Covering college tuition bills often requires leaving no stone unturned—and now there are more lending start-ups offering help both during and after college. Provided you've picked the right major, that is.
Academic history, grades and earnings potential factor in to the rates borrowers get with lenders such as Upstart and Pave. Both introduced new short-term loans this year, with fixed rates starting at 5.7 percent and 6.8 percent, respectively. "That employability speaks to how easily you'll pay back a loan," said Dave Girouard, founder and chief executive of Upstart. Another lender, CommonBond, offers fixed loan rates as low as 3.89 percent for graduates and 6.24 percent for incoming students. It restricts borrowing to four graduate degrees—J.D., M.D., M.B.A. and engineering—across more than 100 programs.
The companies are edging in amid mounting student loan debts, which have swelled to more than $1.2 trillion. Graduate students are on the hook for as much as 40 percent of that tab, estimates think tank The New America Foundation, while The Project on Student Debt puts the average college senior's loan burden at $28,400. "The problem is large and the need for solutions is equally large," said David Klein, co-founder and chief executive of lender CommonBond.
More personalized lending could offer substantial savings for some borrowers. A 2013 report from the Center for American Progress estimated 70 percent of outstanding federal student loans have rates of more than 5 percent. Rates on Direct PLUS loans for parents and graduate students are currently 7.21 percent, and direct unsubsidized loans for graduate students: 6.21 percent. "It doesn't make sense to get such high rates, especially for creditworthy borrowers," said Klein.