I wrote aboutMyRichUncle, an upstart student loan company founded by two 20-somethings (full disclosure, one of whom is a friend of a friend) in Fast Company about six months ago. Back then their angle was private loans with low rates and their own proprietary lending criteria:
Their proprietary software predicts student income based on transcripts, school, course of study, and other data; a business student with stellar grades might get a .25% reduction over a pottery student with a spotty record. Khan and Garg believe they can drive down defaults by knowing their borrowers better, but they also offer unique sweeteners: They can get you your money in five days (versus several weeks with traditional lenders) or make interest-rate reductions if you choose automatic payments. MRU’s basic variable APR was 6.38% in January 2006, near the lowest in the industry.
Yesterday MRU had a 2-page ad in the Sunday New York Times announcing their entry into the federal student loan business. A couple of things made me say, "wow!" One is that they are to my knowledge the first company ever to discount federal student loans, 1.5 to 2 points below the federally allowable rate. The second is that with a full page list of questions to ask your student financial aid administrator, they are publicizing to students and families all of the shady practices that go on between lenders and schools, and making sure people know that they have a right to choose a lender beyond their school's "preferred" list.
In current circumstances, I still think a student should usually choose a direct student loan because of the extra protections available. But I am very into what MRU is doing. It's great for students to have a real alternative.