There’s a student loan debt crisis brewing nationally, as college grads, faced with unemployment, have struggled with repayments. Unfavorable interest rates and institutional red tape are just some of the conditions that seem to exist only to exacerbate the problems. However, a new social network, SoFi, offers an easier alternative to traditional student borrowing, by connecting students directly to benevolent alumni for loans.
The process is rather uncomplicated. Alumni invest in a particular school’s SoFi fund, from which students then apply for loans. The interest rate for each loan is fixed at 6.24% (5.99% for auto-pay), with alumni earning a 5% return and SoFi taking 1%.
The program began at Stanford last year, initially raising $2 million from 40 alums, which was then able to fund 100 students. As of today, SoFi is expanding to 40 more colleges and universities, with committed alumni onboard.
And of course, being a social network and all, SoFi allows alums and loanees to interact with each other, so borrowing transactions that were once rendered faceless now have a real, human element to it.