One year and $100 million later, CommonBond is going even bigger
We first talked to student loan startup CommonBond in January, when the team was working out of an office-cum-apartment in Downtown Brooklyn, shortly after raising $100 million to change the student loan landscape.
Ten months later, it’s fair to say a lot has changed – they’ve massively expanded their market reach and product line and recently surpassed $100 million in funded loans in their first full operating year. Oh, and they’ve also got swanky new digs in Chinatown.
We sat down with cofounders David Klein and Michael Taormina to catch up.
Wakefield: The last ten months have been a huge growth period for you guys. What’s fueled that?
David Klein: Two things have allowed that to happen. One, our work in preparing for a national rollout – going to campuses and putting on events – really helped spread the word. At the time we spoke, we were at a total of 25 MBA programs, and then in March we expanded our re-finance program to 109 programs.
The second was expanding our products by a factor of three. Now that we’ve introduced our hybrid loan product, CommonBond now offers the most robust set of student loan refinancing products in the country. And so we are really excited about that while we are surpassing this company milestone, generating as much momentum as we can, headed into 2015.
Wakefield: How do you maintain that kind of growth?
Michael Taormina: A lot of it is based on feedback from customers… We started getting a lot of feedback from folks graduating from their JD or MD program saying we should expand. Now we plan to be in 15 different degree programs by 2015.
And applicants wanted different options. When we last talked, we literally had one product, a ten year fixed-rate. Now we have nine. Responding quickly to customer feedback and adjusting user experience has been the central principle in all our products.
W: What has the experience been like trying to reach different communities? MBAs presumably have some financial expertise, but an engineering grad might not.
DK: We have never lost sight of our ethos – we’re a value-driven services company. That means we are going to advocate on behalf of every single one of our clients.
We value savings. The average savings a borrower can expect through a common bond is ten thousand dollars; we have over a thousand borrowers on our platform right now. That means we will have saved our current borrowers about ten million dollars by the time those loans are paid for.
Community through human connection is another pillar… and then social good. For every degree funded on our platform, we fund a student in need for a full year. We partnered with Pencils of Promise, they remain our partner and we are still the only company in finance to have a wonderful social mission.
Those are the pillars of our ethos – that’s how we make decisions and how we invest. If we do that the rest will follow.
W: Explain the hybrid loan product that you’ve just introduced. So for five years, I get a fixed rate, and then after that it becomes a variable rate?
DK: This is Mike’s favorite product, and he describes it as best of both worlds. He describes it as if he had the option he would take this product.
MT: Not only as a borrower, but as an investor. And those are usually at odds!
DK: So if you take a five year fixed-rate loan, and you take out a loan for $100,000, and lets say you get a rate of 3.625 percent, which is the lowest rate we have for that product, you are going to pay $1,800 a month.
But, if you think you are going to pay off in more than five years, you can go into our hybrid product and for the first five years, while the rate is 4.14 percent, your monthly payment is going to be about $1,000.
MT: We expect the typical loan will be paid off in 6 years.
W: What does the year ahead hold?
DK: Right now we are 17 people in the office every day, we just doubled the size of our borrower care team, so that as volume increases we provide the best service we can. We will continue to hire throughout this year and into next year.
Right now, we are in 109 programs – we would love to be in 5, 6, 7 times that number of programs by next year.
W: Finally, it really bothered me that I forgot to ask you guys this last time we spoke – have you paid off your student debt?
DK: We are definitely still paying off our loans, and because we never graduated from business school we are not eligible for our own program. But if we were I would probably choose the 10-year fixed.
MT: Hybrid, definitely hybrid.
CommonBond is currently hiring for five open positions, as well as internships, in product, finance, ops, and tech, with more openings to come. Get all the details here.
Now go forth (and cure the common loan).
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