As she cared for her ailing grandmother, Alice Benitez dreamed of becoming a nurse. Growing up in Villarrica, Paraguay, she worked hard and earned good grades so that she could one day go to college. But in 1996 at age 12, her world fell apart. Her mother died and her grief-stricken father abandoned the family. Seeing her precarious situation, Benitez’s uncle took her in. Although he was not well off, he promised Alice if she were admitted to college, he would pay for it.
Years passed and Benitez found herself living her dream: taking a post-secondary course in the medical field. True to his word, her uncle helped pay her way. But then tragedy struck again when her uncle was diagnosed with cancer. Expensive medical bills made it impossible for him to continue to assist with school fees. Without her uncle’s financial support, Benitez was forced to drop out of school.
Not being able to pay for higher education is not a problem unique to Benitez. Close to 80 percent of youth around the world live in families that earn less than $10 a day, according to the World Bank.
Families in the developing world understand that higher education is their children's ticket out of poverty, but saving is impossible when every dollar brought in is needed to pay for necessities like rent and food, according to a report for the World Bank by the Task Force on Higher Education and Society.
Scholarships are limited, and outside of the United States and a few other industrialized countries, student loans simply don’t exist, according to data from the Task Force on Education.
One solution to this problem is Vittana, a Seattle-based non-profit started by Kushal Chakrabarti. Vittana uses the microfinance model to extend credit to young men and women in the developing world.
“When you ask street kids (in the developing world) what they want to be when they grow up, they say the same things American kids say,” Chakrabarti said. “They want to be doctors and lawyers and teachers.” But if they can’t pay upfront for college, they can’t enroll — no matter how bright, talented or hard working they are, he added.
In 2006, Chakrabarti started to explore the possibility of using the microfinance model to provide student loans to young people in the developing world, but financiers were skeptical about the prospects.
Microfinance programs have shown how lending money to a person to buy something like a cow generates revenue. Milk and other dairy products sold at local markets for cash provides the owner income to repay the loan and rise above subsistence living.
But people told Chakrabarti it didn't work the same way with education. “I was laughed out of meetings and told that ‘education isn’t revenue generating,’” he said.
Chakrabarti knew from personal experience what people were telling him wasn't true. After all, he had more money than he knew what to do with because he went to college. “Education is the biggest revenue generator in the world,” he said.
How a Vittana loan works
Since its founding in 2008, Vittana and its supporters have provided loans for more than 5,000 students in 10 countries around the world
When a student applies for a loan, they meet with a Vittana representative in their country to discuss their needs and educational objectives. “I am agnostic about the kind of education it is,” Chakrabarti said, “It just has to be economically viable. Vocational programs, English classes and traditional college degrees are all funded as long as the student can demonstrate it can improve their earning power. Vittana found that on average, loan recipients’ earning power triples after completing their education.
In deciding the amount to lend to each student, Vittana considers both tuition and other costs of going to school. The average loan of $750 covers the entire cost of the student’s education, which may include fees, transportation costs and living expenses for the student and their family.
Just one of the many lives touched by the Vittana opportunity is Alice Benitez. In 2012 she heard through a friend about the possibility of continuing her education by applying for one of their educational loans. Approved and fully funded, Benitez returned to college. Today she continues to work on her degree in the medical field. When she graduates she'll be able to obtain a good-paying job, repay the money she borrowed and help her uncle's family live a more comfortable life.
Every day Chakrabarti hears from students like Benitez whose lives have been transformed because of the opportunity Vittana gives them to pursue higher education.
First, there is the economic transformation: the average loan recipient triples their income. “For many that means going from two to three dollars a day to ten,” he said. “It is the difference between living hand to mouth and having some cushion when things go wrong — the difference between fighting everyday to make ends meet to being able to think about the future.”
Charkrabarti also sees an emotional transformation in those who receive loans. “For many this loan is the first time anyone has ever put any trust in them,” he said. “Their whole lives they have had to scrap for everything, and so many of them are just exhausted. These loans make their difficult journeys a little bit easier and demonstrate trust and confidence they haven’t known before.”
Chakrabarti believes that by helping young men and women get an education, donors are also helping future generations. The benefits to children of educated mothers have been well documented in sociological and economic literature: lower infant mortality, higher vaccination rates, higher literacy rates and more.
Chakrabarti has found that loan recipients end up helping the entire family. “In Latin America and India,” he said, “people are very family oriented.” Former loan recipients pay their siblings’ college tuition and private school dues for their nieces and nephews.
Not a scholarship
Currently Vitanna has a 99.8 percent loan repayment rate. Chakrabarti says this is important for two reasons.
First, as one of his mentors told him, every time you give something to someone you take away a little bit of their dignity. Chakrabarti believes that giving people the opportunity to pay this money back helps develop confidence and a sense of efficacy. Loans are a form of trust — a relationship between equals.
On a more practical level, the success of his organization hinges on repayment. “My goal is to fight global poverty through education,” he said. “If we just give out scholarships then we can only help the top one percent of students. Once the scholarship is dispersed we’re done. If we give people loans, we can multiply our impact.”
“There are only so many donations in the world,” Chakrabarti said. This system is a way of doing great things over and over again, and hundreds of lives can be changed with just a small donation.