Social Finance uses a unique method to help students fund their pursuits of a higher education. Unlike traditional lenders, the start-up uses a peer-to-peer or group-to-group lending system. Social Finance, or SoFi, is funded by groups of alumni who generally receive a five percent return on their investments.
The group-to-group system allows SoFi to eliminate certain fees associated with loans. As a result they can offer more desirable, competitive interest rates, even lower than government student loans. Interest rates of government loans start at about 6.8% but SoFi is able to offer loans as low as 5.9%. SoFi is currently available at 78 institutions but with the $77.2 million they recently raised they are looking to expand to 250 colleges and universities.
[via Wall St. Journal]