New CommonBond Funding Expected to Provide a Build-Out to Student Loan Refinancing

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NEW YORK (MainStreet) —

Student loan refinance provider CommonBond announced a new round of funding on July 19 and an acquisition in the student loan space that it says will facilitate its ability to lend.

"We just raised over $30 million in new funding, acquired a student loan management platform, Gradible, and are launching an employer-based student loan repayment platform," said CEO David Klein, which allows employers to contribute towards paying down their employees' student debt. He added that "CommonBond is now able to help improve the lives of 40 million Americans with student debt, regardless of income, education or credit profile--a first for a student lender in this country." 43 million Americans have student loans. About one in four of those loans are passed due.

A Common Bond company spokesperson said the new investment "includes a $30 million Series C equity round led by Neuberger Berman Private Equity, as well as over $300 million in loan purchases from another large asset management firm." That firm was not identified.

The spokesperson added that "Common Bond will use the $30 million in equity financing to hire across the organization, build out its technology platform and continue to scale its loan operations. The $30 million plus in loan purchases will be used to fund loans that Common Bond originates."

The spokes person described Gradible as "a personal finance platform founded in 2013 that provides people with unbiased, personalized recommendations on how to better manage and repay their student loans. With the Gradible acquisition, CommonBond now offers employers a full suite of student loan repayment programs for their employees, beyond CommonBond's student loan refinance options."

Gradible focuses on student loan assessment. CommonBond says that Employees are given tools to manage and save on student loans regardless of their credit history, providing guidance to accessing federal programs such as Income Based Repayment and Public Student Loan Forgiveness. CommonBond now enables companies to contribute to their employees student loan payments, through a student loan contribution platform akin to a 401(k) matching program.

Who are Gradible's actual customers? The CommonBond spokesperson said, "We just started signing on employer partners, secured a few partnerships already and look forward to sharing more about that in the coming months."

"Gradible started as a microtask site, where you could earn LoanCreds for doing small online tasks that could be applied to paying down your student loan debt," said Mark Kantrowitz, publisher and vice president of strategy at Cappex.com. LoanCreds acted as a virtual currency, where 100 LoanCreds were the rough equivalent of $10. A Gradible spokesperson could not be reached for comment.

"Now they claim to facilitate employer-paid loan repayment assistance," said Kantrowitz, referring to CommonBond, "though I haven't heard of them having any employers as clients."

Kantrowitz noted that "The employer loan repayment assistance market is starting to heat up, with both PricewatershouseCoopers and Fidelity offering benefits to their employees, and are several players already in this sandbox." Among those he cited were EdAssist in Chicago, part of BrightHorizons Family Solutions, Boston-based Gradifi, Tuition.io of Santa Monica, California and StudentLoanGenius located in Austin, Texas.

If successful platforms could be built, borrowers would likely come, especially those with loans made before the current, near zero interest rate environment.

"CommonBond's new round of funding is a positive signal for both consumers and the student loan refinancing industry," said Andrew Josuweit, CEO of Student Loan Hero. "The three biggest challenges facing student refi lenders are the ability to identify alternative underwriting opportunities, scale funding sources that are comfortable with this asset class, and educate borrowers about refinancing." Student Loan Hero's 2016 study found that nearly 37% of borrowers weren't aware that they could refinance their loans.

An industry source who did not want to be identified said that CommonBond and similar firms could soon be getting a run for their money. "There's an existing student loan business, Elm Resources, which could easily morph into an employer loan repayment assistance program, and I'm not sure why they haven't given done this. Similarly, Sallie Mae could expand Upromise into such a business."

"Facilitating employer-paid loan repayment assistance is not rocket science," the source said. "It is effectively a payment processing business, where one collects information from borrowers about their loans (e.g., loan id numbers) and serve as a conduit for payments from employers to lenders. Contributions to 529 plans is a natural follow-on," the source added. "Just substitute college savings plan for lender.

The source was familiar with a large bank that was thinking of setting up an LRAP, or loan repayment assistance program. It could be similar to one managed by LRAP.org, that helps colleges and universities retain students who fear colleges is becoming unaffordable.

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