March 24, 2022
Today, over 60% of students graduate college with more than $30,000 in student loan debt, across an average of 5 loans, with a combined average interest rate of 5.8%. Refinancing allows these consumers to refinance and consolidate their student loans into a private student loan with a new rate, term and payment designed to fit their budget. Nearly 80% of consumers in the market to refinance are between the ages of 22 – 38. They’re not just looking to refinance their student loans; they’re seeking pathways to reshape their budget, purchase new homes, start families, and build long-term wealth.
The emergence of new student loan Fintechs over the last 5 years has driven increased competition for these consumers. These companies have found that helping refinance student loan debt now, provides ample cross-sell opportunities to this core group of consumers. Community banks and credit unions, in partnership with LendKey, are positioned to win the business of these prospective consumers and meet their lifelong banking needs.
True to form, the best rate will always attract borrowers (price is king) and technology has made it even easier for consumers to check their rate and compare options between lenders. However, the best customer experience will help close the deal. Refinance, after all, is a loan of convenience. Lenders that win provide a quick and transparent experience. That’s why we’ve invested in technology enhancements and automation that reduce friction and drive speed in the lending process.
Automation creates an easy and familiar experience for borrowers that our bank and credit union customers can leverage for success. We’ve digitized everything, from quick decisioning, all the way up to electronically signing the loan document. We can quickly verify FICO and income using alternative data sources integrated into the platform, reducing the need for manual documentation up front and reducing the lift for borrowers.
Our automation also helps lenders close more deals. For example, we use AI to determine where our outreach efforts are best utilized. We can determine which applicants may need additional support and then actively reach out to help them finish the process. On the reverse, we can reduce time spent with applicants who do not need assistance or who have no intention of moving forward with their application.
When in the market for a new product, consumers are most likely to turn to an existing relationship with a financial institution. Expanding their product offering, allows banks and credit unions to meet the needs of these existing members. LendKey provides each of our lenders a branded experience to ensure a seamless customer experience as they apply for their student loan.
Our partnership model is designed to help banks and credit unions serve the needs of their current customers but also to attract new customers through LendKey’s acquisition channels. We use a variety of traditional and digital channels, coupled with data to ensure we’re reaching the right consumer, at the right time. In addition, LendKey works with hundreds of affiliate partners to acquire the business of consumers shopping around on various sites like NerdWallet and Credible.
We always encourage our lending partners to view student loan refinancing as not only a way to deploy liquidity and diversify their balance sheet with a new asset, but as a way to court a younger demographic and open the door for potential cross-selling. As consumers continue to pay off their student loans and look to acquire more sophisticated assets, like a new home, many still want a brick-and-mortar borrowing experience along with a friendly face to help them through the process. This is where community banks and credit unions shine.
Competing on price and convenience across a spectrum of top asset classes, here initially with student loan refinance, helps lenders service their customer base and get an edge over the competition. With LendKey, these lenders can provide their customers with a quick, digital experience and a competitive product offering. Providing high quality loans to our lending partners is what LendKey is all about, and you can expect continued investments—and innovation—in our technology and automation to come.
Broc Sleek is Lendkey’s Senior Vice President of Lending Operations where he is responsible for the end-to-end customer experience and leads LendKey’s direct customer acquisition channels. Broc also serves on the Board of Directors for CHROME Federal Credit Union.