously being assessed on serially excluded communities with minimal wealth. As a result, individuals are increasingly forced to overextend themselves to pursue higher education, paying a higher price to do so, and not getting the same return on investment they were promised at the outset. This scenario only exacerbates the racial wealth gap as minorities are prevented from reaping the same wealth and income mobility benefits as their white counterparts.   

This is a perfect storm for what Louise Seamster, a sociologist at the University of Iowa termed “Predatory Inclusion”, a “process wherein lenders and financial actors offer needed services to black households but on exploitative terms that limit or eliminate their long-term benefits”. They posit that is one of the mechanisms behind the persistence of racial inequality in America, a belief that we strongly share.

As such, our approach is based upon directly countering this mechanism of predatory inclusion by ensuring that people have a product that enables them to achieve the long-term benefits of higher education, as opposed to limiting them.

This means a few things in practice:

1) Providing access.

It’s important that people are able to get a product on their own merits, rather than as a function of their parental or communal situation which may have no reflection on their ability to take advantage of a higher education. This means forgoing things like credit scores and co-signers to instead focus on what a student has demonstrated that “de-risks” their pursuit of higher education and attainment of a job.

2) Providing access on terms conducive to success.

To put it simply, a 15% interest rate on a student loan is a destructive self-fulfilling prophecy. This creates a spiraling debt load that is highly difficult to overcome.

This approach has led to working with institutional investors like the McCormick Foundation, and The Chicago Community Trust who have a vested interest in the success of the student, not just the maximization of their bottom line. Another example of this, is the Illinois State Treasurer who has been working to invest a portion of its investment portfolio in reducing the cost of student loan debt in Illinois through innovative means.

This is important work because without the alignment of capital and the accompanying incentives, it will be impossible to scale any approach.

3) Creating an organization aligned on the long-term well-being of its customers, instead of the extraction of the benefits of higher education.

We know that in all asset classes, borrowers of color and those without means are often not afforded the same opportunity that other borrowers might have. Student debt is no exception. One data point that we believe illustrates this point is that African American Borrowers who have paid off their student debt, are twice as likely to have gone into default than their white counterparts. Hispanic borrowers are 3x as likely to have gone into default.

This underscores the fact that even those students of color who have had their investment in education result in a meaningful degree may end up paying more than their peers.

A recent report from the Student Borrower Protection Center shows that African American students are not afforded the same opportunity to take advantage of consumer protections to avoid default, and thus be on the path towards building wealth. This is a large, and very overlooked mechanism that allows organizations to strip the value of higher education from vulnerable populations.

Therefore, we believe that on a fundamental basis, it’s important to build an organization that is predicated on the fundamental success of students as opposed to the extraction of wealth. To this end, we have invested heavily in understanding where, and when our financing is additive, instead of extractive.

Additionally, we have spent a lot of time mapping out what the different positive and negative pathways can look like for a student, so we can proactively assist our borrowers in avoiding common pitfalls. Fused into these pathways are the additional supports we have created to help students take advantage of both known and unknown opportunities.

Everything we do from wealth-building workshops, free financial literacy courses, our resume feedback tool, and our other job matching opportunities are in service of this. These are not “nice to have”. These resources are a proven and critical part of our success. 

When we design and apply policies, practices, or rules that appear to be neutral or innocuous yet result in a disproportionate impact on communities of color, we are inadvertently promoting prejudiced and biased systems that inhibit wealth and income mobility for too many. That is why we’re excited to be able to expand this work, and we are appreciative of the support from The Chicago Community Trust and the McCormick Foundation in service of our mission. If you’d like to learn more about what we are doing and are thinking about how these issues can be addressed even more effectively, please do not hesitate to reach out.

The McCormick Foundation, with Support from The Chicago Community Trust, Awards $1 Million Loan Loss Reserve to A.M. Money

A.M. Money, a student loan provider based in Chicago, has announced an agreement with the Robert R. McCormick Foundation to establish a $1 million loan loss reserve in support of high-performing, low-income college students who have not had access to traditional student loans. The reserve is made possible in part by support from The Chicago Community Trust. The reserve will allow A.M. Money to continue growing its affordable loan portfolio for this historically underserved group, while making it more attractive for outside investors to invest in A.M. Money’s expansion with reduced risk.

Unlike other lenders, A.M. Money does not require student borrowers to have good or substantial credit, nor does it require them to have co-signers. Instead, A.M. Money gives students loans based on the quality of the institution they’re attending, how many credits they’ve earned, and their GPA.

Both the McCormick Foundation and The Chicago Community Trust recognize that reducing the racial and ethnic wealth gap is crucial to building an equitable and connected Chicago region where all people have the opportunity to thrive. Access to education and safe financial products to pay for college are core pieces of this puzzle, and the work of A.M. Money is critical to this success.

In addition to their underwriting practices, A.M. Money does something else unique within the student lending space: they provide additional resources and support to borrowers. By utilizing specific data points, A.M. can identify risks and opportunities for students, and provide additional resources, programming, and partners that can place borrowers on a better track for academic, employment, and financial success.

For example, A.M. Money provides every graduate with 1:1 remote financial coaching through a partnership with The Neighborhood Trust, a national nonprofit organization.

This built-in support has paid off. Since launching in the summer of 2019, A.M. Money has seen repayment rates that are four times higher than those of comparable products, with zero defaults. They have also seen their borrowers compete with graduates from some of the area’s best colleges when it comes to job placement rates after graduation. 72% of A.M.’s class of 2020 found a full-time job within six months of graduation, compared to 70% at Northwestern University, 65% at Purdue University, 48% at the University of Illinois at Urbana-Champaign, and 46% at the University of Wisconsin-Madison.

To learn more about A.M. Money visit www.chicagostudentloans.com.

The Long Walk to a Diploma

If you have ever been a college student, it’s likely you know how financially infeasible it can be. Between books, tuition, food, and rent, college is far and away the most expensive investment a young adult can make. To help cover this cost, students will rely on a mixture of family contributions, aid, scholarships, jobs, and loans, as they do their best to get across the finish line. While all of these options are usually necessary for a student to make it through college, it’s the last one, loans, that can prove the trickiest.

The University of Iowa | Iowa City, IA

Enter Jeremiah Meyers from Chicago. In May of 2019, Jeremiah walked across the stage along with his classmates at the University of Iowa. There was only one thing missing: at the end of his walk, he did not receive his diploma. Jeremiah was caught in a situation that is not uncommon. Ready to graduate with a Bachelor’s degree in Computer Informatics and a Minor in Music, Jeremiah was informed that he still needed to earn a few credits to achieve his diploma. Adding to Jeremiah’s troubles was another issue. He had run out of federal loan funds that could help him cover the cost of college, and didn’t have the financial metrics (great credit score or a cosigner) needed to access the private loan market. A gap of $2,000 stood between Jeremiah and a brighter future. 

“I first heard of A.M. Money from Mike Hugulete (Alumni Support Manager from Gary Comer, a Noble Network Charter High School in Chicago) while at Iowa,” recalls Jeremiah. “Mike was aware that I needed to take a few more classes after walking across the stage. He told me A.M. Money could be the perfect resource for me.” It turns out A.M. Money was exactly what Jeremiah needed.

With a low-interest rate, flexible repayment options, and a no frills application, Jeremiah was able to get back on track for graduation quickly. “The application process was pretty easy. I was sent a link that asked the normal questions about college, and once I filled it out, I think I filled it out Tuesday, they called me by Friday. I had the money for school the next week. When my friends from Chicago ask how I made it through school, or what I recommend for tuition or additional schooling, I always tell them about A.M. Money due to how fast I was able to get the money I needed.”

Jeremiah Myers | University of Iowa, Class of 2019

After officially graduating from Iowa in December of 2019, Jeremiah began working full-time at CH Robinson. His proverbial walk across the stage finally ended when he received his diploma in the mail in the winter of 2020.

Stories like Jeremiah’s happen everyday, but most end with the student dropping out or taking on a high interest rate loan and massive debt. A.M. Money is looking to change those stories. By looking at metrics that a student has more control over (GPA and the institution they attend), not their metrics more in a student’s don’t require students to have a cosigner or credit score, A.M. is opening the door to more students who are on the path to success and just need some additional support to get there. Whether it’s financial literacy, employment support, or transparent lending, A.M. Money is here to help.

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Think A.M. Money could be what you need?

A.M. Money's Talent Path Pt. 1

One of the core hypothesis at A.M. Money is that if we know what a student’s chances of success are, and more importantly what drives that success, then it follows that we can work with our students to do something about it. In this way it’s less about “analyzing” risk and more about eliminating that risk ahead of time. This philosophy influences not only our conversations with students, but the data that we track, and, as will be discussed, the resources and tools that we build. Through this approach, we have been able to produce outcomes that outperform those of elite colleges and universities, and put us in a position to scale this support to more students across the city and state.

Employment Outcomes for the Class of 2020, 6 Months After Graduation

Undergraduate Institution	Type	% Accepting FT Employment
A.M. Money	-	72%
Northwestern University	Private	70%
Purdue University - Main Campus	Private	65%
Marquette University	Private	54%
University of Illinois at Springfield	State/Regional	52%
University of Illinois at Urbana-Champaign	State/Regional	48%
University of Wisconsin-Madison	State/Regional	46%
Illinois Institute of Technology	Private	38%

Over the course of the summer, we will be detailing student stories, their successes and their trouble spots, in tandem with the tools that have been designed to help them overcome and advance. These tools, which focus on everything from resume reviews to individualized job databases to employer pipelines, are designed to ensure that students can better transition from college to career, and have been created in consultation with employers and students from across the Midwest.

In order for us to continue this work, we would love to have your feedback. If you know of any college students, or recent graduates who would like to tap into the resources discussed below, please have them sign-up to use our services:

Alternatively if you’re a hiring manager who has been hiring throughout this pandemic and would be interested in our pool of students, and/or would be interested in helping us improve our algorithms please reach out here.

Part 1 one of this series will explore the story of Tholang Mota and the importance of Resumes in a student’s journey. We hope you’ll read on and learn more about Tholang and our first employment resource: The Resume Tool.

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The past year or so has been a tumultuous time for Tholang Mota (pictured left), and that would seem to be putting it lightly. Like all of the students from our first cohort, Tholang graduated into a pandemic that ground the global economy to a halt. “Over the past year, it’s been so hard to find any kind of quality jobs,” said Tholang, a proud member of DePaul University’s class of 2020. “I’d apply to jobs all the time, but wouldn’t know what I could do to progress myself through that process or improve my chances.”

Like Tholang, 83% of our 2020 graduating class is non-white and experiences many of the complex barriers that can exist between graduation and landing a job.

Our model is predicated on understanding this, and accounting for it in how we lend. However, our approach isn’t just about “analyzing'' this risk but, ultimately, changing it. If we know what a student’s chances of success are, and more importantly what drives it, then it follows that we can work with our students to do something about it.

So that’s just what we set out to do. We worked with our employment network to understand the employment journey from their perspective, and worked with our students to increase their probability of success. We then used our internal data to identify both opportunities and challenges for our students, and proactively worked with them to understand these things, and how to navigate them.

“The loan was huge, but the best support I feel that I got was when I was able to talk with your team about the problems I was having and what steps I could take to secure a job.” This, from Tholang, is really saying something when one considers that the Interdisciplinary Physics major with a 3.3 gpa was on the verge of being forced to drop out ahead of his last semester due to a funding gap. “Without A.M. stepping in and helping, I’d probably be working a triple shift at Target right now just trying to earn enough money to be able to get back into school.” Our loan provided Tholang with a reprieve, a chance to finish his degree, and a gateway to opportunity, and STILL it comes in second place behind the employment support and resources? This, of course, begs the question: Is this support really worth this kind of hype? Well, as noted in the table above, our employment results so far do tend to speak for themselves.

In light of this success, we’ve been working hard to make our tools and processes public so that not only our students, but students across the country can access this support while navigating the transition from college to career. Throughout this series, we’ll profile students who have found success as well as the products and services that helped them get there.

So, where to start? As we embarked on our journey to better understand the pitfalls and roadblocks that exist for students on this path, the first and most obvious step was to further examine the resume. Resumes act as more or less the gatekeepers for many of the roles that our students aspire to have, and thus have the ability to either open or close doors quickly.

Our tool guides students through this process by providing them with a grade on their current resume. This grade stems from an algorithm that we have created in tandem with employers and experienced recruiters. Thanks to this group’s feedback and insight, we have been able to build out dozens of rules which we know to be critical to improving a student’s chances of success. Below the grade is a list of ways, some small, others more challenging, in which a student can improve their resume and better compete for opportunities.

From there, we can utilize their edited resume and better identify what employers and positions are a fit for their profile.

One of the first students to benefit from this support was Tholang! “Just seeing the ways in which I could improve my resume and qualify for more jobs was incredible, and I think my prospective employers really enjoyed knowing more about me.” After better understand Tholang’s profile, we quickly discovered that he was a great fit for a local company’s Associate Analyst role and encouraged him to apply. A few weeks later, and Tholang had completed his turnaround from a near drop-out at DePaul to a full-time employee with a great company. “I just accepted a job offer from Eligo Energy and I couldn’t be more excited!”

Tholang’s success story doesn’t end with him just getting through the door. He’s continued to thrive, and was recently applauded by Eligo Energy’s CEO, Ken Pedotto, “Tholang has been a tremendous asset to our team. He is driven, enthusiastic, and a hard worker. I'm glad we were able to work with A.M. Money to find him. He's been a great hire.”

You can hear more from Tholang by checking out our interview with him here:

To utilize this tool yourself, or for any college students that you might know, please check out the link below and let us know what you think!

Tholang’s story is just one of the many that we are excited to share this summer, and our resume tool is just the tip of the iceberg in terms of our support. Please stay tuned for more posts and never hesitate to reach out to us with any questions or comments.