Federal Asset Paying 7.3% Yield

By Wayne Mulligan, on Thursday, July 23, 2015

Can you guess what the government’s largest asset is?

Surprisingly, it’s not land, mortgages, or tax receivables.

It’s student loan debt.

According to a recent report by the Federal Reserve, student loans currently represent 48.5% of the government’s assets...

And over the next 20 years, those loans will translate into roughly $135 billion in government profits.

But thanks to a new start-up, that money may soon be ripped from their hands…

And put right into yours.

Upstart

The start-up we’re referring to is called Upstart. It’s a Palo Alto-based company run by former Google executives.

Initially, its vision was to help young people raise $20,000 to $30,000 to get their start-up ideas off the ground.

But the company soon realized that it could build a more valuable service by focusing on recent college graduates.

It decided to help these grads refinance their student loans with far better terms—and at the same time, provide individual investors with above-average yields.

Here’s how it works...

How Upstart Works

Upstart is what’s known as a "marketplace lender."

On one side of the market, Upstart has a pool of borrowers. On the other side, it has a pool of lenders.

But these lenders aren’t big banks—they’re regular people like you.

The thing is, by pooling small amounts of capital from a large amount of people, Upstart can lend a significant amount of money.

In fact, the young company has already originated over $130 million in loans for recent graduates.

Upstart’s Secret Sauce

What makes Upstart different from other marketplace lenders such as Lending Club or Prosper is how it evaluates the “credit risk” of each loan.

You see, most marketplace lenders use traditional evaluation methods, like credit scores or credit histories.

But for a recent college grad without credit or employment history, such methods wouldn’t provide any insights—which helps explains why most marketplace lenders won’t make loans to recent grads.

So Upstart came up with a unique method for evaluating risk, starting with evaluating a grad’s field of study or current job.

For example, if a recent medical school graduate who’s just beginning his or her career sought to borrow $10,000, Upstart would consider that a fairly safe bet.

Big Demand

Given Upstart’s unique risk evaluation methods—and the spiraling nationwide increase in student loan debt—there’s been considerable borrower demand for its service.

Over the past few years, Upstart has been growing at a double-digit rate month-over-month. In total, it’s originated over 9,000 loans.

And because Upstart operates as a marketplace, it’s been able to eliminate “middlemen” like traditional banks from the process. This allows the company to pay its lenders higher interest rates than they’d find elsewhere.

On average, lenders on the system have earned 7.3% annually.

How You Can Get Involved

We predict that Upstart will continue to grow in popularity, and will gradually do its part to chip away at the $1.2 trillion market for student loan debt.

And with U.S. treasuries yielding sub-3%, we imagine that demand from lenders like you will be robust.

To explore getting involved, check out the Upstart website here »

But keep in mind, you’ll want to create a portfolio of loans that’s diversified...

According a recent report from Upstart, 100% of the lenders on its system who’ve backed at least 25 loans have generated a positive return.

Happy investing.

Best Regards,
Wayne Mulligan

Founder
Crowdability.com

Comments

If you enjoyed this article, subscribe to updates:

Sign-up today and you'll receive our daily insights on early-stage investing, as well as our FREE "Equity Crowdfunding Action Kit" – where you'll learn:

  • The Ins & Outs of Equity Crowdfunding
  • A step-by-step path to get started
  • Tips from dozens of Venture Capitalists
subscribe to updates

Thank you for subscribing!

Tags: Income Yield Lendingclub Prosper

Share This:
comments powered by Disqus