Sure, we all believe that youth must be served, but are you willing to invest in their future — literally?
Crowdfunding platform Upstart, which launched in October, lets recent college graduates raise cash from online backers, who in return get a slice of their income for the next 10 years.
The money is meant to help young people pay down their debt or bankroll an otherwise out-of-reach dream, such as launching a business or developing an artist portfolio. It’s also designed to score investors a 6 to 8 percent annual return, according to founder David Girouard, the former head of enterprise at Google.
Using information such as grades and standardized test scores, Upstart calculates the amount of money a person can raise on the site for every 1 percent of his income offered — the sweet spot is somewhere between 3 and 4 percent, says Girouard, with typical loan amounts ranging from $20,000 to $30,000. Returns are capped at 15 percent.
The loans also offer some leeway: If an Upstart grad earns less than $30,000 in a year, he’ll pay nothing, and a year is added to the term of the loan, for up to five additional years.
“The model is designed so that if you make a lot of money you pay more, and if you make less you pay less,” said Girouard.
So far, the company has funded about 35 people, with the first round of repayments scheduled to come in this month.
Student lending company Social Finance, which launched a pilot program at Stanford in 2011 and has made $90 million in loans with another $40 million in progress, also employs elements of crowdfunding, but in its case the crowd is made up of alumni.
Investors pay into a school-specific fund that makes loans starting at 5.9 percent interest. Alumni can expect a 5 to 7 percent return, according to the company.