Mediaboss Marketing

SAN FRANCISCO--(BUSINESS WIRE)--

Social Finance Inc. (SoFi) today announced that it has raised $77.2 million in series B funding led by Baseline Ventures and joined by DCM and Renren Inc. (RENN), Chinas largest social networking site. SoFi is an innovative lending solution that gives students access to lower loan rates than Federal Direct and PLUS loans with similar borrower protections by fostering social and economic connections with alumni investors. The new capital will be used to help SoFi grow its alumni investor base and reach new student and graduate borrowers as it expands beyond 78 schools this fall.

With more students applying for loans for post-secondary education coupled with state budget cutbacks for higher education and a federal loan market that can punish good borrowers, the student loan and debt crisis is getting worse before its going to get better, said Mike Cagney, CEO of Social Finance. Through SoFi, we have been able to create a whole new market that gives students better alternatives to fund their education while strengthening ties to their alumni community.

The SoFi program works as a dedicated lending fund that offers students a better fixed loan rate than todays unsubsidized Federal Direct and PLUS loans. At the same time it enables alumni to connect with their alma mater while earning an attractive return. The program also fosters interaction between students and alumni through a unique social platform that combines on-line and off-line connections that facilitate financial literacy, career mentoring and in-school project assistance ultimately helping to reduce lending rates and lower loss rates for students.

To date, SoFis lending program is available in 78 schools ranging from large universities such as Stanford and University of Michigan to smaller colleges such as Smith and Swarthmore. It will expand beyond 78 schools this fall.SoFi has generated more than $60 million in loan applications and is on a path to commit more than $200 million in student loans in 2012.

When taking the current and foreseeable macro environment into account, there is a massive opportunity for SoFi to disrupt the entire finance market, said Steve Anderson, founder of Baseline Ventures. Alumni across the country want to be more involved with their universities and many have savings sitting on the sidelines earning no interest. At the same time students need lower loan rates to make college more affordable and need help with career decisions and mentoring. SoFi makes the economics work for everyone: students benefit from lower rates and alumni support, and alumni earn better returns and add value to their schools through SoFis community lending engagement model.

In March, the Consumer Financial Protection Bureau announced that student debt had passed $1 trillion. In addition, a recent report from the Federal Reserve Bank of New York revealed that the delinquency rate for student loans, which is currently at 8.9 percent, increased during the second quarter of 2012. This compared to the delinquency rates for mortgages (6.3 percent), credit cards (10.9 percent) and auto loans (4.2 percent) which all decreased.

There are very few companies that do social good while also leveraging next generation financial and social networking services, said David Chao, co-founder and general partner, DCM. Student loans are a major national issue that needs to be resolved. Through SoFis unique approach they are not only helping students through financial literacy and reducing their loan rates, but also enabling alumni to connect with their alma mater and truly give back to their community.

As a pioneering company pushing the potential of social infrastructure, we closely observe and participate in other online businesses that are leveraging social to create, market and distribute products at scale, said Joe Chen, CEO of Renren. SoFi lies at the nexus of the social revolution, which began with social gaming and social ecommerce and is now poised to transform finance and education.

About SoFi

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Social Finance Raises $77 Million to Address Student Loan Crisis