Crowdfunding is stretching its tenticles into an ever increasing array of areas. One area of particular interest is that of student finance. Around the world universities are charging ever higher tuition fees. With developed countries struggling with recession, state support is being removed, passing the burden onto the students themselves.
Of course, the idea of students turning to the web for financial support is not a new one, but efforts have often been on the seedier side of selling certain services on eBay.
Upstart aims to change that. They’re a crowdfunding company, where the investment is not in a project or product, but in you. The company, which recently itself raised $6 million in fresh funding, exists to help students finance their university studies by offering investors a stake in their future income.
The offering has all of the hallmarks of traditional crowdfunding sites such as Kickstarter. Candidates publish a profile of themselves that describe their potential and also what they intend to use their investments for. Investors, who also have profiles of their own, can then offer cash to those who catch their eye.
In return for their investment, they will receive a percentage of that person’s pre-tax income over a fixed number of years. This figure is typically determined by the individual when they create their profile, with the figure going as high as 10%. Individuals can also set a cap on how much is repaid to investors.
Upstart alone has already seen around 50 individuals secure investments of around $1.4 million using their site. They’re far from alone however. In America Pave offers a similar service, whilst in Germany Career Concept do a similar thing. There is even a Latin American alternative called Lumni.
An additional feature of such sites is that as well as providing investment in promising individuals, investors can choose to mentor and support them in their formative years.
Suffice to say, such methods of funding are still but a drop in the ocean of student finance, but they do represent an interesting alternative to traditional finance options.
Interesting idea. I'd imagine it would only help to fund the truly exceptional though, and you'd think such people wouldn't have trouble finding money anyway.
I am really happy to know about resolving the student finance issues. A good way out is being introduced and such solutions are highly encouraged in order to make education easy for every child. I appreciate and encourage Upstart for their initiative.
It's interesting to see Marco Rubio push for this kind of financing in his presidential bid. Might help to push it a bit more mainstream.
I don't know why Rubio is promoting it, as if it relates in any way to his platform. If it's funded privately, then the government is out of the picture.
I personally don't think this is at all a solution to the issues of high-cost education. I just don't see how it fits.
Under an equity financing scheme, would students then be fiduciaries of investors?
If so, this could lead to a slippery slope of investors wanting more. They have some claim of "ownership" by virtue of their investment. In that case, investors could nudge their way into career choices made by students. The student who is deciding between following a passion at a lesser salary may be pushed toward an ill-fitting but more lucrative path.
The fundamental issue is not the student taking the higher salaried position. The fundamental problem is that the choice would be dictated by another person's motives.
Ultimately, debt can force the same decision making. With debt it is a choice to pay quickly and minimize your obligation. But, with an equity set up, it may become a pressure to maximize a third party's financial gain.
The investor is a minority investor. The student still haves the financial incentive to get a higher paying job. College graduates on average earn 65% more than high school graduates. If the graduate is paying 5% of his/her income to the investor they’d their incentive to take the higher paying job is getting a high school grad type job and earning 95% of what the high school grad earns or, depending on his/her skills getting a college grad job and earning 160% of what a high school grad earns.