This report is the result of an investigation that reveals potentially harmful business practices and possible fair lending risks by Stride Funding, an education finance firm that originates and markets Income Share Agreements (ISAs). Extensive mystery shopping revealed that Stride’s lending model may violate federal fair lending law by penalizing borrowers of color for attending minority-serving institutions (MSIs) such as Historically Black Colleges and Universities (HBCUs).
Stride Funding’s own data reveal that the company’s ISA products are priced in ways that could generate huge cost disparities for students of color attending MSIs, sometimes even when an MSI is a higher-ranked school than a given non-MSI.
Based on these findings, the SBPC and NAACP Legal Defense and Educational Fund (LDF) sent a letter to Stride Funding calling on the company to explain and address uncovered areas of potential consumer and fair lending risk.
Read the Letter: The SBPC and LDF’s Letter to Stride Funding on Potential Discrimination in ISA Platform
Read the Report: Inequitable Student Aid: A Case Study of Disparate Lending Practices and Educational Redlining Tactics in the Market for Income Share Agreements
Read the Press Release: New Report Warns of ‘Educational Redlining’ By FinTech Student Lender Systematically Overcharging Borrowers Who Attend Historically Black Colleges and Universities
Read the Blog: New Evidence Underscores the Fair Lending Risks Inherent to Income Share Agreements
A set of exhibits documenting the SBPC’s findings is available here.
A memo outlining the fair lending risks associated with ISAs and the use of alternative data in underwriting is available here.