Student debt is at a record high, and this company is cashing in by trying to help
That spells good news for student loan-focused marketplace lending startup CommonBond.
The New York-based firm announced on September 8 that it has taken on another $35 million in the form of a Series B round of funding. August Capital led the new funding round, according to Commonbond chief executive David Klein.
The startup is also adding a new member to its board: Hans Morris, a former executive with Citigroup and ex-President of Visa who is now a partner with venture firm Nyca Partners.
The funding round brings CommonBond's total cash raised to about $400 million, said Klein. Big name investors include former Citigroup chief executive Vikram Pandit and ex-Thomson Reuters chief Tom Glocer.
The Series B funding round follows the hire of former Maquarie and Morgan Stanley banker Morgan Edwards as its chief financial officer and ex-Citigroup banker Vinayak Gurjar as chief risk officer earlier this year.
The firm in June closed its inaugural securitization of graduate student loans, raising $100 million in the process. In February it inked a partnership with NelNet, a Nebraska-based loan servicing firm that has committed to buying a portion of the loans the startup generates.
CommonBond has gone out of its way to tap into the most reliable segment of student borrowers - graduate students - instead of undergrads.
The emergence of these lenders has come at a time when banks have withdrawn from the student lending arena, and student debt has been ballooning.
The class of 2015 will graduate with more than $35,000 in debt on average, according to research from Edvisors.com. In 2010, student loan debt overtook auto loans and credit cards as Americans' largest source of non-mortgage debt.
Student loans are especially attractive to investors. Unlike other forms of consumer debt, including home loans and credit card debt, it cannot be discharged via bankruptcy - so the borrower will always face the expectation of repayment.