Five Questions With David Klein, CEO & Co-Founder, CommonBond
As he explains below, David Klein launched CommonBond, a marketplace lender focused on funding and refinancing student loans, largely out of personal frustration.
He built the nontraditional finance company by drawing on skills honed in more traditional arenas, including managing a $250 million annual consumer-finance business as director of strategic planning and business development for American Express and advising financial-services clients as a consultant at McKinsey & Company. Klein graciously made time to chat with The Score despite a busy travel schedule this month.
What are some solutions/products that CommonBond provides that can help people dealing with student debt?
Student debt is undoubtedly one of the biggest challenges facing millennials today, and CommonBond is a fintech company that is tackling this issue head-on. With over $1.3 trillion of outstanding student debt in the U.S., this issue impacts the majority of college graduates. Seventy percent of students graduate with debt, and, on average, graduates leave school with $35,000 in student loans.
At CommonBond, we believe student loans should be more affordable, more transparent and easier to manage online. That’s why we created the suite of products that we wished had been available when we took out our student loans. CommonBond is the only lender in the U.S., fintech or otherwise, to offer a suite of products that will help all 40 million Americans with student debt find their best repayment options. Our products include:
- Student loan evaluation:
Our powerful online recommendation engine helps everyone with student
loans, regardless of income or credit history, evaluate their loans and
get a personalized recommendation on the best way to manage their debt.
- Student loan refinancing:
CommonBond uses data and technology to offer our members the lowest
possible rates on their loans. The average CommonBond member saves over
$14,500 when refinancing. CommonBond offers superior customer service
and the first 1-for-1 social mission in finance: for every loan funded
on CommonBond’s platform, we fund the education of a child in need, in
partnership with Pencils of Promise.
- Employer student loan contribution: CommonBond offers a software as a service (SaaS)-based platform that enables employers to attract and retain talent by helping employees pay down their student loans. Through this platform, companies can contribute to their employees’ student loan payments—regardless of lender—to help employees get out of debt quicker. We like to think of this as a “401(k) for student loans.”
Who would you consider a solid candidate for getting his/her student loan refinanced? What type of financial behavior is CommonBond and/or a bank looking for when deciding whether to approve someone requesting a refinance? Do you look at academic achievement or other “nonstandard” indicators in addition to typical metrics?
When it comes to student loan refinancing, CommonBond looks at a wide variety of factors in our underwriting. We consider an applicant’s education, employment, income, credit history, debt-to-income ratio, free cash flow (and more) in order to provide a personalized interest rate that aligns with their ability to repay.
We also understand that refinancing isn’t right for everyone who has student debt. That’s where CommonBond’s other solutions—such as student loan evaluation and employer student loan contribution—come into play. Using our student loan evaluation tool, for instance, those with student loans can determine the best repayment options depending on their circumstances, including federal government programs like Income-Based Repayment (IBR).
Student loan repayment benefits in the workplace have also been a growing trend; while just 4% of companies offer the benefit today, that number is expected to grow to 26% in just under two years. CommonBond has partnered with nearly 100 employers and benefits providers (including Mercer and WeWork) that use CommonBond’s solutions to help employees save money on their student loans.
Relationships with people – whether it be your borrowers or those social causes to whom you donate – seem to be one of the reasons your company thrives. For instance, you host borrower dinners across the country to better understand your clients. What are some insights you’ve gleaned from these dinners?
From the very beginning, we have set out to make finance a community, not a commodity. We do this in three primary ways:
- Our Social Promise CommonBond is the first and only company in finance to have a 1-for-1 social mission, or what we call our Social Promise:
for every loan funded on CommonBond’s platform, we fund the education
of a student in need through our partnership with Pencils of Promise
(PoP). So far, we have helped more than 2,000 students in Ghana get
access to a quality education.
As part of our Social Promise, we organize an annual trip to Ghana for CommonBond members and employees to visit PoP schools and see our impact firsthand. We’re taking our second annual trip in just a couple of weeks, and I am looking forward to meeting five of our members who will be joining me and two other CommonBond employees on the trip.
- Member Dinners
The member dinners we host create an intimate setting where our members
can meet each other as well as CommonBond team members and connect
offline. Most of our business is conducted online and/or by telephone,
so the opportunity to meet in person brings a sense of warmth and
connection that vastly improves the borrowing experience for our
We host CommonBond member dinners in cities across the country, and I’ve been fortunate to attend some of them myself. The opportunity to meet face-to-face with our members is invaluable. It’s always fantastic to hear from members who, thanks to the savings from refinancing with us, have been able to more easily achieve a life milestone such as paying for a wedding or buying a home. We often hear feedback like this from members, and these conversations continue to motivate us to work hard and serve our members in the best ways possible.
- In-Office Events CommonBond regularly hosts events at our SoHo NYC office, where we invite members and others to join us for panel discussions and other events. It’s an opportunity to hear from interesting speakers and network with each other. The events cover everything from managing your career to tackling your personal finances to entrepreneurship – all topics that we believe add value to our members’ lives. It all comes down to being more than just a lender to our members. We go a step further by truly being invested in their success and providing them with the resources to be successful both financially and professionally.
With a successful career at American Express and McKinsey, why did you leave your positions to start down this career path? Did your own experience going through years of schooling play a role in that decision?
I come from a family of entrepreneurs and have always been driven to pursue entrepreneurship myself. The real spark for me hit when I went to Wharton Business School and had to pay my way 100% with student loans. From that experience, I realized a few things: the interest rates were very high, the process was unnecessarily complex, and the customer service was incredibly poor. I knew there had to be a better way, so we set out to transform the lending experience.
In running CommonBond, I have drawn quite a bit from the foundational business skills I picked up at McKinsey and American Express. Those roles were instrumental in helping me develop strategic acumen and the ability to execute, respectively – skills that I use every day in my role as CEO and Co-Founder of CommonBond.
In addition to student loan refinancing options, CommonBond currently offers student loans to MBA candidates. Do you see business school as a particularly low-risk avenue in the decades ahead? If so, why?
CommonBond’s business is heavily rooted in the business school market. It was in business schools that we first came across the issue of overpriced and inefficient student loans, came up with a better student loan product, and piloted that loan through a program for Wharton students funded by Wharton alumni.
Because of that, the business school market holds a near and dear place in our heart, and these members are a critical part of our customer base.
More broadly, we find that MBA students and graduates are generally great candidates for CommonBond’s in-school and refinancing options because those graduates tend to have a solid employment history prior to starting business school as well as strong career prospects upon earning their MBAs.