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If you’re a college graduate and you’re still paying off your student loans, there are a bunch of different startups that say they can save you a lot of money by refinancing your debt.
Credible, an online marketplace that connects lenders and borrowers, is one such company. You go to the Credible website and provide basic details, like where you went to school and how much you make now, and they find a lender that will give you a better interest rate than what you’re currently paying off.
Today, Credible is announcing that it has raised a $10 million Series A investment round, led by Lending Club co-founder Soul Htite. The company finished raising a $2.7 million seed round earlier this year.
Credible also helps people who are looking to take out new loans, but the real money is in the business of refinancing existing ones. Credible’s job is to attract premium borrowers — graduate students, college grads with steady, well-paying jobs — and put them in touch with lenders that can offer them a better deal.
It’s important to point out that Credible isn’t a lender; it’s a platform that makes money when it successfully extends new loans to borrowers. The best-known lenders are probably SoFi, which says it will loan out about $4 billion this year, and Upstart, which is run by former Google Enterprise boss David Girouard.
In an interview with Re/code, Credible founder and CEO Stephen Dash gave more details about how the market for student loans has evolved in the past few years.
“In student lending, the market has changed a lot,” he said. “There was one lender when we started refinancing, just SoFi, and now there are more than 12. There was literally one option to refinance a federal student loan.”
Dash makes an important point here: The overwhelming majority of student loans taken out, whether by engineering majors at UC Berkeley or undergrads at for-profit colleges, are loans from the federal government set at a fixed interest rate. Seventy-one percent of college students finish school with some amount of unpaid debt. In 2012, the average amount of debt per student was around $29,400.*
If you were a college grad who wanted to refinance a federal loan, there weren’t really any options available, as Dash noted. So as online lending now begins to heat up, companies like Credible are focused on attracting borrowers who can afford to refinance onto their platforms.
Credible investor Soul Htite, co-founder of Lending Club and CEO of the Chinese peer lending service Dianrong.com, said in an email that “this borrower-centric approach strikes me as a very sustainable model that has wide applicability as online lending expands.” The “borrower-centric approach” includes partnerships with organizations like the American Medical Association, which can help supply the kinds of reliable grads who would likely qualify for a refinanced loan.
In a follow-up email, Dash said that the newly raised $10 million will go into expanding the number of partnerships like these, making Credible’s tech better and, of course, finding new borrowers. As to the murkier question of who’s best served by the student-loan industry, Dash mainly passed on giving an answer.
“Could the student loan system be better? Yes,” Dash said. “Is there a reason I moved from Australia to do this here? Yes. But it’s not something that can be changed overnight.”
* Both numbers come from The Institute for College Access and Success.
This article originally appeared on Recode.net.
