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With SoFi, Fellow Alums can Help you Refinance Student Loans

With SoFi, fellow alumni can help you refinance student loans at rates as low as 4.99 percent fixed or 2.92 percent variable (with AutoPay discount).

When bold new ideas come along to help you take control of your finances, we love to tell you about them; that’s why we’re here.

We also strive to be transparent, because we’re human. David and I have always shared about how we’ve messed up our finances in the past, and then took positive steps to regain control. It’s not about perfection, but correction. We all make mistakes, or get into tough spots. It’s how we respond to those missteps and obstacles that makes all the difference.

That’s why this column is particularly special. If there’s one financial lament I hear from readers and students, it involves how student loan debt is strangling them. As the founder of AOL’s Money College, I asked former Loyola University Chicago student Fruzsina Eordogh to tell the story of her travails with Sallie Mae. That column touched a nerve: More than 1 million people read it, making it one of the most popular pieces that week.

Got Student Loans? You’re not Alone!

Today, young adults carry around more than $26,000 in student loan debt on average, according to The Project on Student Debt. It’s an albatross for young adults trying to establish themselves financially. Can anything be done? Who’s out there to help?

Sofi provides student loan refinancing funded by alumni of your school.Dan Macklin (pictured), the co-founder of SoFi, wondered much the same while finishing up at the Stanford Graduate School of Business. It was 2011, and over drinks with a few of his classmates, the group talked about the state of the student loan realm—a state of emergency, if you prefer.

“We were horrified by the high rates people were patting for student loans, and 93 percent of loans are made by the government, so there is very little choice for students out there,” Macklin says. “It’s an underserved market and we wanted to bring a new solution, something that was completely fresh.”

And so Macklin set to work immediately. He graduated Stanford on a Saturday and started SoFi the following Monday.

Enter SoFi: Student Loan Refinancing With Help From Your Alumni Network

SoFi, short for Social Finance, is a business that leverages the financial power of university alumni to get strapped graduates consolidation and better interest rates on student loans — as well as a  host of other services not typical of conventional lenders.

Let’s say, for example, that you lose your job. SoFi’s network has set up uses those same alumni connections to help you get a new job, or get started with professional development. (For that reason alone, I wish SoFi existed and that I was a part of it when I lost my Chicago Tribune staff job in 2009.)

As for the loan rates, they’re likely to beat anything you currently — even through the federal government. If you sign up for a fixed rate loan with AutoPay deductions, you’ll be starting as low as 4.99 percent APR. For variable rate loans, the starting rate with AutoPay is 2.92 percent APR.

SoFi will also originate new student loans, but borrowers looking to refinance student loans will likely see the greatest financial benefit.

SoFi is still very much a growing concern, and so your school may not be on the list of 100 schools represented. (My alma mater, Rutgers, has yet to join forces.) Visit SoFi to see if your school is on the list. If it doesn’t, Macklin and the SoFi team encourage you to talk to your school’s financial aid office, alumni office, or your own community within social networks to get the ball rolling, or to contact SoFi directly.

All of this made me wonder: Why would alumni and institutional investments get involved in helping SoFi lend to students and graduates of your college, my college, or any college? Here, Macklin appeals not just to school spirit, but the community spirit that once drove the banking industry.

“It is simple: It’s a return to the community banking days where people banked within their towns and villages, and everyone knew everyone” Mackin says. “It has a bit more heart and soul to it.”

Yet clearly, SoFi approaches this with 21st Century savvy. Based in San Francisco, it combines social networks, high tech and a fresh, entrepreneurial vision to create a breakthrough financial tool where none existed before.

In two years, the company has grown to 70 full-time employees, with 2,500 borrowers, and $200 million in loans funded. SoFi is also running an entrepreneur program to help students and alumni take the next step towards making their business dreams come true.

“We help to connect them with investors and help them to start this business,” Macklin says. “We had two entrepreneurs who went the through this last year. One sold [their business] to Intuit and the other raised $1 million. We can claim some small part of helping them out of their success.”

All of this and more explains why we’re teaming up with SoFi to lend a hand to Money Under 30 readers. If your student loans have you over a barrel, or feeling despondent about your future, then we can say in this case you’re truly not alone: alumni through the SoFi network are waiting to help.

Click here to find out if you school is in the SoFi network and begin a student loan refinance application.

Also, Money Under 30 readers who are approved for a SoFi loan will receive $100 off their first interest payment.

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Affiliate disclosure: SoFi is an affiliate partner of Money Under 30, meaning if you become a SoFi customer, we may receive a referral commission. If you choose to support Money Under 30′s free content in this way, thanks! 

About Lou Carlozo

Based in Chicago, Lou Carlozo is a personal finance contributor for Reuters Money, a columnist with DealNews.com, and a former managing editor at AOL's WalletPop.com. Contact him with story ideas for Money Under 30 at feedbacker@aol.com, or follow him via LinkedIn and Twitter (@LouCarlozo63).

Comments

  1. It reminds me a little bit of Lending Club, but geared towards student loans and limits the donars to the alumni of the school. I think it would be a while before my school would make the list since I went to a small division III school. I do like the idea though of having a network where I can refinance my loans at a lower rate. I have no issues paying back what I owe but wish I wouldn’t have to pay back so much in interest.

  2. I wouldn’t recommend them as a viable option – my husband and I clear six figures per year but they refuse to consider his income and denied me the loan since I had only $1,300 of free cash flow from my salary rather than the $1,500 minimum. So unless you happen to be one rich post-grad without relying on a two income household – good luck trying to get them to loan to you.

    • JL – Elizabeth from SoFi here. We’d love to talk to you about your individual circumstances and see if we can help. Give Sonja, our head of customer service, a call: 415.697.2029

  3. I have been reading Money Under 30 for a while, and I am disappointed to read this post. While there is a clear disclosure at the bottom of this post, I still think you are doing the readers a disservice with this “advertorial.”

    My boyfriend is deep in student loan debt from law school, and he received something in the mail from SoFi this weekend. We looked into it — the reality is very few borrowers will receive a 4.99% interest rate. That was noted clearly on the mail ad (and missing from your post). The variable interest rate offer is also a red flag. Entering into a loan with a variable interest rate is very risky. While many federal loans have interest rates as high as 7%,8%,9%, one of the benefits of a federal loan is a fixed rate. You also receive special protections that private loans do not offer, such as deferment, forbearance, and access to other programs such as IBR and PAYE.

    I am disappointed that your post lists none of the risks of trading a federal loan for a loan through a private lender like SoFi. Many people under crushing student loan debt are desperate. Sites like Money Under 30 should give borrowers a full picture so they understand both the risks and advantages of any product. SoFi could be helpful to some people, but it is not a good idea for everyone.

    Please be more careful in the way you present these “partnership” posts.

    • Thanks for your comments VA – we at SoFi appreciate your feedback and wanted to respond directly to some of your concerns.

      While you are correct that our most-qualified borrowers get the best rate, we have a narrow range of rates for everyone who qualifies (only a 1% difference – such as 4.99%-5.99% for a 5-year – for any particular length of loan). And all of our rates are below what most are paying for PLUS & Direct Federal Loans.

      Variable rates are not right for everyone, which is why we offer both variable and fixed rate options. However, if you plan to pay off your student loans quickly, a variable rate loan may be a good choice, here’s how to choose what’s right for you: http://bit.ly/16cDxmW

      As for borrower protections, you are correct that most private loans do not offer identical benefits to the federal loan program and this is something we make sure our borrowers are aware of before refinancing. However, we’ve worked with dozens of our borrowers who find themselves in an unexpected financial situation offering loan forbearance or modified payment schedules when appropriate. If a borrower becomes unemployed, we call them up to offer up the help of our on-staff job placement & professional development experts.

      More than anything, we promote smart borrowing. SoFi is a great solution for our community of nearly 3000 borrowers and growing, but we know it’s not right for everyone. We encourage people to explore their options and select the lender, interest rate, loan term, and borrower benefits that are best for them.