www.eStudentLoan.com

 

Screen 3:

Output from LoanFinder at eStudentLoan.com. This is where the company makes its money, matching borrowers with lenders. Everything else on the site merely acts as a funnel into LoanFinder.

After completing a five-step questionnaire about loan preferences, four lending programs are selected. In this example loans from Bank of America, First Union, Educaid, and Crestar were offered as solutions. The site makes it easy to compare loans with detailed pricing and payment info.

The Company: eStudentLoan.com LLC is the brainchild of Brian Kaff, who not coincidentally is friends with Steve Aldrich, founder of InsureMarket, purchased by Intuit in May, 1996. The privately held company is headquartered in Bethesda, MD and has been funded by angel investors. Its Web site opened on Oct. 7, culminating an 18-month learning process by founder Kaff, a veteran of several start-ups and a recent two-year stint (’94 to ’95) in the technology area of the American Banking Association. The company currently employs 12, but most are not full-time. Kaff estimates the full-time equivalent employment (FTE) is approximately five.

The Product: eStudentLoan delivers information, resources, and lender links to help students and parents in navigating the myriad options for financing a college education. The primary commercial function of the Web is as an “alternative educational loan marketplace” to assist borrowers in finding and comparing financing alternatives and/or supplements to government-sponsored loans (Stafford and Plus). The business model is somewhere between GetSmart (referrals only) and The Lending Tree (completed applications delivered to preselected bidders).

Lenders: The company had four original sponsoring lenders, and has added two more since launch. More are expected to come on board very soon. ð

eStudentLoan.com Lenders
Name	Web Address
Lenders at Launch (Oct. 7, 1998)
Access Group*	www.accessgrp.org
Bank of America	www.bankamerica.com/studentunion
Crestar	www.crestar.com/borrow/student
First Union	www.firstunion.com/fuel
New Lenders
American Express	www.americanexpress.com/edloans
Educaid**	www.educaid.com

Source: Company, 12/11/98 *loans by National City Bank

**division of The Money Store, now owned by First Union

 

Pricing: Web services are free to users and educational institutions. Lenders pick up the tab. The company won’t reveal its pricing except to say there are numerous marketing opportunities ranging from a relatively low-cost graphical enhancement within the general listing of student loan lenders, to joining the six lenders participating in LoanFinder. Kaff hopes to add two to seven new lenders during the next three months.

Screen 1: eStudentLoan.com segments visitors into graduate, undergraduate, or high school students. There are also sections for parents, lenders and financial aid (f.a.) professionals.

How it works

1. Prospective students, or their parents, are greeted at the front door (screen 1 above) and invited to select the appropriate door into the Web:

•  graduate student
•  undergraduate student
•  high school student
•  parent
•  lender
•  f.a. professional (financial aid)

2. After entering the appropriate door, users are greeted by a screen containing the navigational options. Dominating the Web real estate is a graphic funneling users into the LoanFinder (middle of screen 2 at right). Sponsor logos appear on the bottom of the screen.

3. After selecting LoanFinder, students are greeted with a 15-question profiler, divided into five screens with links to help along the way. Questions revolve around the educational status of the applicant, amount of money requested, repayment preferences, and loan pricing preferences (e.g., fees vs. rate). It takes less than two minutes to answer the questions.

Screen 2: Users are funneled towards the LoanFinder.

4. After submitting the loan profile, eStudentLoan presents up to four alternative loan options for the borrower to consider (see screen 3, above).

Screen 4: Users select the loan programs of interest, then lenders contact users by phone and/or email.

5. After selecting one to four lenders, users complete a request form (screen 4 above) asking to be contacted by the lenders. Alternatively, eStudentLoan provides hyperlinks directly into the education loan areas of the lenders’ Web sites, so borrowers can start a dialogue immediately with the lender.

6. Leads are electronically sent to participating lenders so they can contact the prospective borrower by telephone and email (users can opt out of telephone contact if desired).

Contact: Brian Kaff is CEO/founder,
(301) 951-3252, briank@estudentloan.com .

Analysis

According to the Tower Group, the alternative educational loan market amounts to just $2 billion annually compared to the government-backed market of $30 billion per year. But the $2 billion number doesn’t include “indirect borrowing” by parents. For example, increased usage of credit cards, equity lines, cash-out mortgage refinances, 401(k) loans and so on

Mr. Kaff has put together an impressive marketplace. Anyone who could land six large lenders such as First Union, Bank of America, and American Express to participate in a start-up, must know a thing or two about sales.

He seems to be listening to his advisory board of private- and government-sector educational lending experts. One board member, Herm Davis, co-author of Financial Aid for Dummies, authors an advice column at eStudentLoan.com (screenshot right).

From our conversation, Mr. Kaff seemed sincere in his overriding goal of demystifying the college financing process. He said that after studying the process for 18 months he is convinced “only about 300 people (in the U.S.) understand the process.” He wants to deliver a quality product and plans to grow at a moderate pace to maintain quality. He seems less interested in a financial killing than doing a good job for both lenders and borrowers.

He dismisses an IPO, saying the alternative educational loan market isn’t big enough for that. We’re not so sure about that. With more than 10 million students currently enrolled in post-secondary educational programs, this is a sizable market.

The challenge, for any start-up, online or off, is generating traffic and establishing a trusted brand name. Kaff declined to discuss marketing plans or budget, but it appears he lacks the financial backing to close a portal deal or make a huge splash on the Web. It’s only advertising presence to date is on GoTo.com (above).

Look for eStudentLoan to partner or merge with better-capitalized efforts, such as GetSmart, Lending Tree, or even Intuit. But, he may be able to bootstrap enough traffic to make a go of it as an independent entity. He’s off to a great start. 8

Herm Davis, co-author of Financial Aid for Dummies, pens an advice column on eStudentLoan.com.

GetSmart Launches a Student Loan Referral Center

GetSmart launched its Student Loan Finder in November. Currently, all referrals go to just a single lender, American Express, but the company expects to bring additional lenders into the program shortly. AmEx does not have an exclusive. Note: the Education Financing Alternatives option (forth bullet above) links into GetSmart’s Home Equity Loan area.

Contact: Peter Gilbert, is VP Membership Services, peterg@getsmart.com , (650) 524-1805.