April 24th, 2009
People Capital Website Review
People Capital is a new peer to peer private student loan service that evaluates students based on characteristics, rather than relying only on a credit score. This makes sense since most college students do not have an established credit history. People Capital utilizes a scoring system called Human Capital Score, which was built and developed by University of Pennsylvania’s Wharton School in order to provide lenders with the potential earning power of each student.
The Human Capital Score takes into account your credit, and then blends that with other metrics such as GPA, SAT/ACT test scores, college, and major to predict your future earnings. This score then allows lenders to more accurately determine how much money to lend to prospective borrowers. You can calculate your Human Capital Score online, so I took the bait and ran my Human Capital Score using a few different scenarios.
Using my actual high school GPA, SAT scores and college information, it was surprisingly accurate in estimating my salary along a 10 year timeframe. I changed my college to a community college, and my salary dropped nearly 25%, as well as my score dropping from 9 to a 7 (max score is 10).
The site is still in beta and you are not able to complete an investment online yet. The site currently has a lot of good information on social lending and how People Capital intends to change educational lending. They are targeting being able to fund and transact funding for the fall semester of this year. This is very interesting stuff; People Capital is taking the Prosper/Lending Club model and applying it to student loans.
It will be interesting to see how these loans perform in comparison to the traditional student loans. Unfortunately, with payback terms on student loans averaging 15 years, it’s going to be a few years before you can fully evaluate its ability to provide more insightful ways for lenders to valuate loans. We will check back in once they are actively lending to take another look at the website and its offerings.
Thanks for the insight and review. I think this credit crisis has taught us a thing or two about conventional methods of credit risk analysis… including FICO credit scores
This is terrific information and will surely help many people to research the new p2p market and better understand the need for this score, which truly hits the mark for students.
So many lenders are using FICO criteria that is archaic/conventional and just does not make any sense.
Thanks for the update.
Thanks for the review. I think student loan is very very important in the present scenario. People Capital Website is doing a good job.