• August 30th, 2014

SoFi lets you invest in your school’s next great grads

Roizen head shotFor Heidi Roizen, Stanford University is more than just the place at which she earned her degrees. It is also a community.

Since completing her MBA in 1983, the entrepreneur has held a number of prestigious leadership roles, and has achieved success as a corporate executive, corporate director, venture capitalist, and educator. Through it all, she has held a great affinity for her alma mater, and today, has found a novel way to give back.

Through SoFi, an organization that taps into alumni communities to offer students and recent graduates a better deal on their student loans, Roizen has been able to invest in the future of current and recently graduated Stanford students. It has also provided her an investment opportunity with a personal approach.

“For me, the attraction was that I was able to put 401K money to work, money that I don’t need for a long time, and money that has relatively fewer investment options than my free cash,” she explains.

SoFi connects students and alumni through a dedicated lending pool that allows alumni, specifically those that qualify as accredited investors, to provide educational funding for students from a specific school. The company is set up in a way that benefits both students and alumni as it allows borrowers access to a lower fixed loan rate than they’d receive from other loaning institutions, and provides an investing opportunity for the alumni, who have the option to invest through a tax-deferred IRA or 401K account.

However, the benefit is more than just financial. The company also touts a networking element, in which both sides gain from the connections formed. SoFi refer to this as a “double bottom line” return, in that it offers both a social and financial benefit (hence the company’s name – SoFi).

“With SoFi I now have the opportunity to make a more personal bond with a group of students for whom I may be able to provide more than just a loan,” says Roizen.  “I could, for example, provide career advice or connections for future employment down the line.”

To Adam Boyden, SoFi’s chief operating officer, this is a big reason for the company’s success to date. Launched by a group of Stanford Graduate School of Business students in the fall of 2011, the company boosts $90,000,000 loans funded as of March, 2013, with zero default since inception.

“Because we are connecting alumni with student or graduate borrowers, we are injecting not just a financial transaction, but also a social transaction,” Boyden explains.

Because of this social element, Boyden believes that borrowers are less likely to default.

“The borrower does not want to upset the very people that will be their prime asset when graduating from the school, which is the alumni.”

However, no matter how good the borrower’s intentions may be, things beyond their control may arise.

“Some of our borrowers are going to get into trouble in the future,” says Boyden, suggesting that, for example, some borrowers may get laid-off if in the future if their employer hits a rough patch.

“But because of our community they’re able to actually leverage people who not only have a social reason to help them because they are part of the same school community, but also have a financial reason to help them because these are people who have actually borrowed money from them.”

SoFi believes that this will have a significant positive impact, helping people go through challenging times as they are grow their careers after school, something appealing to lenders such as Roizen.

“I love their idea of creating lending circles, where students can all promise to hold each other accountable and reap rewards for doing so,” she says.

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