Student Loans May Be Easier to Find Online

"People say to me, 'Well, there's a big crunch in the student loan arena,' and I say, 'Well, not really,'" says Chaman, who has a background in structuring student loans for Smith Barney. "This crunch is not lack of cash, this crunch is on lack of education."

More P2P sites besides Fynanz are also cropping up: At least two, called Lendary.com and Loanio.com, are on the horizon. Woods expects the overall P2P lending market to grow from $282 million in 2006 to over $5 billion in 2010. The credit-market turmoil and added woes for the student-loan market can only enhance its potential, he adds.

"This could spread like wildfire," says Woods. "Natural business rules dictate that they will get more demand. People will still want to go to school despite the credit crunch."

A look at Fynanz and some other P2P lending sites, as they pertain to student loans:

Fynanz

Description: Fynanz.com is strictly for student loans. Borrowers post their requirements and lenders sort through listings to bid on loans that offer the most attractive risk-reward balance.

Fees: Borrowers pay an upfront fee, which varies from 2.9% to 6.9% based on their credit scores. Lenders pay an annual 1% servicing fee, which can be postponed if a loan is in deferment.

Pros: Students can set the rates and terms, and credit bureaus are not informed of the loan until the rate is set, a deviation from standard practice, according to Chaman. Borrowers can opt out of a loan within 30 days. In addition, the interest rate drops one percentage point as soon as 10% of the original loan has been paid.