Crowdfunding for college graduates’ dreams

Posted on October 2nd, 2013

Cinderella never had to worry about student loans. And she got to live in a castle and had her own room. She might have had to work for her room and board, but her situation sounds pretty great compared to the typical college student’s cramped living quarters.

And even if Cinderella had gone to college, she had a fairy godmother to step in and wipe away her student loans.

Unfortunately, most college graduates have to suffer through the pain of repaying student loans all by themselves.

But a new company called Upstart provides promising college graduates with “fairy godmothers” in the form of wealthy investors to help them achieve their dreams–whatever those might be.

Here’s how it works: College graduates (or “Upstarts”) create a profile detailing their background, goals, and what they hope to achieve with the funding they receive. Recipients of funding can use the money to do almost anything: pay back student loans, learn a skill, build a start-up company, write a book, or go back to school.

The catch is, however, that these students agree to pay investors a portion of their future income for the next 5 or 10 years, depending on the arrangement.

After analyzing the graduate’s profile, Upstart uses an algorithm that takes into account salary statistics, grades, and other factors to determine his or her future earning potential. The program then generates a funding rate for the individual graduate, which is the amount he or she can raise for each 1% of income shared – for either a 5 or 10 year term.

Based on this rate, graduates can then choose how much money to raise, but can share no more than 7% of their income with their investors.

Besides the actual money, Upstarts who receive funding will receive an even greater gift: the freedom to pursue their passions and ideas while they’re still young.

It may not be as glamorous as marrying Prince Charming or becoming a princess, but it’s an enormous help for graduates struggling to both repay student loans and pursue a dream.

We’re happy that more innovative ideas and companies are trying to combat the massive student debt problem in unique ways. While we don’t believe it’s always possible to accurately predict graduates’ salaries based on where they went to school or their background, we’re fans of the idea of investing in a person, rather than a business.

And graduates will likely continue to benefit from the experience and mentoring of their “fairy godmothers” long after the money is gone.

Category: Student Loans & Repayment

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