Peer-to-peer (p2p) lending is an alternative method of bringing together borrowers and lenders without the mediating presence of a traditional financial
institution. In p2p lending, the “lender” category is expanded to include individual investors, philanthropic or affinity groups, financial institutions,
even friends or family members. Using web technology and a unique auction processes, lenders “compete” over borrowers; the lender who offers the lowest
interest rates for a loan “wins” the borrower.
But how do p2p lenders evaluate the amount of money each borrower is eligible for? Many students, especially those fresh out of high school, have not had
the opportunity to develop their FICO scores and their credit histories, which are the traditional determinative criteria in the arena of private student
loans. Recognizing this problem, People Capital relies on its patent-pending Human Capital Score, a data-driven method for predicting a student’s future
potential income, to determine its borrower’s risk assessment. The Human Capital Scores uses hard data such as GPA, standardized test scores, and choice
of college/major to produce a powerful and very concrete credit risk assessment for an individual student borrower.
Private student loans offered through People Capital enjoy all the same benefits as traditional private student loans: lenders receive regular verifications
of student enrollment, as well as the expected array of credit risk analytics tools. Lenders can thus enrich their portfolio with private student loans that
are not dischargeable in bankruptcy. Student borrowers can avoid the pitfalls of federal or traditional private loans while knowing that their p2p loans may
possibly be tax deductible. These are truly customized private student loans that can be made for either the short or long term.