Pencil Finance completes first fully on-chain student loan cycle with $1M deployment

Student loans are not exactly the sexiest corner of decentralized finance. But Pencil Finance just did something that even the skeptics have to acknowledge: it completed an entire student loan lending cycle entirely on-chain, from capital deployment to repayment records, with $1 million in loans to show for it. The milestone landed on July 10, 2025, when Pencil Finance deployed its first fully on-chain student loan bundle on EDU Chain, a layer-3 blockchain built on top of Arbitrum and designed specifically for educational financing. Every loan issued, every repayment recorded, all of it sits on a public ledger. How the $1M was structured The loan bundle was split into two tranches, a structure borrowed directly from traditional asset-backed securities. Senior tranche investors received $750,000 in capital deployed at a fixed 15% annual percentage yield. Junior tranche investors took the remaining $250,000 at variable returns, along with the first-loss risk if borrowers default. The loans themselves are administered on the ground by ErudiFi, a Southeast Asian edtech lender with existing operations in the Philippines and Indonesia. ErudiFi handles the real-world underwriting and stud...