‘A 401(k) of the future’: How SoFi wants to grow student loan refinancing with WeWork
- SoFi struck an agreement with WeWork to offer discounted student loan refinancing rates for WeWork employees and members
- Student loan repayment assistance is becoming a workplace benefit from employers, and SoFi is aiming to get a piece of this market
SoFi wants to sell its loan refinancing products to WeWork and its member companies by offering them an additional 0.125 percent discount.
The San Francisco-based financial services startup that once targeted alums from a select group of universities has been broadening its potential customer base over the past year. Last week, it announced a forthcoming checking account, initially available to its own members with a plan to expand it to others, and now it’s going after startups looking to offer student loan repayments as an employee benefit, it said Monday.
A growing number of companies have been adding student loan repayment as a workplace benefit. With $1.4 trillion in outstanding federal and private student loans, it’s a huge market. Some employers are offering the benefit directly to employees, while others are working with financial service providers. Incumbents like Fidelity are also offering this service to employers, along with smaller companies like tuition.io and Student Loan Genius.
“The bigger story is that the student loan pay down as a benefit is a massive industry that hasn’t even got going yet — every Fortune 500 company is going to have this as a benefit in the next year or two,” said Peter Renton, analyst and founder of Lend Academy.
The program will be part of SoFi at Work, a two-year-old service that lets employers integrate SoFi’s products into employee benefits packages. For example, companies can offer employees discounted loan refinancing from SoFi as a tool to get new recruits. The WeWork agreement will allow 3,000 WeWork employees and 175,000 WeWork members to access discounted student loan refinancing and other SoFi member benefits, including career help and member events.
SoFi currently offers student loan refinancing, mortgages and personal loan products to partners. Reaching out to affinity groups gives SoFi quick access to large numbers of clients as it grows its presence outside of its original client base, said Aite senior analyst Denise Valentine. The company’s member benefits are a plus for millennials who crave a personalized service experience.
However, Renton said he’s skeptical the small rate discount will be able to draw in large numbers of participants.
“It’s going to encourage those people who are thinking about it anyway, but not a large number of people,” he said.
SoFi plans to grow its offerings for employers, said Wayne Thorsen, SoFi’s svp of marketing and strategic partnerships, noting that some SoFi at Work partners are matching employee student loan payments on top of discounts offered on refinancing. It’s a growing area for SoFi as more employers entice recruits with loan repayment assistance.
“Some of our more forward-thinking partners match a certain amount of contributions or make a specific payment towards student loans of an employee — it’s a new way of looking at it,” he said. “We think about this employee benefit as a 401(k) of the future.”
Photo courtesy of WeWork