DeFi Lender Deploys $1M for Student Loans to the Philippines, Indonesia—But at What Cost?

Key Points

1. Pencil Finance's initiative involves $1 million in tokenized student loans, split into a $750,000 senior tranche with a fixed 15% annual yield and a $250,000 junior tranche with variable returns and first-loss risk.

2. The project is built on EDU Chain, a Layer-3 blockchain on Arbitrum Orbit, with initial liquidity provided by Animoca Brands, Open Campus, and NewCampus.

3. The global student loan market is valued at approximately $3.3 trillion, with potential for significant growth if even a small fraction is tokenized.

4. Student loans in emerging markets often have high interest rates (up to 20% APY or more), while U.S. federal student loans have a fixed rate of 6.53%.

5. Coinbase is also reintroducing Bitcoin-backed loans, allowing customers to borrow up to $100,000 in USDC stablecoin, collateralized via its Ethereum layer-2 network, Base.