CommonBond, the online student loans provider founded by a trio of Wharton MBAs, has raised $275 million in funding from banks Barclays, Macquarie and other backers.
The so-called “warehouse lines” provide the company with extra capital to make loans. CommonBond has already dished out $625 million to borrowers. It expects to surpass $1 billion in loans funded this year.
CommonBond is part of a growing industry of marketplace or peer-to-peer lenders hoping to take a bite into the student loans market, worth $1.3 trillion in the US alone.
Rival, digital student loans providers include Prodigy Finance, founded by MBAs from the business school INSEAD, and SoFi, the biggest, which was founded by Stanford GSB grads and recently raised $1 billion in venture capital.
The company works with MBAs to secure loans with rates as low as 5.78% APR. It claims it saves borrowers more than $14,000 on average over the life of the loan.
It operates a “social model”: for every degree fully funded on the company’s platform, CommonBond funds the education of a student in need for a full year through a partnership.
The New York based business was founded in 2011 by David Klein, Mike Taormina, and Jessup Shean, who met at elite US business school Wharton.
“At CommonBond, we’re creating a company built to last,” said David, chief executive.
CommonBond also announced that it had snapped up Beth Starr, former managing director at Jefferies and Lehman Brothers, who also studied at Wharton. “CommonBond is at the forefront of disrupting consumer finance,” she said.
Brian Foley, managing director at Macquarie, said that CommonBond is “one of the leaders in consumer marketplace lending”.
“The company stands out for its high quality underwriting, strong technology platform, and innovative approach to student lending,” he added.
CommonBond has doubled its team to more than 60 employees over the past 3 months. It has raised $44 million in total equity funding.