Fynanz and People Capital, Two fledgling peer to peer lending companies, which offer peer to peer loans to student borrowers, may face trouble finding customers given the student loan reform legislation which was passed as part of the health care reform bill.
Although the legislation does not deal directly with private loans like those issued by Fynanz, People Capital and other private student lenders, it will make federal Stafford loans more attractive to student borrowers because the interest rates that the government is charging are now much more attractive than what private lenders can offer.
Subsidized Stafford loans will be offered to borrowers at 4.5% during the 2010-2011 school year and at 3.4% during the 2011-2012 school year. Unsubsidized and graduate rates will be set at 6.8%.
Fynanz COO Chirag Charman was quick to state that his company would not be effected by the reform, saying “The bill overall doesn’t affect private student lending, and even if it does, it helps the borrower, so it is a positive for the industry” in a release from the company.
The legislation will likely not act as a death knell for the peer to peer lending industry’s expansion into the student lending market, but it may make borrowers somewhat harder to come by with more attractive subsidized Stafford loans and more student aid being available via Pell grants.
