Note from Editors:
The national student debt of America is almost $1.3 trillion, showing more than 70% increase in 2009 data. With this present landscape, new #fintech companies, especially #lending #startups, are exploring loan options, refinancing and repayment schemes that students can choose from based on their #financial situation.
by Stephen Dash
Fundamentally altering the financial services industry and traditional banking methods, financial service #technology (FinTech) companies are disrupting several existing sub-sectors of traditional lending markets.
One such area of the lending market is student loan refinancing. Startups have been entering the space at an increasing rate, catering to demand for products and services largely unmet by traditional market participants. Though FinTech has largely pioneered this corner of the market, traditional lenders are iterating quickly to meet and exceed those demands as well.
The financial crisis helped spur this rapid change, with the reasons being two-fold: the status of student loan debt post-crisis, and the changing needs and wants of young consumers.
The New Student Loan Landscape
With the rapidly rising cost of a college education, today’s students are graduating with increasing levels of student loan debt, hindering many of their financial goals, such as buying a home or starting a family.
America’s national student debt stands today at nearly $1.3 trillion, a more than 70% increase since 2009. Paying close attention to this heavy burden on young America, FinTech companies have grown dramatically by turning the burden into an opportunity to engage young Americans with tangible solutions.
Embracing online technology and streamlining traditional processes, many new companies are making it easier for borrowers to explore their student loan options. Refinancing is one such area, which can allow some student loan borrowers to find new loan terms and competitive interest rates based on their financial situation.
The financial crisis also changed the perspective of consumers, as many Americans across multiple #socioeconomic statuses were impacted. From the loss of jobs to vanished investments, a gap GPS +0.14% of distrust between consumers and the financial services industry grew, most notably with millennials.
Many millennials were in in their formative years of high school or college, or the first years of their professional careers, as they witnessed the unforeseen impact of the crisis on the economy. A survey conducted in March of 2015 found that over two-thirds of millennials distrusted traditional financial firms, making it more likely that they would change providers and actively seek out options benefitting their financial futures.
This opened the door for FinTech startups to build their companies around the desires of a new, largely millennial consumer, making their processes more transparent and personal, working to build trust with skeptical consumers.
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Note: Featured Image credit to risk.net