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April 30, 2024
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Ehh, are they trying to get these loans guaranteed by SME? Too lazy to look.
If not the interest rates will be too high, that is until this whole thing collapses.
Or am I wrong
I think the rates are fixed at ~6.5% with the ability to lower the rate upon gradutation and timely payments. The thing that catches my attention is that the rates are below others on the markets, the alumni are making a ROI that is small (prob 3%-4%) but more than a savings acct, at the same time of building a relationship between the student and the alumni loan provider. An incentive for the alumni provider is to help get the kid a job to make sure they can pay back the loan. I am looking into a loan through them and wanted to get your feedback to see if the company is legit and whcih funds were invested. Also to see if they will even be around in 5+ years when I need to repay and want someone to talk to
From taking a quick glance, looks like a strong management team, and is well funded with $90 million, recently raising $80 million in late July. Their initial funding of $10 million came from: Baseline Ventures; Linden Ventures; RPM Ventures; Ulu Ventures. In terms of my thoughts, there is definitely a sizable market for this, given the rising costs of student loans. There is a strong value proposition for both the student and the alumni investor. However, I'd be concerned about the ability to find alumni interested in funding this as it'd be a long-term investment, albeit probably low risk (and also low return). It's definitely a unique business model and there are many challenges involved, but nothing impossible to overcome.
Very, very interesting. I thought the rates would be lower compared to federal loans, but I guess if you're financing 100k for an MBA 50-150 basis points is significant. One thing I saw in the FAQs is that the loans are pretty transparant i.e. if you default your name will probably be released to the alumni investors. If you're a POS degenerate then I'm all for that transparency, but not all defaults are avoidable and shouldn't necessarily come with that public shaming.
It also looks like the interest rates are the same for all the schools. If I'm a Harvard alum I'd probably be happy to get a 3-4% yield here. A Wisconsin alum? Probably not.
The big issue is the extremely small and niche market. By restricting investments to alumni/affiliates of a school, the program essentially creates extremely small pools of available investors and recipients, which is not a particularly effective way of allocating capital.
The greater challenge is the expanding beyond the top tier Ivies and state schools. If I were to assign the students and alumni of colleges and universities credit ratings, after the expected AAA rating schools (Ivies, flagship state schools, top liberal arts colleges), the credit quality of students in the middle tier is probably a lot lower and the available $s of alumni willing to invest is a lot lower.
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