If you’re trying to get a mortgage or an auto loan, banks will put on their judging glasses and look into your past. Makes sense; it’s a reasonably reliable indicator as to whether you’ll be able to repay your loans or not. Student financing is a little different. Sure, your past plays a role, but for a lot of education, having a degree dramatically changes your earning potential, and hence your ability to repay. With a philosophy that the current student loan systems perpetuate the rich-get-richer systems, Stride Funding is taking a different approach and just raised $12 million to help it take the business a few more steps into the future.
The issue at the heart of the company is one of equality and access to education — one of the most significant indicators as to whether someone will have an opportunity for financial upward mobility. As you might expect, there are layers of privilege (can your parents help pay for your loans) and — more specifically — institutionalized racism in the picture. It is with quixotic optimism that Stride Funding is taking on the $130 billion student loan industry, which currently has $1.6 trillion worth of loans outstanding.
Since closing its seed round in 2019, Stride increased the capital committed to students to over $50 million, with capital providers such as Silicon Valley Bank seeking to finance hundreds of millions of additional funds.The main thrust behind the company is to make education more available, especially to populations that have traditionally struggled to secure financing.
“Especially in student lending, there’s this massive gap in terms of access to capital,” says Tess Michaels, CEO and founder at Stride Capital. “Ninety-two percent of private loans require co-signers, and less than a fourth of students actually have access.”
The company today announced it closed a $12 million Series A financing, led by Firework Ventures (co-founded by Brigette Lau and Ashley Bittner). Other investors include impact investors such as Juvo Ventures and Graham Holdings — alongside previous investors GSV Ventures, Slow Ventures and Sinai Ventures. The Stride Funding team has a personal mission at the core of its business:
“Both my parents immigrated here to the States, and education was their pathway to economic mobility. Education is what opens doors. And unfortunately for a lot of historical reasons, I think a lot of folks, especially underrepresented populations, are just left out of the market,” says Michaels, highlighting how this difference further amplifies the gap between the haves and the have-nots. “I feel very tied to the mission. We have supported such a wide range of really, really amazing, inspiring students, from refugees to DACA students, women, underrepresented minorities, and so on. We get such encouraging stories all the time from students, and it just reinforces that this is something that is worth doing.”