Whether you’re gearing up for an MBA and looking for more affordable student loans, or asking yourself why your existing interest rate on old loans is so darn high, CommonBond offers a competitive alternative to federal and private student loans. What intrigues us about CommonBond is that their mission extends beyond financing student loans and has a social component. As far as bang for your student loan buck goes, this is a real differentiator. Here’s a glimpse of how they both lend new student loans and refinance existing MBA loans…
Investor Fueled Lending
CommonBond doesn’t operate as a traditional bank-type private lender but rather as more of a disruptive innovator in the student loan market. Their loans are funded by alumni and other individual and institutional investors who invest directly in MBA students. The company has developed a network called the “CommonBond family.” This network/family can be tapped by borrowers to assist with career opportunities they may not otherwise have had access to – so that’s pretty cool.
CommonBond delivers its low-cost financing, at present, only in the MBA market and offers initial loans and refinancing of existing loans. They plan to extend to other higher degrees, including Law and Medicine, in 2014. Lending is limited to a roster of top colleges for both their in-school and refinance loan products. All schools are top-tier and are drawn from all over the U.S. The only downside we see to the CommonBond program is the limitation on schools and that it’s not offered to undergraduates, but CommonBond has mentioned a possible expansion to undergrads in the future.
Interest Rates for New Student Loans and Refinancing
For new loans, federal unsubsidized student loans for graduate students are currently at 5.41% (5.53% APR) for “Stafford” loans and 6.41% (6.89% APR) for Direct PLUS loans. CommonBond offers new student loans for the 2013-2014 school year at 6.24% (6.40% APR) for a 10-year term, making it a great option for people who need to borrow more than the $20,500 Stafford Loan limit. MBAs who have already graduated can consolidate and refinance existing student loans to a low, fixed 10-year rate of 5.99% APR (with auto pay enrollment) with CommonBond. Also important to note is that CommonBond’s rates are fixed while federal interest rates are now tied to treasury note yields, which will be on the rise in coming years. Compared to private lenders, CommonBond’s rates are even more competitive because they view MBA borrowers as a lower risk, enabling them to pass along a lower rate to the borrowers.
Here’s where CommonBond really gets interesting. For each degree funded through their lending platform, CommonBond covers a year of education for a student in need abroad. And near some universities in their lending network, they fund financial literacy programs in under-served areas. While CommonBond is a for-profit entity, their strong social mission is impressive.
Pros and Cons
Pro – If your college is on the roster of schools CommonBond works with, you can borrow at very competitive rates.
Con – If your college is not on the roster of schools CommonBond currently works with, you can nominate them, but otherwise you wouldn’t be able to borrow.
Pro – Once you are a borrower, you are part of a strong network you can tap into for job opportunities, mentoring and more.
Con – Currently, loans are available only for MBA matriculation or refinancing of prior MBA loans – not for bachelor’s or other programs.
Pro – Because of CommonBond’s social mission, your student loan payments will help students in need around the world who may not otherwise have had access to affordable education. Consider revising or removing – confusing
Con – Federal loans offer income based repayment options and eventual forgiveness for low-income earners under IBR or PAYE. CommonBond and other private lenders do not.
Pro – CommonBond does offer forbearance options for those experiencing financial hardship and works on a case-by-case basis to assist borrowers.
To find out more about CommonBond or if you’re interested in applying, click here.
And remember, with Tuition.io’s free student loan tool, you can track federal student loans as well as private loans through lenders like CommonBond to track and optimize your debt. Be sure to read our blog for student loan news and tips and be sure to check out our Student Loan Help Center for a codex of debt-related knowledge.