SOFI: Social Finance


Industry Financial services
Founded August 2011; 6 years ago
Headquarters San FranciscoCalifornia
Key people
Anthony Noto (CEO) former COO of Twitter
Products Student loan refinancing
Personal loans
Parent loans
Wealth management


SoFi was founded in 2011 by Mike Cagney, Dan Macklin, James Finnigan, and Ian Brady, four students who met at the Stanford Graduate School of Business. The founders hoped SoFi could provide more affordable options for those taking on debt to fund their education.The company’s inaugural loan program was a $2 million pilot at Stanford. For this pilot, 40 alumni invested an average of $50,000 to 100 students.

Business Model

SoFi originally utilized an alumni-funded lending model that connected students and recent graduates with alumni and institutional investors via school specific student loan funds.Investors received a financial return and borrowers received rates lower than the federal government offered. The company sought to minimize defaults by focusing on low-risk students and graduates.

As SoFi’s product offerings expanded to include mortgages, mortgage refinancing and personal loans, the company moved away from an alumni-funded model to a non-traditional underwriting approach focused on lending to financially responsible individuals.

Customer Profile and Underwritting

SoFi uses an underwriting model that examines free cash flow, professional history and education in addition to a history of responsible bill payment to evaluate its borrowers. 

But no matter how innovative their underwriting algorithms and evaluations may be,typically, the best indication that an applicant will receive a favorable interest rate is nearly always their credit score, often paired with proof of high income. That said, both SoFi and Earnest will look further into an applicant’s background and financial status. SoFi’s underwriting process requires that a borrower have graduated from a selection of Title IV colleges, have a strong monthly cash flow, and either have a job with significant income or have a job offer with a start date within 90 days. They also require a “responsible financial history” but there isn’t much elaboration on what that entails.

Earnest analyzes savings patterns and career trajectory in order to provide rates and terms that are tailored to individual applicants. Their claim to investors is that this results in identification of less risky borrowers, which they are able to attract with suitably lower interest rates. Earnest considers factors such as whether an applicant has invested into a 401k, and their past employment history and future job growth potential. Interestingly, both SoFi and Earnest claim they technically have no minimum FICO score and no minimum income, and truly evaluate an applicant individually. Of course, both companies also consider their exact underwriting processes to be trade secrets, making it a little difficult for applicants to thoroughly gauge ahead of time their chances of approval and likely interest rate.

SoFi’s average customer has a six-figure loan balance and a rate of 8% or higher. Students who have borrowed $100,000 or more often have done so to attain postgraduate or professional degrees. Consumer finance site NerdWallet indicates that the average approved borrower at SoFi has an annual income of $130,000 and an average credit score of 766. From this we can infer what kind of borrowers fit SoFi’s profile: lawyers, doctors, MBAs, and other professionals who are high earners.

It turns out that private lenders are targeting a very small slice of student loan borrowers. To put things in perspective, as of September 2017, only 6.9% of all working professionals make $130,000 or more per year.

But what about the average student loan borrower? Going back to the calculator, an undergraduate degree borrower with $30,000 in loans who refinances from 6% to 4.5% would only save $22 a month.

Diversifying Products

In 2013, the government changed the way it set interest rates for federal student loans. It started indexing student loan rates to the 10-year U.S. Treasury note.

The decline in federal student loan rates is now accompanied by a rise in short-term market rates. As the difference between federal loan rates and refinancing rates gets smaller and smaller, at some point the savings won’t be big enough to entice borrowers to give up federal loan repayment protections. Even though federal loan rates have recently spiked to 4.45%, this higher rate is still lower than the lowest current rates offered by SoFi.

The new-age private student lenders seem to recognize that their prime value proposition may have an expiration date as a viable business, which is why they are diversifying into other product areas like personal loans, mortgages, and wealth management. In other words, they’re becoming banks.

$30B in funded loans, $2B in member seavings, 460k+ members

Member Benefits

SoFi membership has its benefits.

Networking events—not bank branches.

Regularly host member events like dinners, happy hours, educational events, so you can connect with members in the SoFi community.

Over 400+ events—free for all SoFi members.

Career coaching for all members.

From resumes to raises, our dedicated team of career coaches are here to help you make your next move.

$795 value—free for all SoFi members.

Complimentary financial advising.

 Put your financial goals in reach with guidance from our team of licensed advisors.

$750 value—no cost for all SoFi members.

Additional rate discounts on loans.

Get a rate discount✝✝ on any additional SoFi loans of a different type—just for being a SoFi member. Those savings can really add up.

Get a 0.125% rate discount just for being a member.


Student Loan: Commonbond, Earnest etc.

Mortgage Loan: Lending Home etc.

Personal Loan: Lending Club, Prosper, Upstart etc.

Wealth Management: Wealthfront etc.


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