It's a very interesting concept and I applaud those willing to do this but for me there are too many variable that are unknown. If students are in certain majors they may never be able to pay back their loans unfortunately too many still view their college education without viewing their ROI. I would need more a more stable investment that I could use to fund my own children's college education, it's a good option for the philanthropist though.
Re: Wonder about Terms
cat tail
5/24/2012 12:49:26 PM
Every investment is a gamble. Need I mention Facebook? At least this one is associated with something that could be good for society as a whole.
The reason we decided to focus on student loans is because it's a $1 trillion industry but completely broken
I agree with StreetSmart that Stanford B-school isn't representative, but since the loans aren't dischargeable in bankruptcy, that mitigates the risk.
The problem with student loans, which we've discussed here before; is perspective - Too many students load up on 'whatever it takes' debt to get degrees that are closer to 'worthless' than 'priceless'.
SoFi seems to be addressing that by looking for schools where the debt loads are better matched to incomes that students can expect at graduation.
Re: Wonder about Terms
tokyogai
5/24/2012 12:35:32 PM
That makes it seem much better for an investor. I hope this plan succeeds.
Re: Stanford Business School? Really?
Street Smart
5/24/2012 12:27:18 PM
@Sherri, your explanation of the concept was crystal clear from your post. Maybe my point wasn't, which was that Stanford Business School isn't very representative of the "ties that bind" alumni to current students for many reasons:
1) Upscale nature of the market
2) Relative lack of debt going in
3) Ability to repay
4) Graduate school versus undergrad environment (where the real need probably lies)
4) Small, close-knit, "You'll never eat lunch in Silicon Valley again if you don't repay" alumni base.
All I'm saying is that on a spectrum from say, Stanford Business School to the University of Phoenix, Stanford's results might not translate to a broader sample. A well-known Eastern business school's either for that matter. I would expect the default rate to be a LOT higher in other populations.
Re: Stanford Business School? Really?
Sherri Cruz
5/24/2012 12:04:07 PM
@streetsmart: The idea is that if you know the person you owe money to and have some sort of relationship with that person, you are more likely to pay back the loan.
Re: Stanford Business School? Really?
Sherri Cruz
5/24/2012 12:01:01 PM
I didn't mention it in the post, but SoFi has a separate nonprofit for alumni to help students in need.
Re: Wonder about Terms
Sherri Cruz
5/24/2012 11:56:13 AM
@tokyogal: These student loans are like any student loans -- they can't be discharged in bankruptcy. But from what I gather, SoFi has flexible repayment plans available. SoFi tries to head off those sorts of problems by helping students land jobs or by giving them career assistance and by establishing loan programs at schools where the default rates are low.
The trick for students is to make sure that the education you get is worth the debt that you take on.
Re: Wonder about Terms
Dex
5/24/2012 11:07:29 AM
The innovative nature of this concept may be the best thing about it Noreen...Yep, you are right, time to think outside the box.
I love the concept from the pure standpoint of its innovation. It's time for change in college financing, and new ideas are a welcome change.
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