Melbourne-based start-up Study Loans has taken a leaf out of US lender SoFi’s playbook as it plans to securitise student loans and potentially break into the domestic mortgage market.
Mortgage Business understands that San Francisco-based SoFi, which raised US$500 million earlier in the year to fund a global expansion, has obtained its Australian Credit Licence (ACL) and will soon begin offering home loans Down Under.
SoFi was established in 2011 by a handful of Stanford students eager to find a more affordable funding option for their studies. The group went on to form a peer-to-peer model before moving into securitisation. They now offer mortgages and car loans and have funded more than $20 billion to date.
SoFi’s success has been watched carefully by Melbourne-based Brett Shanley, co-founder and CEO of student loan provider Study Loans.
“SoFi is an incredible growth story,” Mr Shanley told Mortgage Business. “Within six years, they have grown their market cap to about $50 billion and moved from a peer-to-peer to a securitisation structure.
“Have I looked at SoFi and have I taken that into consideration? Absolutely. If I can emulate a tiny amount of that success, I would be incredibly proud.”
Mr Shanley recognised that the world of education is shifting with the forces of technology and government funding. Lengthy university degrees are being replaced by what he calls ongoing learning in “bite-sized chunks” as the workforce adapts to new industries and the educational requirements underpinning them.
Frustrated with the federal government’s budget cuts for tertiary education and job-specific training programs, Mr Shanley said that there is a shortfall of billions of dollars. He added that a growing number of education providers are not on the government’s funding list.
“We are a data-driven business looking at the financial and educational attributes of the borrower. What is the likelihood of them completing their course? What is the likelihood of an increase in salary, of their ability to move into a new industry? We are looking at things that lenders traditionally haven’t looked at.
“We want to be the first people to securitise student loans here in Australia.”
The company has raised $5 million debt equity to distribute for the first tranche of loan applications, with help from investors Simonds Family and RMY Corp. They have also completed an additional seed round of $2 million equity to get the business off the ground.
Perpetual are “sitting in the wings” and have been appointed as trust manager and security trustee, Mr Shanley said, adding that a warehouse funding facility is also “ready to go”.
While the lender will be focused on funding Australian tertiary education students for now, Mr Shanley can see significant opportunities for diversification similar to the SoFi model.
“Our current customers are in their 20s," the CEO said. "They don’t have a mortgage or any assets. And they don’t trust the major banks.
“In six years, we will have a loan book of people in their late 20s and early 30s looking for car loans, business loans and mortgages. There is a pipeline of future customers there.”