Review of CommonBond: Crowdfunding for Student Loans

CommonBond: Crowdfunding for Student LoansCrowdfunding has come to the student loan world, and it’s being led by a platform known as CommonBond. Based in New York City, CommonBond is a web platform designed to provide student loans to graduate students. CommonBond has funded or refinanced over $200 million in student loans so far. Founded in 2012, the company’s goal is to lower the cost of borrowing money in graduate school. Let’s see how they’ve done in this detailed review of CommonBond.

Further, this isn’t a simple student loan refinancing scheme. For example, the platform enables you to refinance all of your student loans into a single loan. But it also allows you to borrow the funds required to pay for your education from the outset.

Unlike many for-profit companies out there, this one also comes with a social promise: “For every degree fully funded on the company’s platform, CommonBond funds the education of a student in need abroad for a full year”. In this regard, the company has partnered with Pencils of Promise, a not for profit organization that both builds schools and serves students in underprivileged areas of the world.

How CommonBond Works

With CommonBond, applicants start the process by completing a simple and easy-to-read application that is handled entirely online. Upon completion, they can choose to borrow money for current graduate school attendance (the MBA Loan) or to refinance/consolidate existing student loans upon graduation.

Contrary to popular belief, however, loans made through CommonBond aren’t offers through the company itself. Instead, loans are made by either the Bank of Lake Mills or by Union Bank and Trust Company of Lincoln, Nebraska.

The following requirements must be met in order to apply for a loan:

  • Your loan(s) must be in its grace period, in repayment, or in deferment in order to be eligible.
  • You must be a US citizen or permanent resident alien.
  • Both private student loans and Federal student loans can be refinanced with CommonBond. Federal loans include Direct Stafford Loans, Grad PLUS loans, and any other loan programs administered by the US government.
  • You must attend/have attended one of the schools in the CommonBond network. If you are a current student, attendance must be on a full-time basis.
  • You must be credit approved by either the Bank of Lake Mills or Union Bank and Trust Company of Lincoln, Nebraska.
  • A cosigner can be added to your loan if you do not meet the minimum underwriting criteria.
  • You can apply for either an MBA loan if you’re a graduate student, or for a refinance or consolidation loan if you have already graduated.

For MBA Loans, approval generally takes 1 to 3 business days after you forward the required documentation. However, once your loan is approved, the application will be sent to your school to confirm your attendance and your loan amount. This process can take anywhere from 5 days up to 3 weeks.

Documentation you may need can include proof of employment, a recent loan statement for each loan you wish to refinance, and proof of residence.

On refinances and consolidations, the credit decision can be done in a matter of minutes. This is possible because CommonBond does not have to go through the schools as part of the application process.

CommonBond: Additional Details

Current students borrow up to their school’s cost of attendance, but the loans max out at $110,000 per academic year. Once approved, the loan proceeds will be disbursed directly to your school. You can also change the amount of funding that you need by contacting a CommonBond Care Team member. For a refinance or consolidation, the maximum loan amount is $220,000.

Once your loan has been made, it will be set up with a loan servicer to whom you will make your monthly payments. You will not be required to make your payments directly to CommonBond.

Although refinancing student loans can help you save money, CommonBond does warn students with federal loans to carefully consider this option and its downsides before pulling the trigger. This is because federal loans offer certain protections, plus loan forgiveness programs such as the Income Based Repayment (IBR) feature. Should you convert your federal loan to a private loan, you will lose this and other borrower protections.

CommonBond Features and Benefits

Along with the fact that this company can help you save money and pay down student debt faster, CommonBond has several features and benefits worth mentioning:

Repayment Options. If you are a student, you have two repayment options. The first is a full deferment plan, which allows you to defer your interest payments for as long as you are enrolled in school. You will then have a six month grace period following graduation, although interest will accrue during the grace period. The second is full payment of principal and interest, which you can pay every month – even while you are in school.

No FAFSA Requirement. You are not required to complete the Free Application for Federal Student Aid since CommonBond does not provide federal student loans.

International Loans. CommonBond refers international loans to Prodigy Finance, which is a partner site but not an affiliate. This is a niche all to itself since most banks don’t make international loans. Prodigy Finance uses a community finance model in which alumni, institutional investors, and qualified private investors provide funding for loans for MBA and postgraduate students. Once your loan is referred to Prodigy Finance, CommonBond will no longer be involved in the process.

Resource Center. The platform is also an information resource center. The Refi 101 page has a number of articles that will explain everything from the nuances of student loans to various debt repayment scenarios.

Referral Program. After joining this program, you’ll earn $200 for anyone you refer to CommonBond who borrows or refinances through the platform.

Temporary Forbearance for Economic Hardship. CommonBond allows you to temporarily postpone debt repayment for a specific period of time due to economic hardship. This is similar to what is offered on federal student loans.

CommonBond Pricing

CommonBond offers in-school MBA loans with two loan options:

  1. A fixed rate loan with a term of 10 years, and a fixed rate of 5.59%, and an APR of 5.78%
  2. A fixed rate loan with a term of 15 years, and a fixed rate of 5.59%, and an APR of 6.09%

Pricing is the same for all borrowers regardless of credit score and qualifications. You will also be eligible for a 0.25% interest rate reduction if you enroll in automatic payments.

In addition to the interest rate, MBA Loans through CommonBond also require the payment of an origination fee, which is equal to 2% of the loan amount taken. The origination fee will be added onto the amount of the loan, which means it will ultimately be repaid over the term of the loan.

By comparison, the Federal Government’s Direct PLUS loan charges an interest rate of 6.84% and an origination fee equal to 4.3% of the loan amount.

If you are refinancing or consolidating existing student loans, your interest rate will be determined by your credit profile, the length of the loan term, and whether or not your loan is a fixed or variable rate.

For refinances and consolidations, CommonBond offers five pricing options (each with two sub options, all reflecting the 0.25% autopay discount):

  1. Five Year Loan – A fixed rate with rates between 3.74% and 5.89%, or a variable rate based on the 1-month LIBOR (currently 0.19%) + 2.97% to the 1-month LIBOR + 4.57%, making the current variable rate range from 3.16% to 4.76%.
  2. 10 Year Loans – A fixed rate with rates between 4.74% and 5.99%, or a variable rate based on the 1-month LIBOR (currently 0.19%) + 2.97% to the 1-month LIBOR + 4.60%, making the current variable rate range from 3.16% to 4.79%.
  3. A 10 Year Hybrid Loan – The APRs on this loan currently ranges from 4.14% to 5.64%. The first five years of the loan are at a fixed rate of between 4.44% and 5.89%. The last five years are variable rates based on the 1-month LIBOR plus a margin that ranges from 2.97% to 4.60%. With the current 1-month LIBOR rate of 0.19%, the rate range on this portion of the loan is currently between 3.16% and 4.79%.
  4. 15 Year Loan – A fixed rate with rates between 5.09% and 6.24%, or a variable rate based on the 1-month LIBOR (currently 0.19%) + 3.22% to the 1-month LIBOR + 4.70%, making the current variable rate range from 3.41% to 4.89%.
  5. 20 Year Loan – A fixed rate with rates between 5.44% and 6.49%, or a variable rate based on the 1-month LIBOR (currently 0.19%) + 3.64% to the 1-month LIBOR + 4.74%, making the current variable rate range from 3.83% to 4.93%.

Variable rate loans do have interest rate caps that vary based on the length of the repayment, with most ranging between 8.99% and 12.99%.

Origination fees do not apply on refinances and consolidations. Meanwhile, it’s also important to note that CommonBond does not charge any prepayment fees is you choose to pay your loans off early. That goes for both MBA loans and refinances/consolidations.

How CommonBond Can Help You

If you are a current graduate student, CommonBond can offer you substantially lower rates and fees than what you can get with Federal student loans. On the refinancing and consolidation side, there are not a large number of lenders available, but even fewer that will allow you to refinance or consolidate both federal and private loans. That makes CommonBond stand out even more.

And not only will CommonBond allow you to refinance or consolidate, but they also offer you multiple plans to make it happen. And with a generous maximum loan amount of $220,000, you should have no trouble handling your graduate school costs or outstanding student loan bill.

By taking a CommonBond MBA Loan, you can also feel good about the fact that a disadvantaged student will also receive an education. And if you have difficulty making your loan payments, you can take advantage of the Temporary Forbearance for Economic Hardship feature, similar to what you get on a federal student loan.

If you need loan funds for graduate school, or are struggling to find a way to refinance or consolidate your current student loans, give CommonBond a careful look.

Topics: Education

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