The credit crunch has driven dozens of lenders out of the student loan market. But a number of new Web sites are trying to sidestep the traditional players, facilitating loans between students and anonymous investors or even friends and family members.
The latest startup player in the so-called “peer-to-peer” student lending market, GreenNote, marks its official launch Wednesday. The timing is intended to attract interest as students piece together financial aid over the summer.
Fynanz, a competitor that matches up students anonymously with investors, says it’s gotten 180,000 applications in the last three days alone.
The sites are popping up as many lenders have stopped issuing federally subsidized loans. Such loans are still available contrary to sky-is-falling predictions but students are having to hunt for banks or turn to the federal government itself.
Meanwhile, the credit squeeze is affecting some students as they try to find private loans, which more and more students need once they hit the ceiling on cheaper federal aid.
Peer-to-peer loans are trying to step into that private-loan market, though they likely won’t amount to more than a tiny sliver of it anytime soon.
The idea is that students can secure better terms by turning to individual investors willing to back them. Investors may get satisfaction from helping out a child, relative or friend. And if the lender knows the borrower personally, it lessens the likelihood of late payments or default.
