![\"CommonBond](\"https:\/\/i4tsk12in2b2y7uts14c528g-wpengine.netdna-ssl.com\/wp-content\/uploads\/sites\/4\/2015\/12\/Screen-Shot-2015-12-09-at-12.55.03-AM.png\")
<\/a><\/p>\nWhen David Klein, Michael Taormina, and Jessup Shean decided to return to school for their MBAs, they knew that they would have to rely on student loans to fund their education. Like millions of other prospective students, they discovered to their dismay that interest rates were remarkably high, the process was highly complex, and the service was exceptionally poor.<\/p>\n
David summarizes the funding landscape that he and his peers encountered:<\/p>\n
The federal government charges the same, high fixed interest rate to all students, regardless of past credit history or future likelihood to repay the loan. Grad school students pay 6.8% fixed for the first $20,500 borrowed and 7.9% fixed for money borrowed thereafter. In addition, borrowers must pay an origination fee of 1%-4%. Those numbers are simply too high. For many qualified students, this is a significant mis-pricing of credit risk.<\/p>\n
Private bank lenders, the typical bastion for market-based pricing, aren\u2019t offering a much better deal for fixed rate student loans. Still shell-shocked from the financial crisis, many banks are \u201cgun shy\u201d when it comes to extending student loans and have either stopped lending or raised rates considerably, making it even more difficult for students.1<\/sup><\/p>\n In response to this \u201cbroken system,\u201d in late 2011 during their first year at Wharton, David and his classmates founded CommonBond. Since then, the company has experienced rapid growth:<\/p>\n Though the company has not disclosed information on its valuation, it recently received over $35 million in funding and is aiming to triple its loan financing to $1.5 billion by the end of 2016.3<\/sup><\/p>\n <\/p>\n Business Model<\/u><\/strong><\/p>\n\n