Minimize Your Student Debt with Sofi

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Saving money on your student loans, ranking grad programs based on salary-to-debt ratios, plus life as a Columbia Business School grad. All in today’s show.

Today’s guest, Amanda Wood, graduated from Vassar College in 2009 with a degree in social psychology and economics. After graduation, she worked at BNY Mellon and at Brigham and Women’s Hospital in Boston. In 2014 she earned her MBA at Columbia Business School. Since 2013, she has worked in business development for SoFi. In March 2016, she became the Director of SoFi’s Entrepreneur Program, and in December, she became the Director, Business Operations & Strategy at SoFi. Welcome, Amanda!

How can students save money with SoFi? [1:20]

Students can save money by refinancing their student loans with us.

When I went to b-school I graduated with five to six different loans. What SoFi does is consolidate all your loans into one, so you only make one monthly payment to one lender, which saves time. And we can lower your interest rate, which saves money.

Do you originate loans, or just refinance them? [2:00]

We don’t do new school loans, except to parents. We refinance loans. One of the ways we can offer such great savings is by offering great interest rates, and we do that by lending to “safe” borrowers who have graduated and are employed.

It’s for US citizens and permanent residents only, and we have no plans to expand at this point. [3:25]

What are your career resources? [3:40]

We have a career services team in house that helps place borrowers.

We do a bit of reactive help – say, if a borrower loses their job we can help them find a new job.

But we also work with people proactively who are gainfully employed and want to change their job (from law to tech, etc).

What is the Entrepreneur Program? [4:50]

We started when we were a very young company. We want to help people progress.

For participants in the Entrepreneur Program, we waive the income guidelines (since many entrepreneurs pay themselves only a token salary in the early stages of their company). And they can defer repayment for up to a year.

We have a kickoff day in San Francisco where participants can meet each other and discuss their ideas. We coach them through various stages of their business – pitching, marketing, etc. And we conclude with a demo day – we’ve seen a number of investments result from that.

Does interest accrue during the deferment? [7:10]

Yes, and some people opt to pay interest-only payments during that time.

You mentioned the income requirement. What are your other criteria for underwriting? [7:45]

We’re looking at ability to pay. So we look at their monthly income, expenses (based on where they live, etc), their total loan balance, and their other debts.

We’re also looking for a generally responsible financial history: no recent bankruptcy or significant late payment history.

What is Return on Education? [9:20]

We realized we have all this fantastic data on an interesting group of people – we know how much people are making, what they studied, how much debt they have. We wanted to use that to help people make decisions about what schools to go to.

We look at the salary to debt ratio about three years after graduation, and that’s how we create our rankings.

Let’s look at the MBA rankings for a moment. These compare earnings to debt loads 3 years after graduation, correct? Some surprises (BYU (2.0), Villanova (1.9), U of Wisconsin – Madison, U of Kansas) and some to be expected (Stanford 1.9; HBS 1.6; bunch at 1.5. Your alma mater Columbia is at 1.4.) Did anything surprise you about these numbers? [12:40]

It makes you realize how debt and income go hand in hand. Schools that have great reputations tend to lead to great careers. It’s refreshing to see smaller programs (and programs that may be less highly regarded) on these lists: you don’t need to go to a top school to be successful later in life.

Do you think about going more than three years out – say, five to ten years? The ratios might change. [14:45]

Yes, that’s important. We’re still a young company and most of our borrowers are recent grads, so our data is recent. But we’ll refresh the numbers as time goes on.

Deciding to go to school shouldn’t be entirely determined by salary/debt/RoED, but salary is a realistic consideration. [17:30]

Yes, consider whether the degree you’re applying for will allow you to do what you want to do.

Linda: That’s one of the things that distinguishes graduate studies from undergrad – you need to have a clearer goal and sense of purpose. [19:50]

Do you have any tips for reducing student loan debt while people are in school? [20:45]

There are a lot of things people can do.

When you’re taking out the loans – a lot of people rush and sign whatever is in front of them. Do your research and know what you’re signing, especially when it comes to important details like origination fees and interest rates.

Think about practical reality: If I’m going to have $100K in loans, what does that mean for me in real terms every month? It’s so easy to get loans that you don’t think twice.

When you’re in school, spend responsibly. Your loans may be covering your living expenses, food, travel, etc. So don’t spend irrationally.

After, take a job that will allow you to repay your loans.

I’m a strong believer in doing something you’re passionate about even if it’s not the top paying job, but be aware of the reality that you need to make your repayments.

Looking back to your time at Columbia now – what do you miss from your experience at CBS? [29:20]

I miss my friends most. People are what set schools apart.

Was there anything that could have been better? [25:40]

I really, really liked it a lot. I’m not sure I would change anything.

One of the things that surprised me was that banks and consulting firms were already recruiting in month one-two. I would start students thinking about goals earlier, especially for students considering alternate career paths.

Did CBS help you find the SoFi position? [29:20]

I think so. What they really helped with was with the “self job search.”

And me being a Columbia student helped me – when you’re a student, everyone is willing to chat and help you out. The alumni network is helpful.

It sounds like you’re glad you got the MBA. Any other reasons why? [31:20]

I came from a non-traditional background (non-profit), and I wanted to boost my technical skills. The classes really helped me round out my business knowledge.

I also loved the opportunity to travel extensively with my classmates, both before the program started and during breaks.

Do you have any tips for MBA applicants? [35:10]

Think about what your classmates are going to be like. What is the learning style? (Case, lecture?) What is the average salary, and the average debt?

As far as the application itself goes: let your personality shine through. Everyone’s resume is impressive. And you need a good GMAT – that’s all well and good. What sets you apart is the essays – that’s where they get to know you.

Any tips for a grad student looking to finance their education? [37:05]

Learn everything you can. Figure out what the cost of education is. Negotiate as much financial aid as you can. (Certain schools give more scholarships.)

When it comes to loans, pay attention to interest rates and fees, and consider different lenders and programs.