The average student loan debt has been rising, from $29,400 in 2012 to $37,172 in 2017, with 70% of college graduates having student loan debt. A study by Nerdwallet suggest that as a result, this can push off retirement until age 75.
The current student loan interest rate varies from 4.45% for Federal Student Loans up to 7% for a Direct PLUS loan. Assuming a $40,000 student loan at 5.5% interest rate, that would be a payment of $434 per month for 10 years. During the life of the loan, the borrower will pay close to $12,100 in interest and $52,100 overall.
eShopedia is partnering with student loan companies to create a unique program that can help borrowers pay down their student loans. By shopping through a dedicated affiliate portal, borrowers will have a percentage of the commission automatically applied towards their student loans.
However, the difference can actually be much larger if you invested the $434 monthly payment into the stock market for those 16 months (since you paid off your student loan early). Using a financial calculator, investing $434 per month with an average return of 7% for 16 months will grow your savings to $7,300. Over 10 years, the $7,300 almost doubles to $14,300.
So an extra $50/ month for (almost) 10 years, plus an extra 10 years in the stock market could end up being a difference of $14,300 for the borrower.
- Market differentiator - offer borrowers a benefit/service other lenders do not have;
- Help borrowers pay down their loans using other people's money;
- The affiliate commissions earned can help off-set costs or provide an additional source of revenue for Lenders
The model below shows the potential revenue if the Lender keeps up to 1% of the affiliate revenue commission and up to 50,000 participating borrowers.
As the program grows, Lenders will have more leverage with merchants to negotiate larger affiliate commissions, which will increase the amount that borrower and lender earns for each transaction. Lenders will also have leverage to partner with more prominent merchants such as Amazon, etc., giving borrowers more options and making it more desirable to shop through the Lender affiliate portal.
Potentially, this program can be expanded to other types of lending, from personal loans to car loans to mortgages.