May 02, 2017 09:56 AM EDT
CommonBond has confirmed a direct student loan product. This is part of the startup's efforts to expand its footprint in the debt business.
The company is one of the biggest second-generation startups that are tackling online lending. It is known for its strict requirements for qualification for refinancing packages. Because of its initial focus on the high end of student lending, servicing only 20 prestigious colleges and universities when it launched, the startup has become a promising player in the student loan refinancing business.
Tech Crunch reported that CommonBond chief executive officer David Klein will be shifting the company's focus to direct lending. This is the last part of the student lending puzzle that it has yet to solve.
Other similar companies like Pave and Upstart created a model for college financing that exchanged tuition money for a percentage of a student's future earnings. However, both have shifted away from equity financing to become straight personal lenders.
Klein said that CommonBond would bring a different approach to student lending. The company is currently trying its hand at student lending with variable rates starting at 2.87 percent annual percentage rate of charge as well as fixed rates that start at 5.50 percent with a discount for autopayments.
Students now have the choice to pay at a fixed monthly rate a full monthly payment. This is through an interest-only payment and the option to defer will always be available.
The company also has a partnership with Pencils of Promise. They will offer in-kind financing for every student loan it issues.
The new product is part of the company's efforts to expand its direct student loan offering to students outside of the MBA programs. These were the only loans it used to make to students. The new product can be used by any student enrolled in undergraduate or graduate study.
According to Fast Company, CommonBond has also created tools to facilitate the involvement of a co-signer. This factor has always been a pain point in traditional systems but parent co-signers can help reduce the risk for the company.
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