SoFi in the News: Marketplace APM & American Banker
SoFi continues to make waves in the media this week on public radio and in print. We were thrilled to see top business radio program Marketplace bring much needed attention to important education issues. In this recent story, Amy Scott reports on the challenge of refinancing Federal student loans. While one youth advocacy group is encouraging the government to take action on this issue, SoFi already helps graduates refinance their private and Federal educational debt!
It is possible to refinance student loans — privately. SoFi makes loans to students and graduates of certain colleges. The loans are funded by alumni of those schools. For a re-fi CEO Mike Cagney says the average borrower comes in with a rate of about 7.2 percent.
“We’re refinancing them into rates between 6 and 6.5,” he says. “And the borrower’s savings have been about $10,000 over the life of the loan.”
American Banker – an essential resource for the banking and financial services community – demonstrated the importance of the student loan issue in a profile on SoFi which made the day’s list of top stories.
Reporter Kevin Wack explains the pivotal role community plays in the SoFi lending model:
SoFi hopes that another wrinkle in its business model will help ensure that its default rate stays low. The company is using funds invested by wealthy alumni of the universities where it operates to establish loan pools at each school, and then seeking to foster connections between the borrowers and lenders.
The idea is that borrowers who have a deep connection to their lenders will be more likely to repay. “If I borrow from my community, and I default, my default is transparent to the community,” says Chief Executive Mike Cagney.
The default rates on student loans at these schools are typically far below the national average. SoFi gets additional security by making many of its loans to folks who have completed their degrees, have good jobs, and are looking to refinance existing debt.
“By only refinancing for students who graduated, and moreover students who graduated from these[…] programs, they really are minimizing the risk,” says Andrew Gillen, research director at Education Sector, an independent think tank.
We continue to be excited about opportunities to talk with incredible media outlets about the important issues surrounding student loans. You can take a look at other coverage featuring SoFi on our press page.