Micro-lending has come to the American student financial aid market. GreenNote.com will syndicate student loans among individuals who wish to provide as little as $100 to college-bound students, in return for which the lenders will get a guaranteed return of nearly 7% (while the syndicator, presumably, gets the difference between the lender’s return and the borrower’s interest rate, unspecified in Green Note’s promotional materials). Even if the borrowers are paying only a few basis points above the lenders’ return, this seems an awfully expensive way to provide college money to students at a time when the discount rate is below 4%. Unless students are totally shut out of the college lending system as mediated by Sallie Mae, it’s not at all clear why they would turn to this electronicized (and commercialized) version of the old mutual-aid-society lending arrangement.
If the American banking system is actually collapsing, this is neither a good time to borrow money for college nor a good time to become an unsecured creditor to debtors without skills or degrees. If the American banking system is not collapsing, there should be sufficient guaranteed student loans available to attendees at most accredited institutions. The Nonprofiteer has no doubt that GreenNote.com will make money connecting small lenders to small borrowers, but she doubts strongly that this connection will make much of a contribution toward paying the average college student’s bills of more than $40,000 annually.
Not everything that comes dressed up as “e-commerce” and “micro-lending” actually makes any sense.