New FinTech Companies Aim To Solve The Student Loan Crisis
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New FinTech Companies Aim To Solve The Student Loan Crisis

According to the Consumer Financial Protection Bureau, student loan debt has now crossed the $1.2 trillion mark – and $1 trillion of that is in federal student loans. That means student loan debt is now the second largest debt category in the U.S. behind mortgages.

FinTech to the Rescue?

With a legislative solution seeming unlikely in Congress, the private sector has responded with a handful of companies that aim to solve the student loan problem. Traditionally, students who take out federal loans receive a one-size-fits-all interest rate that isn’t tied to their future earning potential or the university they attend.

Today, new FinTech companies such as Credible, Earnest, Student Loan Hero, Sofi and Gradible aim to help reduce loan payments with lower rates and more favorable payoff schedules. By deploying sophisticated algorithms to assess students’ creditworthiness, these new players are ultimately offering lower interest rates, educating students on financial literacy and how to efficiently pay down their debt along with connecting students with alumni investors who fund students’ education.

Here are a few emerging FinTech companies helping students refinance and pay off their student loans:


Credible has taken a complex, intensive, and frustrating process and turned it into a 10-minute, hassle-free re-financing solution. Credible is a marketplace that allows students to shop around for refinancing options. Graduates begin by entering the school they attended, their approximate annual income, debt balance, interest rate, and credit score. Credible takes these inputs and generates a list of competitive re-financing offers from its eight partner companies, including Citizens Bank, CommonBond, and CordiaGrad.

Says Founder and CEO Stephen Dash: “Many graduates don’t realize that like a mortgage, they can refinance their student loans to both reduce their interest rate and monthly repayment. In addition to this lack of awareness, the process of refinancing is a confusing one, requiring lots of research, filling out multiple forms, and making comparisons difficult between lenders.”

If you believe your earning potential and credit score should mean lower interest payments, Credible is the place for you. If you’ve planned on refinancing your debt and want to compare lenders, Credible allows you to do that. If you’ve held off looking at refinancing options because the paperwork seems tedious or confusing, Credible simplifies that process.

Adds Dash, “We started Credible in 2012 because we saw an opportunity to help simplify this complex process and make it easy for graduates to compare their various refinancing options. With Credible, graduates receive personalized offers from multiple lenders to refinance their student loans, so they can make an informed decision. So far, the average Credible user who has refinanced, has saved over $11,000.”


While Credible is a refinancing marketplace, Earnest handles the refinancing themselves. They start by generating a credit report based on five characteristics, using predictive algorithms to determine a student’s creditworthiness going forward. According to their website, clients typically have a solid employment history or job offer, savings, track record of making payments on time, positive bank account balances, and minimal credit card debt.

Earnest is able to offer refinancing solutions to students who haven’t started working yet but whose earning potential makes them creditworthy. The average Earnest borrower is between the age of 22 and 34, according to a recent New York Times article. Earnest’s ability to determine creditworthiness from clients who haven’t started working provides them with the opportunity to offer lower interest rates than traditional student loans, saving customers $12,588 on average.

Recent graduates who feel that their interest rates don’t match their earning potential should check out Earnest. The company offers payment forgiveness, allowing customers to skip one payment per year without penalty, allows customers to switch between fixed and variable rates at no cost, and consolidates federal and private loans into one easy payment. Each of these features make Earnest an intriguing one-stop-refinancing-shop for college grads.

Student Loan Hero

Student Loan Hero provides a platform to manage outstanding student debt and offers a student loan calculator to compare similar loans and explore different payment options. The company specializes in helping individuals find repayment plans that fit their budget. Customers begin by entering their outstanding debt on the loan dashboard, ranking them by priority.

The software then provides Savings Plans and Repayment Options. The Savings Plans are based on a user’s profile and data generated from their student loans. These plans vary from Direct Consolidation Loans to Bi-weekly Payments. Student Loan Hero provides the Pros and Cons for each Savings Plan, and then offers “Our Recommendation.” The Repayment Options are broken down into Lower Payments and Postpone Payments, each of which have different strategies designed to achieve one of the two goals. Student Loan Hero also offers the Pros and Cons for the payment strategies, but does not provide a recommendation like it does with Savings Plans. In addition to budgeting tools, Student Loan Hero also offers refinancing services through secondary providers such as SoFi, Darien Rowayton Bank, and CommonBond.

Student Loan Hero is a terrific tool for individuals who are having a tough time juggling debt payments or are interested in finding different ways to fit debt payments into their monthly budgets. The Loan Dashboard consolidates all loans in one place, in much the same way that Personal Capital’s financial dashboard does. The in-depth Savings Plan and Repayment Options pages provide users with a playbook of various strategies to pay off their debt without sacrificing in other areas of their financial life. By specializing in student loan repayment while offering third-party refinancing options, Student Loan Hero combines easy-to-use software with financial education.


Gradible tackles the student loan problem by educating students on how to manage their debt, offering exclusive deals and discounts on student debt, and connecting students with freelance jobs that go directly towards their payments while educating them on how to manage their loan repayment.

Among the companies highlighted here, Gradible is the only one that provides a marketplace for students to earn money that goes directly towards the repayment of their loans. In this sense, Gradible is almost like an Amazon Mechanical Turk for students debt. On average, students earn $10 to $15 per hour, with some tasks taking as little as a few minutes and others taking as long as a day. Work is compensated by the difficulty of the task, and may include market research, posting on Facebook and Craigslist, or writing blog posts. Gradible works directly with each student loan provider, and pays the debt servicer directly to speed up repayment.

Connecting Alumni with Current Students: The SoFi & CommonBond Way

In a previous Daily Capital post, we interviewed the CEOs of CommonBond (David Klein) and SoFi (Mike Cagney) to get their thoughts on the student loan crisis and how they were helping students pay down debt. At their core, both companies offer student loan refinancing. However, the way they refinance is quite different. SoFi and CommonBond connect students with alumni investors to both refinance their education and strengthen their alumni networks. Doing so allows alumni to earn a return on their investment and facilitates job opportunities for students, increasing the likelihood of repayment.

In addition to student loan refinancing, SoFi has unique career programs for borrowers. Their Career Services branch assists students with their job search, offers six months of deferred payments for borrowers who are starting a business, and defers payments for borrowers who’ve recently lost their jobs. Plus, Career Services assists them with finding new work.

SoFi and CommonBond appeal to students looking to connect with alumni for help funding their education and looking to expand their alumni network. In addition to offering alumni refinancing, SoFi offers flexible options for debt repayment. For students interested in broadening their network or exploring how they can start a business while paying off their student debt, SoFi and CommonBond are the places for you.

Not A One-Size-Fits-All

Though each of these companies has a different business strategy, they all go above and beyond simply offering student loans and refinancing.

Credible allows students to shop around for personalized rates. Earnest offers customized rates based on a student’s earning potential and financial health. Student Loan Hero provides personalized payment plans, loan payment education, and provides recommendations for how individuals can efficiently pay down debt. Gradible works directly with loan services and serves as a marketplace that connects students with short-term job opportunities. CommonBond and SoFi provide investment opportunities for alumni and refinancing options for students while leveraging alumni networks to provide career services.

By offering personalized services in addition to lower interest rates than federal loan packages, these FinTech companies are going above and beyond simply offering one-size-fits-all interest rates.

“We envision a day when no graduate pays more than they should on their student loans, and where all graduates can put their savings toward the important things in life” says Dash.

Fortunately, these FinTech companies are doing just that.

The content contained in this blog post is intended for general informational purposes only and is not meant to constitute legal, tax, accounting or investment advice. You should consult a qualified legal or tax professional regarding your specific situation. Keep in mind that investing involves risk. The value of your investment will fluctuate over time and you may gain or lose money.

Any reference to the advisory services refers to Personal Capital Advisors Corporation, a subsidiary of Personal Capital. Personal Capital Advisors Corporation is an investment adviser registered with the Securities and Exchange Commission (SEC). Registration does not imply a certain level of skill or training nor does it imply endorsement by the SEC.

Arun Sundaresan is a Portfolio Management Intern at Personal Capital. Arun has previously worked at Citigroup in London, and spent time at Personal Capital last summer. He is currently studying Finance at Washington University in St. Louis.
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