By David Klein, CEO of CommonBond
If you were following the news on student loans in 2014, you probably saw a year of growth, change, and new players gearing up to address a broken student loan market. You might now be asking, "What's next?" Here are my top five predictions for student loans in 2015.
1. Policy changes. Federal legislation on student loans will rise and fall. There will be a lot of attention on student loans in Washington, likely a bill sponsored by a Congressional Democrat that gets a lot of press attention, but that bill will likely not pass a Republican-run Congress.
2. Rising rates. It's widely anticipated that interest rates will rise. Interest rates will remain relatively stable, with the possibility of increased rates towards the end of the year, as the Fed will likely raise rates by then. (On a related aside: Student loan borrowers can look to the 10-Year Treasury Auction in May in order to forecast what federal student loan interest rates will be for the coming academic year.)
3. Better student loan options for more people. New companies have entered the market in the past couple of years, with the express purpose of "fixing the broken student loan market." (In fact, that's why we started CommonBond.) These online lenders are focused on giving student loan borrowers a better rate and better experience. These firms focus mostly on refinancing student debt into lower rate loans. And these firms are expanding, which will positively affect more and more student debt holders.
4. More talk about the value of an education. There will be winners and losers among universities and degree programs as price-conscious consumers more rigorously evaluate the ROI of their education. More people will likely become more aware of the dichotomy in the university system today -- that the high cost of education is economically "worth it" for some schools and degrees, but not as much for others. This could bifurcate the schools in our higher education system into a) those that attract an increasing number of applications (winners) and b) those that lose ROI-sensitive students (losers).
5. Broader attention from investors. Investor demand for student loan assets will increase. As more student loans are originated by the private sector to creditworthy borrowers, more investors will take notice of this $1.2 trillion asset class. The last 1-2 years have seen increased student loan activity in the capital markets -- securitizations, whole loan sales, and equity investments. There will be more of this in 2015, and likely increasing demand from investors, as the newer platforms of the past few years mature and continue to show strong portfolio performance to investors.
David Klein is CEO & Co-Founder of CommonBond, a student lending platform that provides a better student loan experience through lower rates, exceptional customer service, and a commitment to community. CommonBond is also the first company to bring the 1-for-1 model to education and finance. Prior to CommonBond, David worked in consumer finance at American Express and advised clients in the financial services industry at McKinsey. David attended business school at the Wharton School and formerly sat on the Board of the Bronx Charter School for the Arts.
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