Let Your Friends and Family Pay Your Tuition with a Peer-to-Peer Education Loan
One way to pay for college is to get everyone to chip in.
By Kathryn Knight
April 21, 2009
Your parents are broke but not broke enough for you to qualify for full need. You have no chance of getting a student loan. During your summer vacation, you burned through your savings. Tuition prices just shot up another 7%. And despite receiving several scholarships, you will still owe thousands of dollars for your college education. So what do you do?
Borrow from a source besides the banks: your peers…family, friends, community leaders, etc., who can help subsidize your college education costs. Through peer-to-peer lending, students are getting the funds they need from people who actually value their education. Or from total strangers who have money to burn.
The idea for peer-to-peer lending originated from Muhammad Yunus, who established the Grameen Bank in 1974 to make small loans for poor families in Bangladesh. The loans, typically offered in the amount of $10 or $20, helped families start businesses. Since its founding, the Grameen Bank has been able to help break the cycle of poverty by lending nearly $6 billion to more than 6 million borrowers. Now, different organizations are hoping to apply the same charity and accountability to students hoping to attend college.
GreenNote is a friends and family peer-to-peer lending network where students can ask people in their family and community circles for small student loans. Rather than having your grandma hand you an envelope of $500 with x’s, o’s, and a pinky promise to payback, GreenNote handles the formalization of preparing the loan documents. Thereby, making your student loan transfers legit.
Students have access to low-interest loans, paying an interest rate of 6.8% versus the private lending interest rates ranging anywhere from 8 – 20%. They also aren’t “approved” on a basis of a good credit score. Instead, students receive loans on the basis of good character, which is “approved” by their peer lenders.
There are also other types of peer-to-peer education loans, like Fynanz, which match you up with a stranger who is willing to lend you money for your education. These stranger-to-stranger loans tend to charge higher interest rates than friends and family.
Some students may ask whether peer-to-peer lending is actually effective. All of that depends on your social network-do you have friends and family who are willing to assist you in financing your education? It is safe to say, though, that peer-to-peer lending sites are growing rapidly. They are another option for students who are finding it difficult to obtain private student loans.
So if you’re in a pinch or caught in the credit crunch, lending through GreenNote, Fynanz or other peer-to-peer education loans is a creative way to get that cover costs.