How SoFi’s Funded Over $30 Billion In Loans

 

One of the largest obstacles facing Americans today is student loan debt. In 2011, four Stanford Business School classmates set-out to address this issue. Their solution was SoFi: an online personal finance company specializing in student loan refinancing, mortgages, and personal loans.

Beginning at Stanford

In 2011, Stanford Business School classmates Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady set-out to find a solution for the millions of Americans that were taking on crippling student loan debt. Their solution were personal loans made directly to students. In order to fund this pilot program, the group solicited funds from Stanford University recent grads. The group was able to raise $2 million from roughly 40 grads, each of which provided roughly $50,000 to one of 100 Stanford students. The experiment was a success.

SoFi: A Huge Success Right From the Start

Having proven the validity of the program, the following year the team managed to raised over $77 million in Series B funding led by, Baseline Ventures. The year after that, SoFi announced it had raised over $500 million through debt and equity for use in re-financing student loans. By this point the company had already funded more than $200 million in student loans for more than 2,500 borrowers from more than 100 different schools. That same year, SoFi announced it had reached an agreement with Morgan Stanley and Barclays to create a bond, backed by peer-to-peer student lending.

Expanding Beyond Student Lending

In February of 2015, SoFi announced a $200 million round of Series D funding led by, Third Point Ventures. This round would be used by SoFi to offer personal loans. By March of that same year, SoFi had also begun funding mortgages. By the end of the year, SoFi had funded over $4 billion in loans and had closed a $1 billion round of Series E funding led by, SoftBank. By the end of 2016, SoFi had funded more than $12 billion in loans for more than 175,000 lenders. That same year, SoFi also became the first startup lender to receive a triple-A rating by Moody’s.

A Sound Idea

The original model for the company was to connect students with recent recent grads from their specific schools. The program allowed the students to borrow at rates lower than what the federal government offered, and also allowed enders a nominal return on their investment via interest. When moving into mortgages the company examined historical bill repayment, education, and professional work history in order to make an assessment of the borrowers credit worthiness.

A Company on the Rise

According to the company website, to date SoFi has now funded more than $30 billion in loans for more than 600,000 borrowers. Along with lending, the company also offers members free career services, complimentary financial advising, networking events, and additional rate discounts on qualified loans. To date, SoFi has raised more than $2 billion from ten rounds of funding. And it all started less than ten years ago at Stanford.

 

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