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MyRichUncle

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MyRichUncle
Company typeDefunct
IndustryStudent loans
FoundedMarch 2000; 25 years ago (2000-03)
FoundersVishal Garg
Raza Khan
DefunctFebruary 9, 2009; 16 years ago (2009-02-09)
FateFiled for Chapter 7 bankruptcy
Footnotes / references
[1]

MyRichUncle, owned by MRU Holdings, Inc., offered discounted student loans to borrowers in the United States.

In 2001, the company launched its first product, in which students signed over a percentage of future earnings to investors; selling their human capital.

In 2006, MyRichUncle published an advertisement in The New York Times questioning financial aid administrators' practice of taking "kickbacks" from lenders in exchange for a place on their "preferred lender" lists; the campaign triggered an investigation that led to several lenders agreeing to a new code of conduct. The campaign also alienated many school administrators.[2]

Between May 2005, when the company launched a private loan product, through June 2008, the company originated over $420 million of private student loans and approximately $40 million of federal student loans.[1]

The company depended on Merrill Lynch to buy and securitize its loans. In February 2009, after banks cut off the company's credit lines due to the 2008 financial crisis, MRU Holdings filed for Chapter 7 bankruptcy and suspended its operations.

History

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MyRichUncle's co-founders, Raza Khan and Vishal Garg, met at Stuyvesant High School in New York City and attended New York University together.[3][4] The founders were inspired by smart classmates who only applied to colleges that they could afford.[5] Garg and Khan founded Iempower in 1999.[6]

In 2001, the company launched its first product, in which students signed over a percentage of future earnings to investors; selling their human capital.[2][7] Students usually received between $5,000 and $10,000 per semester, and had to pay back 0.5% to 4% of their earnings for ten to fifteen years.[8] However, the product only served a small niche market.[9]

To decide how to allocate investor financing to students and at what rates, Iempower built a proprietary data model that used historical data going as far back as the 1960s to predict a student's future income and career prospects based upon a variety of academic and credit factors.[6]

In 2001, the company partnered with the Robertson Education Empowerment Foundation to provide $3 million in financial aid to students.[10]

The company's offices on the 78th floor of 1 World Trade Center were destroyed in the September 11 attacks.[11] The company then moved to Midtown Manhattan.[8]

MyRichUncle then entered the private student loan industry. In July 2004, Iempower, with an equity capital raise of $4.2 million, completed a reverse public merger with Pacific Technologies. Iempower Inc. then changed its name to MRU Holdings, Inc.[12]

In February 2005, MRU Holdings obtained a $165 million credit facility, expandable to $300 million, for funding private student loans from a subsidiary of Nomura Holdings.[1]

In May 2005, it began offering private student loans under the brand name MyRichUncle.[1]

In January 2006, MRU Holdings obtained a $175 million credit facility with Merrill Lynch.[1] The company also raised funds by selling Series B convertible stock.[13]

In May 2006, MRU introduced its PrePrime product.[14]

In June 2006, MyRichUncle introduced its federal loan program.

In July 2004, the company's stock began trading on the OTC Bulletin Board and in October 2006, the it began trading on the Nasdaq.[1]

In February 2007, MRU Holdings purchased Embark, which provided online admissions applications and enrollment management services to colleges and universities and other institutions, from The Princeton Review.[15]

The company also partnered with STA Travel to provide travel loans for study abroad students.[1]

In April 2007, MRU Holdings announced an exclusive marketing partnership with The Princeton Review.[1]

In June 2007, MRU Holdings closed its first securitization transaction, issuing $200 million in principal amount of asset-backed securities through Merrill Lynch & Co.[1]

In July 2008, despite market turbulence due to the 2008 financial crisis, MRU Holdings closed its second securitization, issuing $140 million in asset-backed securities through Merrill Lynch, Goldman Sachs & Co. and BB&T Capital Markets.[16][1]

Between May 2005, when the company launched a private loan product, through June 2008, the company originated over $420 million of private student loans and approximately $40 million of federal student loans.[1]

In 2006, MyRichUncle published an advertisement in The New York Times questioning financial aid administrators' practice of taking "kickbacks" from lenders in exchange for a place on their "preferred lender" lists; the campaign triggered an investigation that led to several lenders agreeing to a new code of conduct. The campaign also alienated many school administrators.[2]

The company depended on Merrill Lynch to buy and securitize its loans. In February 2009, after banks cut off the company's credit lines due to the 2008 financial crisis, MRU Holdings filed for Chapter 7 bankruptcy and suspended its operations.[17][18][19]

Awards and recognition

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  • Ranked 16th among the "Fast 50" by Fast Company in 2006.[20]
  • MyRichUncle is featured in Footing The Tuition Bill: The New Student Loan Sector, edited by Frederick M. Hess, and the college textbook Marketing: Real People, Real Choices (5th edition) by Michael R. Solomon, Greg Marshall, and Elnora Stuart.[21]

References

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  1. ^ a b c d e f g h i j k "MRU HOLDINGS INC, Form 10-K, Annual Report for the Fiscal Year ended June 30, 2008". U.S. Securities and Exchange Commission.
  2. ^ a b c Chernikoff, Helen (August 10, 2007). "MyRichUncle: student lender leverages loan scandal". Reuters.
  3. ^ Shane Windmeyer. "My Rich Uncle Offers an Alternative to College Loans". CollegeBound.net. Archived from the original on July 22, 2012.
  4. ^ David Jeans; Noah Kirsch (November 20, 2020). "Mortgages, Fraud Claims and 'Dumb Dolphins': A Tangled Past Haunts Better.com CEO Vishal Garg". Forbes. Archived from the original on December 7, 2021.
  5. ^ Lederman, Doug (July 20, 2006). "MyRichUncle, InYourFace". Inside Higher Ed.
  6. ^ a b Donovan, Aaron (January 6, 2002). "Personal Business; Education as an Investment. Really". The New York Times. Archived from the original on May 27, 2015.
  7. ^ Ross, Theodore (October 12, 2014). "Human Capital Contracts Could Revolutionize the Way We Borrow Money". Vice Media.
  8. ^ a b Lubell, Sam (January 7, 2002). "The New Human Capital". New York.
  9. ^ Dynarski, Susan M. (April 14, 2016). "What does cutting rates on student loans do?". Brookings Institution.
  10. ^ Mayfield, Kendra (December 21, 2002). "Tech Titan Gives Students a Lift". Wired. Archived from the original on December 6, 2021.
  11. ^ Marrinan, Michelle (September 1, 2002). "Undefeated Seasons". Entrepreneur. Archived from the original on December 7, 2021.
  12. ^ "Exhibit 99.3: UNAUDITED PRO FORMA COMBINED FINANCIAL STATEMENTS, PACIFIC TECHNOLOGY, INC. AND SUBSIDIARY: PRO FORMA COMBINED FINANCIAL STATEMENTS". U.S. Securities and Exchange Commission. 2004. Archived from the original on July 12, 2017.
  13. ^ "MRU HOLDINGS INC, Form 10-K, Annual Report for the Fiscal Year ended June 30, 2006". U.S. Securities and Exchange Commission.
  14. ^ "MRU Holdings, Inc. Announces Jonathan Coblentz has Joined the Company as Treasurer and Head of Capital Markets; Company Reaffirms Strong Lending Liquidity Position of More Than $230 Million as It Heads Into Busy Student Lending Season". American Banker. August 8, 2007.
  15. ^ Rivard, Ry (July 3, 2014). "Troubles at Embark". Inside Higher Ed. Archived from the original on December 7, 2021.
  16. ^ "MRU Holdings Announces Closing of $140 Million Private Student Loan Securitization Transaction" (Press release). PR Newswire. July 7, 2008.
  17. ^ Rudegeair, Peter (June 12, 2016). "Online Lender's Secret to Success: Past Failure". The Wall Street Journal.
  18. ^ Mukherjee, Supantha (February 9, 2009). Kakkrakandy, Jarshad (ed.). "UPDATE 1-MRU Holdings files for bankruptcy under Chapter 7". Reuters. Archived from the original on December 6, 2021.
  19. ^ Kamenetz, Anya (February 10, 2009). "MyRichUncle is Out of Cash". Fast Company.
  20. ^ Kamenetz, Anya (December 20, 2006). "The 5th Annual Fast 50: Raza Khan and Vishal Garg". Fast Company. Archived from the original on October 25, 2012.
  21. ^ "Footing the Tuition Bill" (PDF). American Enterprise Institute. 2007.
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