Finding a lender with a soul can be difficult, but finding a student loan lender with a soul is damn near impossible, which is why when I first heard of TuitionU I was a bit skeptical. The service, which helps students bridge the gap between federal student aid and the cost of higher education, prides itself in putting students first. But do they really live up to the marketing hype?
I was able to talk with Brian Cox, the founder of TuitionU, to learn more about the service. After a half hour chat I can definitely state that this is a company that gets student loans and understands the needs of today's students. In fact, they are a student loan company with a soul! Then again, TuitionU isn't a typical student lender. In fact, it isn't so much a lender as a connector of students with need to lenders who aren't looking to bleed students dry.
TuitionU has two main programs available to students who need financial aid; a private student loan option available at credit unions nationwide, and a peer-to- peer lending model that lets students leverage their social networks to get loans at affordable rates.
The credit union portion of TuitionU connects students to credit unions that, because of their aging customer base, are cutting rates lower than I've ever seen on private student loans. In fact, several lenders in California are offering rates as low as 3% APR, which is unheard of in private student lending.
Not a member of a credit union? No problem! Cox said that for a $5 membership fee to a NASA-affiliated association anyone can then join the NASA credit union. Just think -- you could get a great rate and bank with the astronauts. If you'd rather join a more down-to-earth credit union, that's no problem; credit unions are incredibly easy to join, and despite their general behind-the-times online banking systems, they are very consumer friendly. They are able to offer lower loan rates than many banks due to the fact that they are member-owned, nonprofit lending institutions.
GreenNote, which TuitionU acquired last year, is one of the coolest ways to get a student loan. Like Prosper and Lending Club, GreenNote is a peer-to-peer lender, but it only focuses on student loans. This position allows borrowers on GreenNote to enjoy a lower rate than they might typically get on other peer-to-peer sites and does not require a credit check, since, in most cases the lenders already know the borrower. Multiple friends, family and investors can contribute a portion of the loan you need via Greennote, with a minimum investment per lender of $100. Once the account reaches $1,000 it can be dispersed to the student. While you won't likely raise the entire cost of your education in the peer-to-peer marketplace at GreenNote, you can easily combine this with the credit union option to pay for your schooling.
GreenNote handles all the billing and servicing and splits out your payments to the various lenders who have invested in your education. This relieves some of the anxiety potential lenders might have. Students enjoy a respectable interest rate of 6.8% with a 2% origination fee and lenders are given a 5.8% return, with the remaining 1% going to GreenNote for servicing the loan. Lenders need not worry that they are funding a weekend kegger, since the money is disbursed directly to the school rather than the student.
One of the most interesting aspects of a GreenNote peer-to-peer loan is that if the lender decides to turn the loan into a gift at graduation, the debt can be forgiven without any additional fees.
When it comes to finding lenders, the sky's the limit. Students can solicit their social networks on Facebook, Twitter, and even (gulp) MySpace; as well as looking to more traditional sources like churches, social clubs, and relatives.
Overall, the TuitionU and GreenNote combo are a force to be reckoned with in the student lending market. After talking with Brian Cox, the passion that this company has for helping students get an affordable education is hard to miss, and it shows in the innovative lending products that they offer.
TuitionU and GreenNote offer innovative student lending