Crowdfunding Student Loans
The financial cost of education can be crippling for some students who are saddled with a mountain of debt before they even enter the workforce.
To minimize the debt burden a small collection of start-ups are offering inexpensive loans to those going through college. One of these is Social Finance Inc. (SoFi), a crowdfunding initiative started by a group of Stanford Graduate School of Business alumni who graduated in 2011.
SoFi involves getting alumni from a school to invest in a fund that provides loans to students at a lower rate than they would be given by the banks.
The lenders also serve as a network of contacts post-graduation that can help the students launch their careers; they have a vested interest in their success. This built-in community can also guide students through their university careers.
Big Savings
According to the team behind SoFi, their approach saves borrowers approximately $10,000 compared to a bank loan.
The crowdfunding platform was piloted at Stanford University last year and involved 40 alumni and 100 students. One lender hired a borrower directly and another put a student in touch with a number of contacts in his field.
This year, SoFi was extended to 79 schools and to date $130 million has been lent with 100% repayment.
“SoFi presented me a great opportunity to receive a competitive rate on my student loans, and to help SoFi build and sustain a business model that I believe is a truly modern innovation in student lending.” Jeff Quezada – Cornell MBA Student & SoFi Borrower.
Future Plans
There are big plans for 2013 that includes expanding to 200 schools across the USA, and creating an online social network for lenders and borrowers.
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