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The high-flying sector is primed for a correction, industry leaders said this week. Declining credit standards are one of the top concerns.
April 16 -
Low-income borrowers are responsible for much of the recent surge in student loan defaults and delinquencies, according to new research by the Federal Reserve Bank of New York.
April 16 -
LendKey, a white-label marketplace lender that partners with credit unions and community banks, has reached a deal to sell MidCap Financial up to $1 billion in student-consolidation loans.
April 15
Marketplace lender Social Finance has expanded its education loans to parents of students in 49 states and the District of Columbia.
San Francisco-based SoFi's student-parent loan expansion comes after an initial pilot of 50 borrowers parents of Stanford University students only began last year. Wells Fargo has offered similar loans for several years, and
SoFi and its competitors see an opportunity to undercut Federal Direct PLUS loans, which despite government sponsorship have origination fees and, depending on the type of loan and financial need of the student, higher interest rates than some private loans. Private parent loans feature no origination fees as well.
If borrowers agree to automatic payments, SoFi's student-parent loans will start at 4.5% for fixed-rate loans and 2.93% for variable-rate loans.
SoFi's model since it started in 2011 has been to attract prime borrowers between the ages of 25 and 45 through low-rate student loans and perks, like unemployment insurance, career counseling and placement assistance if borrowers lose their jobs. Once in the system, SoFi looks to continue lending to borrowers through mortgages and credit card consolidation.
Chief Executive Mike Cagney hinted at the recent LendIt alternative lending conference that the program would expand. In an interview there, Cagney said that he viewed his company's model as relationship-driven. "We're not looking at any single product as the end-all, be-all," he said, adding that the company seeks to use modern data analysis to find good credits that mainstream banks have missed.
"I don't think debt to income is a very good measure for creditworthiness," Cagney said. "The banking industry is remiss today to think that the model that worked for [baby] boomers will work" for millennials.
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