The subject of education has been the focus of the last few articles. We reflect on the importance of teaching personal finance in school curricula and how civil society has mobilized to bring this issue to Brazilians in general. The discussion was about how knowledge can improve the relationship with credit and other financial services. In this article, we return to the subject of education, now from another point of view: how can credit increase access to formal vocational education?

In Brazil, student loans are almost always associated with the FIES program, created in 2001. This program is social in nature, with a zero real interest rate for students with a family income of up to three minimum salaries and a grace period that lasts until the end of the course. The program also caters for students with higher family incomes through the P-Fies modality, in which the conditions of the contract are signed with the financial institutions.

Despite the merits of the program, the difficulties of FIES have been widely publicized in recent years. According to data from the Ministry of Education, the number of new FIES contracts has fallen in recent years, from 203,000 in 2016 to around 48,000 in 2023. On the other hand, default rates are rising. Over this same time horizon, the program's default rate rose from 36.8% to 57.0%.

Financial institutions and fintechs also offer student loans outside the government program. This is a possibility for students and families who are looking for courses with higher tuition fees or even for those who face unforeseen circumstances and need to extend the deadlines and reduce the installments, preventing them from canceling their course and, consequently, postponing a personal project.

Private student loans have their own specific characteristics. This credit is different, for example, from the credit granted for the purchase of a household appliance or other consumer good. Those looking to specialize usually expect to make a financial return in the future, which, in theory, would increase the borrower's ability to pay.

On the other hand, the profile of those who benefit from student loans, a generally younger audience, is one that has little history of dealing with the banking system. The question then arises of how to analyze this public with traditional instruments and whether there are other ways of measuring the risk of operations.

The challenges and opportunities for this market were discussed at a recent panel organized by Cantarino Brasileiro, in which I participated as a mediator. The event was attended by financial institutions operating in this segment and the credit bureau sector. The challenge of analyzing student loans was debated. The panelists stressed that it is necessary to add to the traditional analysis an analysis of the potential of that financing, which involves an assessment of the educational institution, the course, in order to estimate the financial return for the student in terms of remuneration.

A study by Elleven, a fintech company operating in the sector, showed an average increase of 38% in the earnings of students who obtained student loans 18 months after taking out the loan. This result is important because it shows a positive return from studying on income even before completing the course. The income in turn increases the student's ability to pay and reduces the risk of the operation. The discussion also pointed to another model for granting student loans, which places financing as a family project.

For the branch sector, even traditional analysis is already more sensitive to capturing the credit behavior of the younger, unbanked public thanks to the increased visibility of credit and the diversity of databases used in prediction models. In addition to granting credit, the management of credit granted, including recovery in the event of default, can benefit from the use of data intelligence.

In short, three lessons can be drawn from the panel: the need for complementary data to analyze this specific type of credit; the importance of linking financial education to taking out credit through short courses for applicants; and complementarity between the actions of the private sector and the government.

Like other types of credit, there is room for this type of credit to grow in a sustainable way, boosting social welfare. The most recent data, especially from FIES, indicates the need for improvements in the analysis policy and constant evaluation of educational institutions Student loans can be a life-changing instrument, opening up new professional prospects and, consequently, personal fulfillment.