CommonBond is a Student Lending Startup with a Social Mission
There are a couple things that almost any student can agree upon, one: the miraculous effects a little bit of alcohol, or caffeine, can have on your zest for finishing a paper, and two: that the student loan system is broken.
You know this by now, student loan rates are higher than rates big banks receive, and they can never be forgiven (with few exceptions). Loans have become an impediment to receiving an education, rather than their once gleaming image as an enabler for the common individual.
What’s a student to do when congress takes its own sweet time? Startups.
Startups are revolutionizing the world one issue at a time in ways that old guard institutions can’t or won’t.
CommonBond, a New York-based startup, utilizes marketplace lending to refinance student loans.
They refinance and fund student loans for graduate programs in certain institutions across the country. The loans are funded by investors and are given at half the rates of standard student loans, with an emphasis on community-building, rather than commodifying student loans.
Their loans were once only applicable to business school students, but their refinancing options have been expanded to offer a wider range of graduate and professional programs from (select) institutions across the country.
Both options offer lower rates. The current Federal Direct PLUS Loan rate is 7.21 percent. CommonBond’s rate for a 10-year fixed loan is as low as 6.24%, and their variable rate and fixed rate (respectively) for loan refinance are as low as 1.93% and 3.74%.
Their key is selectivity: “The federal government is pricing loans as a one-size-fits-all solution,” says CEO David Klein in Forbes Magazine, “They’re not pricing loans appropriately for the most creditworthy.”
There’s also a bit of an altruistic mentality to CommonBond’s mission. For every degree successfully funded through the platform, CommonBond will fund the education of a student abroad, or what the company calls “1-for-1.”
While CommonBond isn’t an option for every graduate student (depending on your program, school and creditworthiness) it is a gleam of light in the gloominess of most student loan options.
This trend has been happening in the finance, payments, education, and other industries for over a decade.
Startups inevitably find an industry that needs progress, and identify a way to move it forward. Crowdfunding sites like Kickstarter and Indiegogo have democratized obtaining finance capital, in turn creating a need for new payments processors like Stripe and WePay to challenge the likes of Amazon and PayPal to adapt to the different needs of crowdfunders.
CommonBond challenges the student loan and financing industries to appeal to the individual consumer, while startups like Affirm, ZestFinance and Earnest are changing the banking landscape by using big data to determine a potential client’s creditworthiness.
If the song and dance of the 1960s and 1970s was change by protest and activism, change in the 2000s is most certainly through small, human-centered and forward-driven startup companies.