Ramping Up Graduate School Loans For Dreamers

Immigrants who are Deferred Action for Childhood Arrivals (DACA) and Temporary Protected Status (TPS) beneficiaries face an often insurmountable problem applying to graduate school: They have the right to live and work in the U.S., but they can’t borrow from the federal government.

That’s why the Dreamers Graduate Loan Program exists. Launched in 2021 with the aim of helping immigrants with DACA and TPS status attend professional graduate schools, it just significantly expanded the pool of applicants who can apply.

“We’re getting to the point where we can be meaningfully impactful for Dreamers who want to get an education,” says Michael Grossman, managing director, Impact Investments, at impact finance and advisory nonprofit Social Finance, which is the program’s fund manager. It worked with scholarship provider TheDream.US to create the program. Funding U, an education lending platform for underrepresented students, is processing the applications and originating the loans.

Jackie Andrade Ramirez, who arrived in the U.S. from Mexico when she was one-and-a-half with her parents and two siblings, is one recent borrower. Ramirez, 23, who attended Colorado State University on a TheDream.US scholarship, graduated with a B.A. in social work in 2021. Then she got her MA from the school’s graduate program the next year.

Now she works for a school district in Ft. Collins as a mental health specialist focused on immigrants. “Working with undocumented youth is what I’ve always wanted to do,” she says.

From Undergrad Scholarships to Graduate Loans

Six years after the launch of TheDream.US., which has given money to about 10,000 Dreamers to attend over 80 partner colleges, the nonprofit teamed up in an advisory capacity with Social Finance to develop a new program for students applying to graduate school. “We set up the loan program to support students’ continuing education,” says Grossman.

The plan: to award loans, because the task of raising enough money to fund scholarships would be so costly as to make it unworkable. The goal was to match the federal subsidized graduate loan program open to U.S. citizens and award loans with an interest rate significantly less than the amount required by private providers. Other noteworthy features: no requirement for co-signing and no minimum FICO score.

To increase the likelihood of repayment, loans are awarded to students in select graduate programs in fields—think law or medicine—where students have high graduation rates, low loan default rates and salaries that can reasonably sustain loan payments.

Opening Up to More Applicants

Initially, for the program’s pilot year, 34 loans were made available just to TheDream.US. scholarship alumni recipients and current college seniors. “We wanted to walk before we run,” says Tracy Pallandjian, CEO and co-founder of Social Finance. For the second year, which was the 2022-2023 academic year, the program expanded to include Golden Door Scholars and Equal Chance for Education, two other programs that award undergraduate scholarships, and made 66 loans.

After that, program officials felt they were ready to open up to more applicants. To that end, for the 2023-2024 academic year, they’re now targeting any grad-school applicants who have DACA or TPS status and meet a variety of other criteria, with 135 new borrowers so far. They expect that number to increase to around 170.

To make sure students’ loan size isn’t onerously large, on average they borrow about $30,000 a year, according to Social Finance. “By combining philanthropy with commercial credit, we can hold the rate down to what looks more like what those getting federal student loans receive,” says Grossman. “We do our best to meet the federal government rate.” Since grad school programs typically are two years or longer, the average total is about $64,000.

Grossman describes the loans as, “a replacement for last mile financing.” By that, he means the financing will take the place of high-interest private loans students would typically need to pay for whatever a mix of scholarships and savings can’t cover.

Ultimately, Social Finance wants to raise $75 million to allow 1,500 loan recipients to attend graduate school. So far, it has raised $23 million in grant equity and repayment guarantees from the Pershing Square Foundation, along with several other philanthropists and impact investors. That money will take a first-loss, subordinated position. That’s to encourage participation from other investors. The Ford Foundation provided grant funding to develop the program.