Higher MELDucation

Debt in Education

The higher education industry continues to raise tuition expenses, especially in the United States. Many students have trouble paying back student loans over their lifetime because of poor ratios between income and interest rates. As long as students continue to go to college, tuition will keep increasing yearly. Death and taxes used to be the only two inevitables in life, but student debt is quickly becoming the third unwelcomed burden. Although some tuition caps do currently exist, they do nothing to help students who already took out loans. Federal governments offer loans at “low” interest rates to students, but they are limited and confusing to navigate. Some creditors offer quality loans to people with established credit, but that does nothing for young graduate students looking for help. The new generation of students who toiled to get through their programs should not be burdened by expenses that will take them their entire life to pay off.

Countries look for solutions to help their students, but cannot come up with an accessible option for everyone. Student debt just reached $1.6 trillion in the United States alone and the standard financial plan for families trying to cover higher education costs is not working. Direct subsidized loans are the best federal options, but the loan amounts are dependent on parents’ income; and if parents do not want to help, then the student scrambles to find an alternative. The Federal Parent Plus Loan allows parents of students to take out money at a fixed interest rate (around 6% for 2021-2022), which is higher than the direct subsidized or unsubsidized undergraduate loan. While parents paying for their student’s college is common, especially because of the steep tuition prices, even a 6% interest rate might be hard to pay off. The more tuition costs, the longer it takes to pay a student loan off, and interest creates an even tougher environment. If credit scores, high interest rates, and low accessibility were fixed, college and university students would have an easier time navigating debt. MELD can offer some help to future or current higher education students that hold cryptocurrency with their groundbreaking loan servicing, credit, and debit-line systems.

MELD can be a Solution

MELD’s loan servicing could be a feasible combatant against student debt around the world. Parents of students who are in higher education typically have a better ability to pay for their children’s education compared to their children. For this reason, students, as well as their parents, should be aware of decentralized finance (DeFi) options MELD has to offer. Although parents usually have more financial freedom and can choose their education loaning option more feasibly, younger generations are more typically absorbed in cryptocurrency. If multiple age groups in families were aware of MELD’s DeFi options, they would be more apt in receiving the best holistic financial options offered. In order to receive one of MELD’s loans from crypto to fiat, one must deposit their crypto to MELD as collateral, and upon Know-Your-Customer/Anti-Money Laundering confirmation, the funds will be distributed to an account. 

The crypto-backed credit line (CBCL) provides another accessible way for people who own cryptocurrency to use it without obtaining a bank account. The CBCL works along with the MELD debit card to allow users to spend their cryptocurrency without actually needing to cash it out for fiat. The CBCL acts as a MELD based fiat loan, where the card collateralizes cryptocurrency at a rate of 2x the fiat needed. Once something is purchased through the CBCL, online or in-person, the smart contract is then established. The user is then responsible for payments on loans/credit lines, as well as being informed on margin calls and liquidation events. The events act in the same manner in CBCL as MELD loans do, in order to protect the funds of all parties involved.

“Loans are issued at a Loan to Value (LTV) ratio of 50%. If the collateral value falls to LTV 65% or stays above 50% for more than three days, a margin call happens. The customer must provide added collateral to bring the loan back to an LTV of 50%. The same happens if the LTV reaches 75%. If the LTV reaches 85%, a liquidation event is triggered where the collateral is converted to USD/EUR stable coins equivalent to the fiat loan plus a 5% fee. The balance of the collateral is then transferred back to the customer, and the smart contract terminates. The customers keep the fiat they borrowed.”

Conclusion

Student debt from higher learning facilities is rapidly growing and without a centralized solution. A centralized solution to debt may never come to fruition, which is why MELD implements a protocol that is decentralized, non-custodial (traders have control over their money, not MELD), and accessible. A solution to the debt crisis around the world could be in the form of a cryptocurrency, but word needs to spread. Knowledge of MELD and its functions/goals need to exist in all areas and ages in order to be most successful. Loaning options, the CBCL, and the debit card all exist to help alleviate the stress that typical financial options create. Economies are not meant to endure massive and increasing debt, especially debt that aids in the gain of knowledge. With MELD, the user is favored, not institutions trying to cripple the people left behind.