SoFi: Stanford-Born Startup Bumps The Banks

All told, the founding team had discussions with about 200 people over five months. Shortly after graduation, they had raised seed funding of $4 million. They invested $2 million in loans – $500,000 of the capital raised among classmates and the rest among alumni – to 100 Stanford students. Some in the school’s administration grew concerned about the impact the group’s fundraising from alumni might have on donations to the school, Macklin says. “People are just naturally protective of their patch. We were able to take in a few of our investors who were able to convey that this wasn’t going to impact their giving.”

With the money, they released their first round of loans, about $20,000 each to 100 GSB students. Their 6.24% loans (dropping to 5.99% after graduation for debtors who agreed to automatic payment deductions) were considerably cheaper than federal government loans, with none of the origination fees that can add thousands of dollars in costs.

SoFi COO Aimee Young, right, with company VP Sonja McIntosh

SoFi CMO Aimee Young, right, with company VP Sonja McIntosh

They expanded their loan program to other U.S. schools, and to undergraduates. By the end of 2013, SoFi had drawn $77 million in capital, and was lending $140 million to more than 1,700 students in 100 schools. However, says the company’s chief marketing officer, Harvard MBA Aimee Young, SoFi was very much in startup mode even when she joined a year ago. “They didn’t have a cleanly defined brand position. There was no cohesive messaging architecture. We didn’t have that basic structure in place.”


Now, SoFi offers MBA student loans, student loan refinancing, and personal loans. For the MBA loans, the degree must be coming from one of 24 top business schools, including those at Stanford, U.C. Berkeley, Harvard, MIT, Duke, Columbia, and UCLA, where the default rates tend to be substantially lower.

SoFi’s current student loan refinancing averages $70,000 to $80,000 per student, with a record loan of $650,000 for a dental surgery student. “That individual we’re probably saving something like $100,000,” Macklin says. According to company figures, the average student loan client saves nearly $12,000 on a $71,000 loan balance by refinancing with SoFi.

The company even markets personal loans for weddings, “So you can focus on your special day, not how to pay for it,” according to promotional material online, which offers fixed-rate wedding loans of up to $100,000 to cover everything from the engagement ring to the wedding day to the honeymoon.

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