ATLANTA, GA– July 27, 2016– Funding University (FundingU), a private student lender serving career driven undergraduates and their families, said it closed a $1 million seed round. The lead investor is Bezos Expeditions, the personal investment company of Jeff Bezos, founder and CEO of Amazon.com. Following a successful pilot for Georgia residents, Atlanta-based FundingU will primarily be used for nationwide expansion of the company’s online student lending platform.
FundingU, a startup in the Advanced Technology Development Center’s ATDC Accelerate portfolio of companies, received more than 800 loan requests from 48 states within six weeks of launching its online consumer marketing campaign in late April. The company’s first batch of loans were made to Georgia residents enrolled at 10 colleges and universities, including Georgia Tech, Georgia State, Emory, Washington and Lee, and Dartmouth. The cohort of student borrowers was roughly 60 percent female and 80 minority.
A typical family/student needs about $10,000 annually to cover the gap between financial aid and the ever-increasing costs of college. With U.S. household incomes remaining flat — more and more academically and career-oriented students find themselves squeezed out of reasonably-priced ways to attain a highly-valuable, four-year degree.
“In today’s credit-restricted market, strong students without a high-FICO co-signer often drop out or take on highest cost debt via credit cards or other sources,” said Jeannie Tarkenton, FundingU founder and CEO. “FundingU addresses this dual problem of educational access and market scarcity by offering a merit-based undergraduate student loan.”
With an industry-first, student-focused underwriting process, FundingU offers current students an alternative to the outdated, FICO and cosigner based bank loan model. The company’s underwriting solution identifies low-risk borrowers with its focus on a student’s academic performance, career trajectory, and earnings potential — balanced by a conservative, projected post-grad debt-to-income ratio of no more than 15 percent.
FundingU offers undergraduate students loans with fixed interest rates of between 6 to 10 percent. Students may borrow up to $25,000 per school year. FundingU loans may be used for both upcoming school tuition expenses and to refinance existing undergraduate debt.
FundingU exclusively uses a proprietary underwriting process, named SMaRT™ (Student Merit and Risk Test), which evaluates each student borrower’s academic and career track, not credit score, to identify hard working students who are low-risk borrowers. SMaRT™ targets students with the highest potential to graduate on time, gain major-related employment, and earn a salary that covers post-graduate debt obligations.
“The vast preponderance of students who struggle to pay back their loans are those who were unable to graduate or who took on debt that was larger than their likely career earnings,” Tarkenton said. “FundingU lends conservatively, but we feel strongly that this reframing of student loan finance is long overdue and presents multiple opportunities for growth in a very large market.”