There is a new method of tackling student debt called relationship lending, a system that puts together a network of alumni that refinances graduate student loans at lower interest rates than typical financial aid.
The two main organizations fronting the charge in this issue, SoFi and CommonBond, also offer career development classes in order to increase the ability of the borrowing students to payback their loans, according to an article on Al Jazeera America’s website.
Jennifer Beall, a graduate from Nothwestern University’s Kellogg School of Management, told Al Jazeera that with SoFi, she was able to refinance her loans from 8.5 to 5.5 percent, which equates to a saving of $5,000.
However, according to Al Jazeera America, the people that qualify for this type of refinancing are low-risk, high-return borrowers, meaning that these particular loan programs will only be available for higher-level schools and in particular fields of study.
William Wood, the coordinator of the financial services program at Wright State University agrees.
“It’s not going to be a loan program that will be available to liberal arts students or education majors, it’s just not going to happen,” said Wood. “People who are the cream of the crop in big name, top business schools around the country ... are really the focus of this kind of lending.”
The article on Al Jazeera also mentions that, given time, these loan programs might be able to extend to other schools and open up to other fields of study.
Wood was still skeptical on how well the program will operate with that expansion.
“I’d be surprised if the rates stay as low as they are now,” said Wood. “It’s an interesting idea and it would be nice if it came down to a Wright State level, but given student default rates, this program would have to be competing with regular financial aid to get the number of students that they would have to get in order to off-set the default rates when they expand outside of these brand-name business colleges.”
The possibility of these loan programs extending to WSU is there, but Wood does not believe it will come quickly. Wood said, “It could come to Universities like Wright State, but it’s not a near term kind of thing.”
