If you’re looking for cash for school, then you may not have to look any further than your fellow alumni. Meet SoFi, a social lending service that lets alumni of a school help finance the education of future graduates and earn a bit of a return on their investment as well.
The way the program works is simple. Alumni invest money in their particular school’s funding, and then students apply just as they might to any other college loan. Loans are given to students for a 6.24% interest rate (5.99% if they sign up for auto-pay), alumni earn 5% back on money they’ve invested, and SoFi keeps roughly 1%. Alumni can invest with cash, or can invest funds through their IRA.
“The student loan market is broken” Dan Macklin, Co-founder and VP of Business Development at SoFi told Mashable. “Students have very little choice on where to get their loans from. Why can’t we use the social groups that are out there and lend between those groups?”
In addition to lending SoFi also creates a social network for each school where alumni can see the students they’re helping finance, as well as check out what classes those students are taking and what their ultimate career goals are. Likewise, students can learn more about who’s lending them cash, and potentially call upon those alumni for advice on things like internships or to get help on a project.
“All this is about giving the students what they need and helping the student succeed in what they want to do,” says Macklin.
When an alumnus lends money, it’s the same as “buying a share” of the entire group of students at a school who have loans. As the students pay back the loans over time, the alumni get paid back. Macklin says students are less likely to default on these loans, because they know the people lending the money to them.
SoFi got its start last year at Stanford, and today is announcing an expansion to 40 colleges and universities across the country. The initial run of the program raised close to $2 million from 40 Stanford alums, and was able to fund 20 students.
Macklin says that the program has helped not only finance student’s education, but also build relationships with alumni that might not have otherwise existed. Students have gotten coffee with lenders, and Macklin says both parties “get a social and emotional return” from taking part in the process.
SoFi already has an alumni ambassador in place at all of the schools it now supports, as well as alumni who have already committed to being part of the project. Starting today students at those universities can preregister for loans, and alumni can start officially signing up to donate.
What do you think about SoFi? Would you consider loaning money to students at your alma mater? Let us know your thoughts in the comments.
Via Mashable: http://www.mashable.com