Student Loan Marketplace CommonBond Raises $35M, Plans New Hires
A bit more cash is going into the pockets of yet another New York-based fintech company.
With $35 million more funding announced Tuesday, CommonBond plans to grow its staff, develop its technology, and to scale up its operations. “We are about 35 people right now; we’d like to be 60 people in the next six months,” says David Klein, CEO and co-founder. At the start of 2015, CommonBond had 15 people on staff, he says.
August Capital led the Series B round, with Nyca Partners and other investors participating. This latest funding puts CommonBond at $288.5 million raised since its founding in 2011, according to CrunchBase. While CommonBond would not confirm that number, a spokesperson says the company has raised a mix of equity and debt in the “hundreds of millions.”
CommonBond’s online platform offers student loans at lower rates, Klein says, for credit-worthy borrowers. “One of the reasons we exist is the student loan market broke down after the financial crisis,” he says.
At that time, the federal government stepped in and charged one interest rate for everyone, Klein says, regardless of past credit or future prospects. That coincided with Klein returning to business school, which he paid for with student loans—a process he found frustrating. “The rate I was being charged was unnecessarily high,” he says.
Dealing with that scenario, he says, prompted the founding of CommonBond. Klein estimates his company saves each person who qualifies for lending through the platform about $14,000 over the life of the loan.
The new funding for the company will help CommonBond further develop its technology because, he says, the finance industry is overdue for innovation. “A lot of the traditional incumbents are using legacy systems that are 10 to 15 years old,” Klein says. “That’s very difficult to work with.”
By year’s end, he expects CommonBond to originate some $500 million in loans for 2015. Klein also expects the company will double that amount in 2016 to $1 billion in funded loans.
A number of other companies are also trying to disrupt the student loan arena. They include Prime Student Loan in Boston; Iontuition, which is part of Ceannate in Rolling Meadows, IL; and New York-based Student Loan Hero.
Klein says CommonBond is looking beyond student loans though, and wants to leverage its client base to offer other types of lending. “Our average borrower is 32 years-old, making six figures on average a year, and their FICO score is close to 770,” he says. “This is a group of customers that will have financial needs that evolve over time.”