Social Finance Inc. (“SoFi”) raised $77.2 million in funding from Baseline Ventures, DCM and Renren Inc. (NYSE: RENN), China’s largest social networking site, to help build its social lending platform to help solve the student loan debt crisis in America.
According to their site they are tackling the student loan issue in three important ways:
- Lowering loan rates. Our loan rates are lower than Federal Direct and PLUS loans, and this delivers real savings that reduce student and graduate debt burdens. Graduates who have refinanced with us have saved an average of over $9,600. Students can avoid costly origination fees and reduce annual payments by $2,500 or more.
- Providing critical education to borrowers. We believe the single greatest contributor to the growing student debt problem is lack of financial literacy. We are about to release an online application that allows you to enter your school, your major, where you plan on living when you graduate and how much debt you plan on incurring. The application then tells you how likely you will be to be able to make your loan payments when you graduate. You shouldn’t be taking out $100,000 in debt and going into a $30,000 a year job – it just won’t work. We’re going to help students “know before you owe.”
- Connecting students and alumni. We believe the single greatest value proposition SoFi brings to the table is the student-alumni connection. By creating a community where everyone is vested in one another’s success, both students and alumni benefit. Alumni are incented both financially and through their school affinity to help students with career mentoring, advice and job placement. Because student loan performance is transparent to the alumni investors, borrowers are incented to ask for this help. An added benefit is that because defaults directly impact alumni, schools with high default rates face greater alumni backlash and will have to address whether student debt burdens commensurate with the value of the education.
See how SoFi works in the below infographic.
What do you think of their attempt to tackle the student loan problem?
How SoFi Works Infographic provided by YoBucko.com – The Next Generation of Financial Education.
Category: News & Trends