As the cost of a college education continues to rise, a startup called SoFi is offering a way for alumni to offer students financial assistance and more.Co-founder and CEO Mike Cagney describes the current student loan system as a “classic market failure,” resulting in students who are stuck with high interest rates and heavy debt that they struggle to pay off. He says that if you can remove government from the equation specifically government loans and replace it with alumni, then “you create a very virtuous cycle.”So that’s what SoFi tries to do. The company is creating university-specific funds for alumni to invest in, and those are used to make loans to students. SoFi says it’s offering to cover the full cost of attendance for participants, with loans ranging from $5,000 to $200,000. The loans are 6.24 percent fixed rate, and they can drop to 5.99 percent, lower than federal Stafford and PLUS loans and many private loans. So Students get relatively low interest rates, while alumni get a significant financial return.The benefits aren’t purely monetary. Through its website, SoFi tries to connect the participating alumni and students, for example if someone is looking for mentorship or help with their job search. Cagney notes that the loans create a financial incentive for alumni to pitch in — after all, they want students to do well so they can pay off the loans. On the flip side, he says that some alumni don’t care about making money from the investments at all, and want to use the interest payments to a nonprofit organization that will help the students something that SoFi is investigating.Of course, alumni donations are already an important source of funding for university programs. Cagney says these loans can be made from tax-deferred accounts like a 401k, so they shouldn’t divert money from traditional alumni giving.Cagney and his co-founders ran a pilot program at Stanford where they attended the Graduate School of Business last fall, raising a $2 million fund from 40 alumni. This fall, SoFi is expanding to 40 locations and hopes to lend out $150 million.As for its own funding, the company has raised $4 million from Eric Schmidt’s Innovation Endeavors, and board members Joe Chen founder and CEO of RenRen and Steve Anderson founder of Baseline Ventures.
Archive for the ‘Changemakers’ Category
There are several early phase companies in the finance sector that develop the new web 2.0 era or whatever the right name is. Why can’t it be as easy as with PayPal to open a bank account and transfer money? Why don’t we have a lot of direct investment markets on the Internet without high management fees? Why couldn’t we build an investment group online with our friends and work like an e-fund and diversify our investments?
Often the answer is, because the regulators and incumbent finance companies want to keep the old models and protect them. They say it is better and safer for ordinary people; they don’t trust that ordinary people actually can be responsible or smart. It was the same before the French revolution, the establishment saw democracy as dangerous when ordinary people could not be trusted to make the right decisions. IBM didn’t believe ordinary people would ever need a computer, they thought a few computers for professionals is enough. And aviation authorities supported local monopolies and stated that state-owned-airlines offer enough options and are safer.We are now starting to see this change coming to the finance sector. The traditional finance sector is really struggling. Yet it is not only about money, it is also about how people perceive banks, funds and finance consultants. People are losing their trust. Crowd funding plays a part in this development. The foundation is constantly being built, but the revolution doesn’t happen over night. We as a community, have got a good start and step by step also regulators and traditional finance companies start to understand our journey. It is important to develop the startup funding market to work well. But at the same time, it is as important that the investment market works well.
The Robin Hood Tax campaign started as an idea. People loved it. We became a movement. And we’re still growing.
We’re committed to reducing poverty and tackling climate change by taxing financial transactions.
We believe it’s time to rewrite the contract between banks and society.
We are charities, green groups, trade unions, celebrities, religious leaders and politicians.
We are world leaders – President Sarkozy of France, Chancellor Merkel of Germany, Prime Minister Zapatero of Spain, among others.�
We are businesspeople – FSA Chairman Lord Turner, financier George Soros, entrepreneur extraordinaire Warren Buffet.
We are economists – Nobel Prize winners Joseph Stiglitz and Paul Krugman, Earth Institute Director Jeffrey Sachs and 1,000 other economists from across the world.
We are 256,000 Facebook friends, and tens of thousands of people taking action around the UK. We are over 115 organisations, including charities like Oxfam, Barnardo’s and Friends of the Earth, all the major trade unions and faith organisations such as the Salvation Army.�
We are part of a movement of campaigns in more than 25 countries around the world with millions of supporters.
We are a force to be reckoned with, and we’re demanding justice.
Every so often, we can be witnesses to disruptive innovation in action. It’s exciting when it happens – for those who see it. Alas, most don’t see it – although they will eventually. Which pair of glasses are you peering through?For those who can see it, there’s disruptive innovation in action at the moment in the merchant acquiring sector of the card payment system. The pieces on this particular game board are beginning to be moved around.In one case, it’s the result of the combination of powerful technology Apple’s iOS platforms in the the hands of skilled designers and engineers from outside the traditional card payment system. They’re taking a beautiful new and powerful platform and shaping it to accelerate change in a stodgy legacy world. Envisioning a new world that leaves the legacy behind. After all, why not?In another case, one of the important incumbents is reshaping its approach to an increasingly important corner of the market. It’s adapting to the new conversation that market has been having with stakeholders and beginning to evolve its traditional model into a next generation solution.I’m reminded once again of the Albert Camus quote: “Great ideas come into the world as gently as doves.” There’s a bit of fluttering going on – all around. Can you see it, feel it? Are you adapting/adjusting or just sailing along?