My high level understanding is that at the start, they tried to target people who were the high "ROI" segment of customers that traditional lenders were lending

My high level understanding is that at the start, they tried to target people who were the high "ROI" segment of customers that traditional lenders were lending to. They identified client segments who had better default numbers than the overall debt pool they were placed in, carved them out, and extended them better terms (but terms that would still make SoFi money). Another way to frame this is that they tried to properly "price" mispriced securities (which in this case are individuals with loan terms with worse terms than their financial profile should beget them). Students working towards advanced degrees from elite institutions were seen by the traditional lending market as higher risk than what SoFi deduced that they should be "priced" at. Traditional banks need scale in their businesses an order of magnitude or two compared to a startup. There were quite a few startups whose business model is "we will carve away the most profitable (but small in size) segments of a big bank's client base, and serve those people better".