The Boston Globe takes a sharp look at the student loan industry and especially the peer to peer market in today's article Student loan confusion opens market niche.
In addition to Fynanz and Virgin Money, the Boston Globe talks to Kevin Walker, co-founder and chief executive of Simple Tuition, an online service that helps students compare various loan options. Simple Tuition is one of the companies we hope to talk to at FinovateStartup on the 29th.
Here's an excerpt from the Boston Globe article:
So-called peer-to-peer lending companies are also sailing into the student loan fray. Waltham-based Virgin Money (part of Richard Branson's empire) offers to formalize loans between students and their family members for $299. Fynanz Inc., a younger New York start-up, recently began doing the same thing in Massachusetts, though Fynanz allows strangers (perhaps alumni of a school) to make loans to students and earn interest - anywhere from 6 to 10 percent, depending on the borrower's credit score.
But online peer-to-peer lending is still new, and Fynanz has completed one loan since its launch in March. "We don't expect this to be mainstream anytime soon, but I do expect some of the smarter, more involved students to see this as an option," says chief executive Chirag Chaman, an alumnus of Worcester's Clark University.
"It could help a small number of students, but I don't think it's going to solve a national credit crunch," Tony Erwin says of peer-to-peer lending. Erwin is Northeastern University's director of financial aid services. "It's a fine idea, but it's not the fix," he adds.
As long as students and parents are searching for a fix, that creates openings for start-ups.
"It's a really disruptive time in the market," says Stein. "But I really view chaos in a marketplace as a great opportunity."
Fynanz seeks to fill void in student lending
Fynanz off to a slow start
Fynanz becomes the first P2P student loan marketplace
Interview with founder Chirag Chaman