There’s a new player in the UK’s alternative lending space, and it’s bringing a new form of finance for students to the sector.
The EdAid platform is effectively a splicing of the P2P lending and donation based crowdfunding models. EdAid is currently working its way through the FCA authorisation process, with a full launch planned for September. The platform’s loans will be repaid at the rate of inflation, pegged to the rate of the consumer price index. Borrowers will not be charged an additional rate of interest. For context, a loan from the government’s Student Loans Company charges 3% per annum plus inflation pegged to the retail price index. The average earner should expect, based on a range of lifetime employment scenarios, to save between £20k and £50k by using the EdAid platform.
EdAid earns an up front fee of 5% for its matchmaking services. But what’s in it for the platform’s lenders?
According to Founder and CEO Tom Woolf, the types of lenders that EdAid seeks to cater to are those that have a vested interest in seeing a student succeed. On the one hand, you have friends and family – for whom the knowledge that they will have funded a loved one through higher education will be reward enough. On the other hand, you have large corporate investors, who effectively act as a sponsor to undergraduates that are in need of funding. EdAid’s borrowers have total clarity as to whom they’re being funded by. The platform can thus allow companies to win the allegiance of future graduates before they even begin their university education. The suggestion is that these corporate backers might well consider converting a portion of their recruitment advertising budgets into lending capital, to be put to use via the EdAid platform.
The majority of peer-to-peer platforms have a social aspect, but are first and foremost investment instruments. EdAid is structured quite conversely. It’s all about financial empowerment for student borrowers. The platform is not a viable option for investors that are looking to earn a return on their money.
EdAid is also fairly lenient in its handling of collections. Every opportunity is given to the borrower to get up to speed with repayments before the platform turns to recoveries agencies. The whole ethos of the platform reflects the mindset of Founder Tom Woolf, who previously served as mission chief for JustGiving’s operations in the Middle East and Africa. The EdAid boss commented:
"EdAid has built a platform to make higher education funding affordable and sustainable, and kickstarting such transformational change is an enormous challenge. One we don't take lightly at all. To date our sole focus has been on building a robust, secure platform. As we launch EdAid our impetus shifts to providing exceptional product support and ensuring we deliver our pledge of drastically reducing the cost of student loans."
We’ll be keeping an eye on EdAid’s attempts to shake up the student lending space.
Now in its sixth year, the AltFi London Summit returns on 18th March 2019 to 155 Bishopsgate. Last year proved to be a crucial turning point for the key players building the future of finance. Leading platforms launched oversubscribed IPOs, digital banks proliferated and mainstream financial institutions started their own disruptive propositions. With 2019 certain to be another landmark year, more questions will be asked by regulators with investor interest in disruption also poised for more rapid growth.