Latest twist in student loans: Peer-to-peer lending

As traditional lending sources such as banks and government agencies pull back, a growing number of peer-to-peer lending sites are entering the student loan market, BusinessWeek reports. Because of the credit crunch, conventional lenders are making it tough for any but the most creditworthy borrowers to qualify for private college loans. Now, a new breed of student lender is trying to get students to return the snub–by writing off the Sallie Maes and Citibanks of the world in favor of relying on friends, family, and even perfect strangers to finance their college loans. "It’s not a solution to the credit crisis in student loans by any means," says Mark Kantrowitz, publisher of financial aid web site "But the idea of using peer networks to raise money is intriguing." In recent months, peer-to-peer lending sites such as Prosper and Virgin Money USA have introduced student loans or started marketing existing offerings to families looking for college funds. Others, including startups GreenNote and Fynanz, are focused exclusively on making college loans. Analysts say the sites are benefiting from a confluence of trends–a growing acceptance of peer-to-peer lending and fallout from the credit crunch…

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