1. Strictly private and confidential
Innovations in Education Finance
This document contains trade secret information. Please be aware that no part of this presentation may be reproduced in any form or by any means, electronic
or mechanical, including photocopying and recording, for any purpose without the express written consent of Quest Growth Partners, LLC (doing business as
People Capital). In addition, due to the proprietary nature of Quest Growth Partners’ methodologies and other information enclosed herein, this presentation
may not be shown to any third party without the prior written consent of Quest Growth Partners, LLC.
For further information, contact:
Al Alper - President
People Capital
274 Madison Avenue, Suite 1400
New York, NY 10016 visit us at:
al.alper@people2capital.com
Mobile: (917) 658-9008
Office: (212) 401-1216 x13
401 1216
www.people2capital.com
p p p
www.humancapitalscore.com
http://educationfinanceblog.com

2. Agenda
• Overview and team
• Market landscape and opportunity
• People Capital solution
• Financials and milestones
2

3. Overview: an Industry Desperate for Innovation
• There i a $113+ billi education funding gap
h is $113 billion d i f di
 Current market environment provides window of opportunity
 Student loans have unique benefits such as tax-efficiency and default survival
• People Capital is a web based education finance company leveraging two technologies that directly
web-based
address the student loan market’s two major inefficiencies:
 Credit risk analysis
 Loan origination and servicing
Credit Risk Analysis: Loan Origination and Servicing:
The Human Capital Score™ Peer Lending Platform
• Issue: Thin-file students aren’t properly profiled
p p yp • Issue: Limited sources for students, lenders,
, ,
for credit risk, resulting in poor quality loans investors
• People Capital has built a proprietary credit scoring • People Capital leverages peer lending technology
– Human Capital Score™ that matches lenders with borrowers
 Predicts 10 year income of students and,
y ,  Provides a choice of loan products
p
therefore, ability to service debt  Offers investor portfolio customizations for
 Algorithm based on metrics such as school, higher risk-adjusted returns
major, test scores, GPA, etc.  Liquidity for students and investors
• Opportunity to build leadership company in large, attractive market
 $2 million of capital required for post-launch operations: w/c, sales channels, system enhancements
 Funding to date of $2.5m - Initial round funded by angels
3

4. The Team: deep financial services experience with
education finance, human capital, credit risk and IT
Officer Experience
Thomas Shelton  Serial entrepreneur and co-inventor of the Human Capital Score TM
Founder & CEO  Former VP strategy and operations for MyRichUncle – a private student loan provider
 Founder of consumer-based startups
Al Alper  Seasoned technology operational executive and entrepreneur
President & COO  Built several companies, including the first online ABL consumer debt purchasing p
p , g p g platform
 Raised in excess of $100 million of growth funding
Alan Samuels  17 years of financial services experience leading product development, marketing and business development
Chief Product Officer  10 years executive experience at Standard & Poor's and Fitch Ratings
John Nerenberg  CIO at Curomax Corporation, a web 2.0 consumer finance company (sold to Dealer Track)
Chief Information Officer  CIO for CIT Commercial Finance
Brendan Pryor  20 years of student loan operations and finance experience in established and start-up companies
SVP – Student Loans  Corporate Officer at Sallie Mae including Director of Loan Originations
Mae,
Professor Stephen Shore  Is a leading academic in the field of insurance and risk management currently conducting research in human
Senior Developer of HCS capital risk
 Ph.D. and A.M., Harvard University; A.B Princeton University
Robert Lavet (of Powers,  Previously General Counsel to SLM Corporation (Sallie Mae) where he managed the Legal, Corporate
Pyles, Sutter & Verville) Compliance and Student Loan Servicing Policy functions
General Counsel  Currently leads Education Practice Group at PPSV
4

5. Large and Persistent market opportunity - Funding Gap
Between Education Costs and Government Funding
• Private Loans are the means by which families and students • Federal loan limits have not kept pace with tuition costs
fill the gap between federal funding and total cost of higher
• A dependent undergraduate can borrow up to $31,000 in the
education
Federal Family Ed
F d l F il Education Loan Program over four years
i L P f
• Credit cards are increasingly becoming a funding source for
 Federal Stafford limit is even lower ($23,000), not even
education expenses
20% of an average 4 year private education
Student Funding by Source for 2007 4 Year Cost of College (‘08/09 v ‘98/99)
( 08/09 v. 98/99)
$136,528
Personal/Family
Funding/Home Equity
g/ q y 2008/2009
$113.5
$113 5 Funding Gap $57,332
$
Billion
Funding
Gap $31,000 $31,000
Private Loans FFELP Limit
Full-Time Private School Full-Time Public School
Federal Loans
$110,320
Grants 1998/1999
Funding Gap $41,884
Education Tax Benefits
$17,125 $17,125
Source: National Center of Education Statistics and College Board, Trends in
Student Aid 2007, Trends in College Pricing FFELP Limit
i i
Full-Time Private School Full-Time Public School
Source: College Board, Trends in College Pricing, 2008
5

6. Market Drivers: Growing Demand for Student Loans
• Private student loans are estimated to grow at 25% per year, versus 8% federal loan growth 1
• Growth in private student lending outpaced other sources of aid by over 4x over ten years. This was caused by the demand to
fill the large gap created by:
 Rapid increase in tuition: 2000-2008 CAGR for private college, 7.0% vs. public 5.0%
 Growth in enrollment: 18.4m enrollments in 2009 vs. 14m in 1995, a 31% increase vs. 15% increase in population over
same timeframe
Growth in Inflation-adjusted Financial Aid in U.S. U.S. Enrollment in Higher Education (millions)
(academic years 1996/97 to 2006/07 – average annual growth)
30.0%
26.3% 19.0
25.0% 18.4
18.2
18.0
18.0 17.8
20.0% 17.5
17.3
15.0%
15 0% 16.9
16 9
17.0
10.0%
6.2% 6.5% 6.6% 6.8%
16.0
5.0%
0.0% 15.0
Federal Federal Other Non-federal Private 2003 2004 2005 2006 2007 2008 2009
Grants Loans Federal Aid Grants Loans
Source: NCES and College Board, Trends in Student Aid Source: Sallie Mae
1. Institute for Higher Education Policy
6

7. End-to-end solution for Education Finance
…. bringing the lenders back to the table
How ItHow it Now
Works PeoplePeople Capital
Capital Differentiators
works now differentiators
What options do students • Federal Loans - but borrowing • Lending platform – matches
limits are very low borrowers with lenders
have to finance their • Private Student Loans - but only to  Unique aspects of student
education? most creditworthy/co-borrower loans, e.g. deferment,
guarantees (if available) consolidation
• Consumer Loan - with no tax  Fully compliant Private
deductibility Student Loans – tax
• Credit cards - with high rates efficiency and legal
protections
 Verification of student status
ifi i f d
(reduces risk)
 Better rates than credit cards
How are lending decisions • Co-borrower (typically parent) • Human Capital Score
guarantee  Fundamentally new way of
currently made? • FICO score assessing credit risk for young
 Based on financial payment adults
history  Based on future potential
 Young adults/student have  Built by leading academic
no credit history – therefore, team
poor FICO score
7

8. End-to-end solution, bringing back the lenders
How It Works Now People Capital Differentiators
Who are providing the • Dedicated industry • Peers:
 Large players pulling back  Friends & Family: legal
loans to students? compliance for tax efficiency
 Medium players exiting the
industry  Savvy individual investors:
• Credit card companies enhanced returns from
 High rates alternative asset class, legal
protections
• Some nascent p2p lenders
• Institutions:
 Easy to “hang out a shingle”
 Affinity/Philanthropic:
 hard to be a true solution
support,
support rather than donate
 Financial institutions: optimize
risk-reward tradeoff
What are the options for • Student loan ABS • Selection based on financial and
• Overcollateralization human capital screeners
p
those that want to invest in
th th t tt i ti  Credit risk data on each
• Unattractive to investors
student loans? • Lack of faith in the ratings underlying loan
 Standing orders to search for
• Lack of transparency in underlying
assets loans that meet criteria
• “One size fits all” • “Build-your-own” portfolio
“B ild ” tf li
 Adjust for your own unique
risk profile
• Emotional drivers
 Support for emotional lending
pp g
decisions
8

9. Servicing Entire Lender Spectrum
existing players only service one or two…
Relationship Segment Description Why are they currently
to borrower
driven underserved
Personal connection to specific borrower Cannot help “Johnny” in a legally
Friends & Family compliant/tax efficient way
“Grandma”
Benevolent lender “giving back” to some Cannot encourage educational choices
Affinity entity he/she is connected with without making it a “donation”
“NYU Alumni Club”
Benevolent lender “giving back”/ supporting Limited access to options that meet the
Philanthropic some “philanthropic” objective “philanthropic” objective in such a targeted
“Bill & Melinda Gates Foundation” manner
Highly-skilled, leading-edge individual No access to this asset class
Savvy individual investor investor Needs data, tools and analytics to analyze
“e-trade guy” risk and return to find alpha
Sophisticated best-in-class risk manager Lack of transparency into underlying credit
Risk-
Institutional risk of asset class
“JPMorganCitiLynch” Cannot “build-their-own” investment pool
reward
driven
9

10. People Capital’s Patented Human Capital Score
dramatically improves student loan credit decisioning
credit-decisioning
• The predominant credit risk metric, the FICO® score, is inappropriate for students
 It is based on credit payment history, and students have little such history
 As a result, they generally receive low FICO® scores and, thus, look like risky propositions
 Alternatively, they may have high FICO scores, but have chosen a field of study which provides
historically low income levels
• The Human Capital Score™ assesses the relative creditworthiness of students without
credit history
 The HCS algorithm utilizes a range of data sets and attributes including demographic, geographic,
college, major, and merit data such as GPA & standardized test scores
 HCS algorithm prototype completed by Wharton Academics based on 10-year back-testing on earnings
levels of students across majors and schools post graduation
 These attributes provide coefficients that predict future income, and hence their ability to repay loans
income
• The Human Capital algorithm produces very fine graduations of credit risk, HCS 1.0
p
provides a simplified 1-9 scale with “+” and “-”
p
 Identifies true “prime” credit borrowers from large pools of applicants
10

11. www.humancapitalscore.com is available to the
public
11

12. Competition in the $113B market opportunity
General Focus Education Focus
Pee Lending
er g
Old School / Bricks & Mortar
Friends & Family Student Loan Corp
l
12

13. Stage-Gated Approach: Milestones 2010: Growth Stage
2009: Build, Launch & Operate Platform Build version 2.0 of platform
GO-TO-MARKET Extend lender value through
secondary market capabilities
Completed:
C l t d In Pipeline: Further reduce manual process
Launched and marketed public Implement lending license with Aggressive customer acquisition
2008: Stage Completed our Industrial bank
Human Capital Score S-1 filing
Patented and launched beta of Pre-launch marketing and PR Build product suite and set-up
Expand Human Capital Score
Human Capital Score broker dealer
Acquired platform peer-2-peer
peer 2 peer into additional relationships
Recruited team lending technology assets and Secure lending commitments
Created extensive operational developed specifications - both
Additional protection of IP
and technology plans in-house and outsource
Launch for 2009 School Year
Entered negotiations with Positioned Advisory Board and
strategic partners Business Development /
p
Institutional Sales Team
Dual lending license acquisition
strategy Drafted Private Placement
Memorandum for securitizing
Capital Invested During Stage
$500,000 $3.0 million $2-3 million
* $2.0m already invested
Principal cost drivers
Talent $1.0 million Most expenses are variable
Systems $1.0 million based on loan volume:
Legal $400k - Marketing fees
R&D $300k - Working capital
Marketing $300k - Loan origination costs
- Talent
l
13

14. Fee-Driven Business Model:
generate volume and outsource non-core activities
non core
• Loan Products:
 2 Short-term: 1-5 year interest only with balloon payment, & 3 year fully amortized loan
 2 Long-term: 10-20 standard private & consolidation student loans
• Assumptions:
 Loan origination: 1,600 loans Oct-Dec 2009 – 20,000 loans in 2010
 Default rate: 6.5% of outstanding portfolio (above DOE rate of 5%)
f l 6 % f di f li ( b O f %)
 Average loan size: $9,600 (weighted average of four loan products)
• Fee drivers:
 Loan origination (1-5% of l
L i i ti (1 5% f loan amount) t)
 Loan servicing (1-2% of loan payment)
 Licensing HCS as a bureau (beginning 2010)
 Secondary market for loan resale between lenders (1% commission)
 Other fees: late fees, NSF (non-sufficient fund fees), recovery fees, etc.
• Expense drivers:
 “per Loan”: incurred in o g a o , p ocess g and servicing each loan
pe oa : cu ed origination, processing a d se v c g eac oa
 Corporate: G&A, legal, compliance/regulatory, business development
 Marketing: referral expenses incurred to generate traffic/customer demand
14

15. Summary Financial Projections
2009 2010 2011 2012 2013 2014
Origination (Loans)
i i i ( ) 1,582 20,045 60,344 121,834 206,372 274,155
Cumulative Originated Loans 1,582 21,627 81,971 203,805 410,177 684,332
Originated Amount $ $15,191,366 $192,429,938 $579,300,375 $1,169,610,764 $1,981,169,200 $2,631,884,959
Cumulative Origination $ $15,191,366 $207,621,304 $786,921,679 $1,956,532,443 $3,937,701,644 $6,569,586,603
Loan Portfolio $14,696,971 $191,157,470 $686,845,280 $1,713,497,598 $3,335,774,875 $5,275,040,727
Revenues:
Lending Business $766,166 $10,391,868 $35,397,520 $85,905,492 $161,374,161 $245,510,334
Human Capital Score $0 $967,821 $2,528,951 $5,057,902 $10,115,804 $20,231,607
Total Revenue $766,166 $11,359,689 $37,926,471 $90,963,394 $171,489,964 $265,741,941
Cost of Revenue (262,604) (4,518,266) (15,054,880) (32,341,642) (56,295,312) (78,751,973)
Net Revenue $503,562 $6,841,422 $22,871,591 $58,621,752 $115,194,653 $186,989,968
Total Operating Expenses (2,429,822) (4,964,711) (8,276,941) (16,115,493) (23,056,028) (29,346,291)
EBITDA ($1,926,259) $1,876,711 $14,594,650 $42,506,259 $92,138,625 $157,643,677
EBITDA Margin ‐251.4% 16.5% 38.5% 46.7% 53.7% 59.3%
Net Income ($1,954,577) $1,801,188 $8,519,755 $24,685,412 $53,709,092 $92,174,600
Net Income Margin ‐255.1% 15.9% 22.5% 27.1% 31.3% 34.7%
Equity Financing 3,000,000 2,000,000 0 0 0 0
Debt Financing 0 0 0 0 0 0
Total Funding $3,000,000 $2,000,000 $0 $0 $0 $0
Cumulative Funding
g $ , ,
$3,000,000 $ , ,
$5,000,000 $5,000,000
$ , , $5,000,000
$ , , $5,000,000
$ , , $5,000,000
$ , ,
Cash Balance 543,549 3,582,705 12,244,127 37,033,011 90,771,617 182,946,216
Total Assets $725,355 $3,857,358 $12,377,113 $37,062,525 $90,771,617 $182,946,216
Tech Build:
P2P Code Purchased $170,000 $205,000 $0 $0 $0 $0
Information Technology
Information Technology $85,500
$85 500 $296,064
$296 064 $863,586
$863 586 $2,097,626
$2 097 626 $3,231,435
$3 231 435 $4,150,486
$4 150 486
Application Development/P2P Build $319,300 $532,450 $727,800 $1,050,180 $1,242,861 $1,479,549
TOTAL TECH BUILD $574,800 $1,033,514 $1,591,386 $3,147,806 $4,474,296 $5,630,035
Cumulative Tech Build $574,800 $1,608,314 $3,199,700 $6,347,505 $10,821,801 $16,451,836
Revenue per originated loan $484 $567 $629 $747 $831 $969
Total OpEx per originated loan
l dl $1,535
$ $248
$ $137
$ $132
$ $112
$ $107
$
• Assumes no origination until October 2009
15

16. We continue to make significant progress …
• Equity Funding
 Closed $1.5 million equity investment in February 09
 Closed $500,000 equity investment in June 09
 $2.5 million total raised to date
 Raising additional $1.0 million that is needed for 2009 post-launch operations
• Funding our Lending Platform
 Institutional sales team: 2 Business Development Officers, 6 high-profile member Advisory Board
 Closing in on several Letter of Intents for funding of up to $15m pre-launch
 Have a full marketing effort, targeting various classes of institutional lenders for initial funding launch:
Community Banks, Credit Unions, Hedge Funds, Foundations, Endowments, etc.
y g
• Launching legally compliant lending platform for the 2009-2010 school year
 Secured peer lending technology assets at fire-sale/recession prices in April – the p2p platform has over two
y
years of coding and development work built in it
g p
 Filing with SEC to register products as securities
• Developed Human Capital Score Prototype
 Filed provisional patent
p p
 Live site www.humancapitalscore.com , launched in April 2009
• Full launch team in place
16

17. People Capital changes the face of student lending
• The People Capital platform is built to support student loan industry – an industry so void of
innovation
 Dedicated student loan products: deferred payment profiles, verifications, disbursements directly to schools,
profiles verifications schools
credit risk tools
 Institutional and diversified investors
• We
W provide student l di based upon a credit risk methodology geared t
id t d t lending b d dit i k th d l d towards thi fil
d thin-file
students
 FICO is insufficient for students – very thin file
 Human Capital Score™ measures income potential, expands prime pool
• Institutions drive substantial volume, liquidity and risk diversification
 Philanthropic/Affinity: based on college, major, region, etc.
 Financial Institutions: People Capital provides a superior option with transparency
17

18. Additional Materials
available upon request:
il bl t
Al Alper, President
mobile: 917 658 9008
email: al.alper@people2capital.com
• Overview and Opportunity ~ 55 pages
• Student Loan Fact Sheet - 2 pages
• Opportunity for Lenders ~ 13 p g
pp y pages
• Complete Presentation ~150 pages
• Financial Model ~28 pages
• Technology Brief ~14 pages
• Human Capital Score ~24 pages
• Marketing Channel (Philanthropic, Affinity, Corporate) ~27 pages