The education sector has been one of the hardest hit by current economic uncertainty. Social Finance is looking to stand in the gap with a student loan solution that taps alumni for funds, and it just raised $77 million in series B funding to accomplish the task.
“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,” SoFi CEO Mike Cagney said, while noting that higher education is in the midst of a worsening student loan crisis.
SoFi’s lending program taps alumni to invest in funds for students from their alma mater and has already processed over $60 million in loan applications. It is already active on 78 campuses, including Stanford, University of Michigan, Smith and Swarthmore. The company plans to expand to additional schools this fall and aims to commit more than $200 million in loans by the end of this year.
The $77 million round shows SoFi has come a long way in a short time, though the company of course still has to make its way down the runway. The startup was founded last fall by students at Stanford’s Graduate School of Business with a $2 million pilot at their university.
Baseline Ventures, which has seed investments in Instagram and Twitter to its name, led SoFi’s most recent funding round, with venture capital firm DCM and Chinese social networking site Renren joining in. One of these companies is not like the other. The investment from Renren, often referred to as China’s Facebook, is worth noting, as the company has over 160 million users, but has struggled with monetization. The company’s $49 million investment made up the lion’s share of the round.
Renren CEO Joe Chen explained in a statement the company’s reason for investing:
“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. 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.”
A growing class of Chinese students eager to study abroad is giving rise to a number of startups, such as interview platform InitialView, looking to connect them with US universities. Renren’s investment in SoFi should also help strengthen ties between the two countries’ education sectors.
Image credit: Wikimedia