It’s the newest thing in student loans: a social lending service where alumni can help finance the education of current students.
Sofi, a service brought to our attention by Mashable, lets alumni “buy a share” of the students at a school who currently have loans. As the students pay off the loans, the contributing alumni are paid back as well.
Interestingly, the co-founder and VP of Business Development at SoFi, says that students are more likely to prioritize paying back their loans through the service because they know exactly who is lending them money.
Here is how it works, via Mashable:
“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.”
Sofi announced Monday that it would expand to 40 schools after launching last year at Stanford. There is a student ambassador for the service at every participating school, and a social networking component where lenders and lendees create online profiles where they can connect to see career goals and course loads (lendees) as well as potential connections for jobs and internships (lenders).
Considering that student loans make up the bulk of debt across generations, we can’t help but think that any innovation is good innovation.