Defynance

Defynance Holdings, Inc. is a financial services company that refinances student debt using income share agreements (ISAs) rather than loans. The company pays off existing student loans for qualified, employed U.S. borrowers; in exchange, the customer contractually agrees to share a set percentage of income for a fixed payment term. The company states it is not a lender and that the financed amount does not have to be repaid as principal: the obligation ends when the payment term expires, regardless of whether total payments are more or less than the amount financed, and no interest accrues. Terms described include payment terms of roughly 5 to 15 years, an income share percentage capped at 15%, payment and term caps, prepayment and buyout options, automatic deferment when income falls below a hardship threshold (stated as $25,000 annually / $2,000 a month), no co-signer requirement, and cash back at the successful end of the ISA.

Alongside refinancing, Defynance operates an ISA refinancing fund open to accredited investors, which funds the ISA contracts and is positioned as generating quarterly income with low volatility, recession-hedging correlation characteristics and tax deferral benefits. A third component is a career and resources marketplace (branded GROW) covering career guidance, recruitment, upskilling, networking and jobs, entrepreneurship support, credit building and repair, financial education, and wellness resources, intended to support borrowers' earning potential and reduce unemployment risk.

Eligibility requires U.S. citizenship or permanent residency, a degree or professional certification from an accredited institution, and current employment; there is no minimum credit score. Pricing and approval rely on a proprietary model the company calls PRAIS (Pricing and Risk Algorithm for Income Sharing), which the company says uses more than a hundred data points and forward-looking indicators of earning potential to set the income share percentage and term options.

Business model

Defynance earns one-time fees — a processing fee from student loan refinancing customers and a sales charge from investors in the ISA refinancing fund — plus recurring revenue from a monthly servicing fee taken from each income sharing payment and quarterly fund management fees. As of its 2020-2021 offering, the company planned to add monetization of its resources marketplace in 2021.

Processing fees on refinancing transactions, investor sales charges, monthly ISA servicing fees deducted from income share payments, and quarterly management fees on the ISA refinancing fund, with planned future monetization of the career resources marketplace.

Traction

By the close of its Netcapital offering in January 2021, the company reported having executed its first ISA refinancing contract, signed its first paying refinancing customer, built the application-to-funding-to-servicing process, ISA approval criteria, the pricing and risk algorithm, an online platform pilot with beta users, a functional mobile app prototype, the resources marketplace and the ISA refinancing fund structure, and received more than 70 applications without marketing. The company's site publishes customer testimonials from borrowers in Tucson, Atlanta and Pittsburgh, including one describing a roughly $170,000 balance negotiated down to $8,000.

Latest developments

The company's current site markets three paths — student loan refinancing via ISA, investment in a fund described as delivering competitive returns uncorrelated with markets, and the GROW career resources ecosystem — and states a mission to eliminate $1 billion of student debt from 25,000 borrowers by 2030.