CHESTERFIELD COUNTY, Va. — A Midlothian bank is making a big bet on student loans.
Bank of Virginia and its parent company Cordia Bancorp have launched a new business unit to try to capitalize on what they see as an untapped sector of the college debt market.
The venture is known as CordiaGrad, an online student debt refinancing operation that hopes to win a share of what CEO Jack Zoeller said amounts to $1.3 trillion in outstanding student loan debt in the U.S.
Capturing even a fraction of that would mean another boost to the bank’s bottom line and another step in Cordia’s plan of distancing the bank from the doldrums of the downturn.
The idea for CordiaGrad, Zoeller said, is to help a certain segment of college graduates realize that the common practice of refinancing can extend beyond its typical place in the mortgage market.
“In the mortgage market, everybody knows if rates drop, you should refinance,” Zoeller said. “But nobody has really done that in the student loan market.”
CordiaGrad will target people mostly in their 20s and 30s but will also try to reach people in their 40s and parents with their children’s loans in their names.
The company spent seven months setting up underwriting standards for its online application and approval system in an attempt to weed out riskier borrowers.
“This is for students who have graduated, have their degrees, have a job and are paying big bucks on their student loans,” Zoeller said. “We’re trying to offer them some combination of savings in lower rates and shorter terms.”
Once a borrower goes through the online system, CordiaGrad would pay off his or her existing student loans and set up a new loan in its own pool.
With new staff hired for the project and a new office in Washington, D.C., the new venture is another example of Cordia taking Bank of Virginia into waters that aren’t typically tested by small community banks.
The $300 million bank, founded in Midlothian 2004, first tested the student loan market by buying tens of millions of dollars into pools of rehabilitated government guaranteed student loan pools.
Find out how the process works, and continue reading, on RichmondBizSense.com.
