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College students get creative in raising funds
By siliconindia
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Tuesday, 06 January 2009, 16:02 IST |
2 Comments
California: At a time when the cash strapped economy is leaving many entrepreneurs without means for funding their ventures, many college students in the U.S., are chalking out innovative plans to fund their education, reports BusinessWeek.
Take the case of Max Stephenson. After accepting admission to New York University for this past fall, Stephenson started searching for loans. A resident in rural Tewksbury, N.J., the 18-year-old had little savings, and his parents couldn't afford NYU's hefty tuition, which hovers around $50,000 including room and board.
Stephensons met with several private lenders, since government aid was inadequate. But like many Americans in need, they couldn't borrow enough. Loans were either unavailable, or they came with double-digit interest rates. As his freshman year loomed, Stephenson was short $25,000.
But Stephensons cleverly prepared a plan. According to which, he would get 10,000 strangers to donate $2.50, $3.50, or whatever they could afford. To thank them, he'd send a piece of his graduation cap or gown. Within weeks, Stephenson's plea - which began as a mid-August e-mail to 250 acquaintances - circled the globe. Donations poured in from the U.S, Nigeria, Spain, and many other countries. As of earlier this month, he has raised $11,000, more than enough to finance his first semester.
Some students have also turned to peer-to-peer lending sites, such as GreenNote and Fynanz, which focus exclusively on making college loans. After creating an online profile, users can court a variety of financiers, including friends, family, and perfect strangers. According to Kantrowitz, however, peer-to-peer lending funds are limited.
In another case, brothers Matt and Mike Kopko have just launched GradeFund, a Web site where needy students can solicit anyone -friends, relatives, coaches, strangers- to 'sponsor' their grades. The better students score, the more tuition money they'll receive.
Matt Kopko explains the site is similar to those where, say, a person runs a marathon and solicits support for charity. "You get people to pledge toward a charitable goal, and everyone benefits."
Michael Beck, a freshman at the University of Michigan who created one of GradeFund's first student profiles, says he was initially skeptical. After all, by skipping the site altogether, and just arranging a similar reward system with friends and family, he would avoid the 5 percent transaction fee which the Kopkos charge to cover overhead costs and eventually make a profit. However, he says, a site like GradeFund makes the process more formal.
As lenders cope with turmoil in the financial markets and fallout from the subprime mortgage crisis, the student loan industry is now more precarious than ever.
In the past year, conventional lenders have drastically reduced funding for student loans. The financial aid Web site FinAid.org reports that 168 have exited or suspended their participation in the federally-guaranteed student loan program (FFELP), which includes the popular Stafford and PLUS loans. Thirty-eight have also stopped offering private student loans.