Crowdfunding Student Loans: For Investors 

Choosing your investment(s) wisely is the most critical decision when considering crowdfunding student loans. The first step toward this goal is to decide whether you will help fund the education of just one person, a small number, or many prospective students. The approach to investing in education crowdfunding might differ depending on this choice. For example, if you fund just one person, you need to know a lot about them and decide that investing in one person is no more risky because there is a low chance of default.

To narrow your choices as far as your education crowdfunding investment, you may want to look into the following factors roughly in order:

Student loan crowdfunding and majors

Do you want to think about crowdfunding for education expenses for just one particular educational pursuit, such as people studying medicine, public health, law, or a trade? You may practice that trade yourself, have a high regard for it, or perhaps feel that those who pursue it are more likely to pay back your education crowdfunding investment.

Crowdfunding student loans and types of students

Do you want to fund a particular type of student? Perhaps there is a specific minority group that you would like to support with your investment, or maybe people from a particular background (adopted, first-generation immigrant, student-athlete, etc.)  This may be your primary choice in deciding where to put your education crowdfunding investment, or it may be secondary to #1.

Crowdfunding student loan criteria

It would be best if you also decided what criteria to use for your measures of likely occupational success before investing in education crowdfunding expenses. How will you assess whether the person is expected to pay back your investment as far as the path they choose – The most straightforward example would be if you decide to invest in education crowdfunding for those pursuing advanced degrees in medicine and law where salaries are high. But how will you assess things if the path to financial success is not as clear?

Crowdfunding student loans and quality

You need to assess the person’s likelihood of success before investing in education crowdfunding. Regardless of the chosen path, what makes this individual more likely to repay your investment? Their history of meeting financial obligations and past academic success is an excellent place to start.

Choosing a Student Loans Crowdfunding Platform

Once you have decided which type of education crowdfunding you are hoping to invest in, you now want to find the best crowdfunding sites for education where you can make your actual investments. There are many choices, the most common of which are peer-to-peer lending sites like Prosper and Lending Club. You may also be able to find education crowdfunding pitches at the usual crowdsourcing websites as well. Look for a website that offers the most choices and the best information.

Another choice might be to look for a “white label crowdfunding for education” pitch – in other words, someone who started their independent website to make their case. This can be an impressive way to go – you’ll likely find more information there, and you may also be impressed by the work and time it took to create a whole website – it shows additional motivation and maybe talent. One way or another, you want to find the best educational crowdfunding sites before investing.

Crowdfunding Student Loans: For Students

The primary ways to get crowdfunding student loans involve proving three things to investors:

Crowdfunding student loans and your potential

First, you must prove your educational potential. Will you finish your degree as expected? This part of the education crowdfunding application involves filling in information about past academic pursuits and may also include essays that try to get at your motivation and interest. This step is vital – education crowdfunding relies on your peers knowing what kind of risk you are. Spend time making the case that you will be financially successful after your education is complete, and give clear and concise steps you will take to be successful. As best you can, include qualitative – how motivated you are, for example – and quantitative – what your grades have been – information.

Student loan crowdfunding and your motivation

Describe your motivation: Now, you need to make your pitch. Concentrate on those attributes that are provable and clear. Remember, those investors looking into education crowdfunding have a ton of choices as far as which prospective students they fund. What makes you truly unique, and how can you back that up? For example, anyone can describe themselves as “motivated.” Still, you can prove your point by describing all the extracurricular pursuits and showing your interest in learning and growing.

Make sure your pitch is well written and solid – the crowdfunding for education investors reading it is not just for content but also for the quality of your writing because that shows the effort you will likely put into your assignments. Make sure any potential investors come away impressed with what you’ve done and how it suggests you will be successful in the future.

Crowdfunding student loans and your future

Next, you have to describe what the occupational future will be after you meet your goals. You will be paying back your crowdfunding student loans with money earned in your post-schooling career, so you’ll need to help the crowd understand your career path and how their funding will get you there.

Providing any statistics you can find from your field of interest can be beneficial. E.g., if you plan to become a college professor, you should give your peers information about the job market, salaries, and salary trajectories of college professors. You can also mix in your reason for pursuing this field – what motivated you to make that choice – you want those interested in helping you with crowdfunding student loans to know you will not change your mind.

You may need to give “what if” scenarios to the crowd. How will you pay off the crowdfunding student loans should you not get the dream job you hope for? Are you willing to move anywhere in the country if necessary? Would you take a second job if your primary job does not pay enough? The crowd knows that some things may get in your way, even temporarily, and they will want to see how you handle and, more importantly, proactively assess possible barriers.

Crowdfunding Student Loans: The Actual Application

Often, the process might be as simple as that, and at the end of those three steps (or something like them), you get crowdfunding student loans for your education. The smaller the loan, the more likely it might be that simple. However, the process will likely be a bit more complicated for larger loans and extended educational pursuits. In these cases, you might expect your crowdfunding student loan journey to include the following:

Crowdfunding for education essays

Essays and other more traditional means of prospective crowdfunding student loans lenders learn about your abilities and potential as a student, as well as your motivation for learning and willingness to put time in to ensure you get this funding. They will want to know how much time and energy you will be willing to put into your education and also the quality of your work that will result.

Crowdfunding student loan interviews

Some sort of interview, ranging from a detailed questionnaire to an in-person interview, gives the person-to-person lender a chance to meet you, get to know you, and take a more holistic view of your application and potential. Otherwise, This process is very impersonal, so the funders may want to step back and see who you are.

Student loan crowdfunding samples of schoolwork

Samples of past school work and academic pursuits while working to show how you’ve performed naturally on intellectual tasks. This helps crowdfunding student loan funders see how you’ve performed on natural functions without getting potential proofreaders.

Suppose your crowdfunding student loans request involves funding beyond one disbursement, such as a need extending over several years. In that case, you will likely have to produce grades, progress reports, and updates about your plans for post-graduation and career. The crowdfunding student loan investors will undoubtedly want to keep in touch.

Final steps for students

The final step is to be responsive to potential investors. This likely includes active responsiveness – if anyone asks a question or wants more information, provide it quickly and clearly and offer examples. Give them reasons why investing in you will pay off, including being clear and concise about your plans, past accomplishments, and hopes for the future. Ensure you have specific materials ready – transcripts from past learning, resumes, listings of references, etc. The crowd must think you are very well-organized and responsive, which predicts that you will be the same in your actual learning.

If you are a veteran, we provide information about veteran crowdfunding separately. 

Crowdfunding Education Loans Summary

Student loan crowdfunding is an excellent option for the investor and the student, given how often top students going in do successfully finish and at least meet with moderate success later on. You can even look into “Human Capital Contracts,” which we cover elsewhere. There are no guarantees with crowdfunding student loans, but they help students reduce their financial burden, potentially leading to a solid payback for investors. We’d be happy to connect investors to the platforms where these loans are funded, and we can help students with the process. Contact us for more information.

The post Crowdfunding Student Loans first appeared on Performance Psychology Group, LLC.

Human capital contracts are an innovative financial instrument for financing higher education. They can potentially replace or reduce college loan amounts for promising students. With higher education costs skyrocketing, many prospective students are being priced out of the top schools. They will carry a mountain of student loan debt even if they attend. In some cases, the student has a choice whether to go to the best college they get into as long as they are willing to take on a mountain of student loan debt or to go to a college they are not as excited about that will lead to a more manageable student loan debt load. This is not a fair choice, yet with tuition skyrocketing and showing no sign of slowing down, this is a reality. Human Capital Contracts seek to solve these problems.

What are these contracts?

Boiled down, Human Capital Contracts involve students entering into a contract with a funding source. This funding source is usually a foundation or corporation, though sometimes it could be a wealthy individual. Consequently, the student agrees to pay a fixed percentage of their income after graduation for a set time. Traditional loans must be repaid beginning six months after graduation. The payments are often fixed and start at a high level immediately. Even those that are deferred carry increasing costs as time goes on. Human capital contracts, on the other hand, grow with you, becoming a fixed percentage of your income. Thus, you always have a high percentage of your income to keep, no matter what you make.

You will likely pay a relatively equal amount on a human capital contract than you would have with student loans. If you do end up paying more, it is likely because you were successful more quickly than is usual, a good thing all around! But you pay a percentage of your income with a human capital contract. This makes financing everything else in life much more comfortable.

Human Capital Contracts Risk

Human Capital Contracts are not without risk. The student risks paying back more than they might otherwise have had to pay on traditional loans. The investor in Human Capital Contracts faces the chance that the percentage of the student’s income that they will collect will fall short of what they would have gained through a more traditional investment vehicle.

The best evidence for the potential of Human Capital Contracts is a government-backed system in Australia, where students repay college costs by forfeiting a percentage of their after-college income. Instead of a fixed period, the students continue paying until their entire debt with reasonable interest is repaid.

Human Capital Contracts Market

Human Capital Contracts allow students to pursue an education they might otherwise not be able to afford with either money their parents or they have saved or through student loans.

Enter the corporation, foundation, or wealthy individual who has learned that investing in potential is a way to make money and fulfill a mission. These groups have traditionally sought to invest in companies, products, currencies, real estate, etc. But the bottom line is that they might be plenty willing to invest in anything that could provide a solid return. Human Capital Contracts allow corporations and foundations to invest in a person’s potential with a mutually beneficial outcome.

After College Choices

After college or graduate school is over, Human Capital Contracts continue to be beneficial as many companies hire those students they once supported. And even if they don’t directly hire the student, if they have chosen where to invest wisely, they end up with a good investment over time, and the student ends up with a payoff method that is much more fair and less burdensome than student loans during the initial years of building a career. The corporation or foundation is often incentivized to provide graduate training and help develop a successful career since that outcome is a win-win. It can also help their marketing and PR efforts if customers know they are generous in supporting promising students.

Human Capital Contract Types

Human capital contracts are most commonly associated with undergraduate education costs, the most common use for these financial instruments. Of course, this makes perfect sense given the high cost of an undergraduate education and the burden that a high student loan debt places on the student post-graduation. The risks and rewards are high for the investors, as they often fund a prospective student with little work history and an unknown post-graduate future. If the right students are matched with the right investors, a human capital contract can pay off while the student happily pursues a positive career path.

Specific Kinds of Contract

But what are the other types of human capital contracts? There are actually several:

Human capital contracts for graduate school.

These financial instruments are most commonly seen in fields where there is almost a guaranteed payoff or at least a likely path. For example, a student with high achievement as an undergraduate who wants to go to medical school may seem like a low risk – as long as they finish medical school, the later income stream from which the investor’s payoff will likely be high.

Human capital contracts for re-training or trade school.

Sometimes, the cost of picking up a trade, such as becoming a plumber or electrician or re-training to deepen and expand specific career skills, is high. Usually, the costs are not as high as post-graduate education, but still, they can be prohibitive or at least challenging. A human capital contract that covers these expenses and then asks for a payoff when the career begins, or resumes could be used.

Human capital contracts in business

A human capital contract could presumably be used by a small business owner who draws a salary and needs money for expansion or start-up. In this case, after the business improves, the investors will collect a percentage of the increase that the small business owner can pay him or herself. This less direct type of human capital contract is not usually seen but certainly fits the mold of what these funding instruments are all about.

These are the three most common uses for this type of funding instrument. We will update this page as we discover more ways investors and people with financial potential match their needs.

Others Who Apply for Human Capital Contracts?

Human capital contracts can provide prospective undergraduate or graduate students with programs that have more flexible terms and even better rates than traditional funding solutions. Most commonly, those who do not qualify for a conventional path or cannot get sufficient value to pay for their schooling use them.

However, those with superior academic or occupational achievement thus far may also use them. Unlike traditional funding based on purely financial factors, human capital contracts are more specifically counting on your potential, and students who meet these criteria may also want to preserve as much money as possible to build their early careers.

If you fall into this group and don’t like the rates and terms a traditional lender offers, you may want to look into human capital contracts.

Human Capital Contracts: The Bottom Line

Human capital contracts are not well known, especially compared to other types of crowdfunding and peer-to-peer lending you find here and elsewhere, but it may grow as more students and investors find new success with this method.

We predict that human capital contracts will take off in popularity and use. Since the funders of the human capital contracts can pick and choose among promising students and select those likely to pursue a fruitful path, this will be like traditional lenders being able to choose who they let borrow more carefully. We think defaults will be low, and the benefits will be substantial.

The post Human Capital Contracts first appeared on Performance Psychology Group, LLC.