What’s the problem with student debt?
A cooperative for student debt? What’s that?
Why did you choose a cooperative model for refinancing student debt?
How can I get involved in Salish Sea Cooperative Finance?
Why should I refinance my student loan with SSCoFi?
What interest rate does SSCoFi offer for refinancing loans?
How do I refinance my student loans with SSCoFi?
Why should I invest in SSCoFi?
What rate of return can member-investors expect?
How does SSCoFi’s model mitigate risk?
As an investor, when can I expect to get my capital returned?
Why should I become a member of SSCoFi?
How do I join SSCoFi as a member?
What does it cost to join Salish Sea Cooperative Finance?
Q: What’s the problem with student debt?
Americans currently owe $1.4 trillion in student loan debt, and the average 2016 graduate owes $37,172. Between 2006 and 2011 federal unsubsidized student loans had a fixed interest rate of 6.8% for undergraduate study, federal parent PLUS loans were as high as 8.5%, and private loans were as high as 13%. The impacts of this debt are felt in local economies, deepening generational economic inequality, and stunting millions of Washington residents’ ability to start a business, start a family, or become homeowners.
On a societal level, this greatly reduces the likelihood people will pursue more socially-conscious professions that are less lucrative, such as social work, activism, environmental law, or education. Furthermore, this debt crisis disincentivizes people from engaging in civic leadership or participating in social change.
Q: A cooperative for student debt? What’s that?
SSCoFi represents a new model in community finance, but it follows the tenets that have been established in other models: solidarity regardless of role in capital flows, relationship-based transactions, keeping capital & profits circulating locally, holistic economic development, skills-sharing and mentorship, placing a conscious value on other forms of capital, especially in this case social capital. As a cooperative, we adhere to the Rochdale Principles established in 1844. SSCoFi does something new by bringing those with capital and those with debt together, as equally empowered partners, to relieve the unsustainable burden of education debt. As such, the business model went through a lengthy vetting and due diligence process since its inception in the summer of 2013.
Q: Why did you choose a cooperative model for refinancing student debt?
Collective ownership is a powerful tool for change. Cooperatives across many sectors of the economy ensure accountability and equity for their members, while providing essential community services and products, such as clean energy access, low-cost groceries, cooperative co-working spaces and so much more. We believe this cooperative has the power to transform an oppressive debtor system into an empowering space for growth.
All of our members, whether debtors or lenders, are co-owners of this business. Becoming a member-owner provides you with many benefits and opportunities for leadership, including profit-sharing, participation in membership meetings and decisions, the option to join the board of trustees, and gives everyone an empowered stake in the organization’s decision-making process.
Q: How can I get involved in Salish Sea Cooperative Finance?
There are many ways to get involved with SSCoFi! If you have high-interest student loans, you can refinance your loans through SSCoFI. If you have money to invest and want to help tackle the student debt problem, you can invest in the co-op. Anyone can apply to join SSCoFi as a member, whether or not you intend to refinance a student loan or invest in the co-op. We are also a volunteer-run organization and welcome volunteers, guest speakers, and community conversations with anyone who’s interested.
Q: Why should I refinance my student loan with SSCoFi?
Are you tired of making high-interest student loan payments to faceless lenders? We can help. First and foremost, SSCoFi can save you money by reducing your monthly payments and/or shortening the term of your loans. We’ll work with you to review your current student loans, determine which loan(s) make sense to refinance, and what the best payment plan is going forward. Then we’ll send a letter — and a check — to your loan holder to purchase your debt.
Which brings us to the next best reason to refinance with SSCoFi: Say “F*** You” to Big Banks.
Instead of making payments to Wells Fargo or CitiGroup, you’ll make your payments to SSCoFi — a local cooperative working to ease the burden of student debt for people like you. Big financial institutions that profit off student loans are often also investing in pipelines, private prisons, and other destructive industries. By refinancing with SSCoFi, your interest will instead go to a values-based company that you co-own. As a member, you’ll have a stake in the cooperative: you’ll be eligible to share in any profits and participate in our governance.
Finally, you’ll be joining a community of people who care about you, your values, and your success in the world. We’ll work with you to identify sponsors — people in your community you can call on in times of need for mentorship and support. We’ll help strengthen your financial literacy, and empower you to help educate others. And we’ll connect you to other members — member-investors and member-borrowers — who share your values and are passionate about community finance.
Q: What interest rate does SSCoFi offer for refinancing loans?
Right now we’re offering loan refinancing at a 5% interest rate. So, if you’re paying student loans at interest rates higher than 5%, SSCoFi can likely save you money.
Q: How do I refinance my student loans with SSCoFi?
First, fill out the member application online (indicate in the application that you’d like to refinance a loan). We’ll contact you within a couple of weeks about your application. At that point we’ll work with you to complete a Loan Application and introduce you to the Co-op. Your application will go through a loan approval process with the Board of Directors, and, if approved, we’ll proceed to purchasing your debt and setting up your new monthly payments.
Q: Why should I invest in SSCoFi?
Are you looking for local sustainable investments with a net benefit to your community? Are you concerned about the student debt crisis and the impact it’s having on younger generations? We’ve got an opportunity for you!
By investing in SSCoFi, you’ll help local folks in your community regain control of their finances and free them up to do great work. It’s a socially responsible, local investment that directly supports people, not the profits of big corporations and destructive industries.
With investment capital from member-investors like you, we purchase member-borrowers’ high-interest student loans from big banks and loan agencies and refinance them. You’ll help lower the interest rates of our member’s student loan debts to 5%, often saving hundreds or thousands of dollars. This wealth is diverted from large financial institutions to our members (both in savings to our member-borrowers and in profits shared among Co-op members) and can be used to reinvest in the local community, buy a house, or perhaps start a business.
As an investor, you’ll receive preferred shares in the co-op in proportion with your investment amount and be eligible to share in our annual profits. As a member, you’ll also be able to participate in the governance of the Co-op alongside other member-investors and member-borrowers: one member, one vote.
You’ll also be part of a community that’s passionate about financial education. SSCoFi provides community support to increase our members’ financial literacy and help them challenge institutionalized economic oppression in their financial decision-making.
Q: What rate of return can member-investors expect?
Our models show that member-investors can expect a 1.0-1.5% rate of return on their capital contributions. For the first three years of operation (2016 – 2018), our average rate of return was 1.14%, and we expect to achieve higher rates in the future. That said, capital contributions are considered equity in the overall business (vs. a government secured CD, for example), and therefore we cannot guarantee a return on investment. The rate of return is variable because members all share in the profits and losses of the business at a proportion equal to their stake in the cooperative.
Q: How does SSCoFi’s model mitigate risk?
Unlike peer-to-peer lending schemes, capital contributing members’ money is used to finance SSCoFi’s entire loan portfolio, distributing loan risk across the membership. Additionally:
- Borrowers must identify two sponsors, to whom they will turn for support if the borrower starts to feel difficulty meeting their financial obligations. These sponsors may be career coaches, financial management advisors, networking mentors, or other such supports for increasing net income and opportunities.
- There is an incentive to participate in SSCoFi meetings and events in order to maintain “member in good standing” status. This encourages interaction and mentorship between financially advantaged investor-members and recent graduates and borrowers.
We have additional documents regarding risk management that are available upon request.
Q: As an investor, when can I expect to get my capital returned?
Capital will be returned to investors in annual installments between 2020 and 2035. (The co-op is scheduled to cease operations by 2035, unless the members vote to keep it going.) In more detail, the investment period of the co-op began in mid 2015 and lasts for five years, but it can be extended to six or seven years by resolution of the Board of Trustees. At the end of the investment period (i.e., sometime between 2020 – 2022), any unused capital will be returned to member-investors, and we will begin returning the invested capital in annual installments as it is paid back by member-borrowers. Should extenuating circumstances occur, you would have options to request that capital be returned early or on a fixed schedule.
Q: Why should I become a member of SSCoFi?
You have to be a member of SSCoFi in order to refinance a loan with SSCoFi or invest capital with us (see Refinancing a Loan and Investing in SSCoFi below). When you become a member you also get a share of equity in the Co-op and can share in the Co-op’s profits (or losses).
Q: How do I join SSCoFi as a member?
To join SSCoFi you must be a resident of the state of Washington, complete a member application, and pay a one-time member buy-in of $125 (see next question).
Q: What does it cost to join Salish Sea Cooperative Finance?
A one-time fee of $125 gives you membership and buys you a share of equity in the Co-op, enabling you to share in the Co-op’s profits (or losses). The membership fee is refunded to you if you decide to leave SSCoFi for any reason.