That Ivy League alums with good jobs and great credit have the ability to pay down their debt faster than is required is certainly a big part of the reason why online lenders were so eager to sign them up at such low, low rates. That they actually would do so, rather than spending that money on hookers and blow? This the online lenders simply did not foresee.
“It surprised me,” said Gary Lieberman, chairman of Darien Rowayton Bank, a community bank based in Darien, Conn., with a national online lending platform where student-debt borrowers are paying 15% to 17% more than they are obligated. “The nature of these borrowers is that they really want to pay off their debt….”
In an early pool of loans originated by SoFi—the largest student loan refinancer that entered the market in 2012—principal payments borrowers have been making on average are about 30% more on an annualized basis than the actual payments they are obligated to make. Prepayments were initially expected at around 10% more than obligated, according to people familiar with the deals.