Crowdfunding Student Loans: Education Crowdfunding Guide

Crowdfunding for Education Can Give You a Boost

Crowdfunding for education is growing in availability and popularity. The difference between education crowdfunding and peer-to-peer lending is that the former often does not require a payback or has a deeply discounted payback schedule. Crowdfunding student loans is more of a gift made by investors who want to give back to a certain field or type of student. They may be compelled by a meaningful pitch of some sort, or have a desire to look to support new students in their chosen field or who are somehow like them or someone they know. Of course crowdsourcing is most commonly associated with business start-ups and expansion, but this is an example of a non-business circumstances that brings the same opportunity.

All that crowdfunding for education takes to motivate an individual, a group of individuals brought together through the internet seeing the potential for profit on their loan because they expect that the person they are funding will be a success and thus will be able to pay off the loan under the terms they took it out. Crowdfunding for students is likely to be increasingly popular.

Types of Education Crowdfunding

Crowdfunding for Education might be made as a simple investment in a person’s education where some degree of payback is expected, just like traditional educational funding. However, the difference is usually that the student must go much further with a pitch that proves to the crowd that they will be successful after graduation. A resume or academic transcript to date might be presented and the crowd must decide whether the student will likely be successful. With a limited number of investors who must choose wisely, the crowd must evaluate the student’s grades and other aspects of their future potential. This is especially true if there will be no payback and the crowdfunders just want to support the most promising students with crowdfunding student loans.

Crowdfunding for education that involves graduate school is a bit simpler. You already have your undergraduate success and maybe even some work experience behind you, so the education crowdfunding group can see how you generally perform academically and maybe even how you translate that into the real world. In addition, your choice of graduate school paths itself gives the potential lending group information – if you are planning to go to medical school they know what doctor’s usually make in the specialty you are pursuing.

While in most cases crowdfunding for education is for formal undergraduate or graduate school funding, but they can also be made to help a person gain specific experience or a skill for their job even if there is no formal degree after that education and training. Examples of these education crowdfunding opportunities include paying a stipend during an otherwise non-paying internship or paying for specific training or retraining course. These skill or training loans are also not very risky for the investor and usually not very expensive.

Advantages and disadvantages of crowdfunding student loans

So what should you expect if you pursue crowdfunding for education? Here are some advantages and disadvantages of crowdfunding student loans.

Disadvantages of crowdfunding for education

First, be aware that this will be a bit more work. Of course the added payoff for crowdfunding for education will make it worthwhile, but in the short-term the application process will be more intensive and is therefore a short-term disadvantage. While traditional student loans only require you to prove credit worthiness and college acceptance (or for public loans only the latter), crowdfunding student loans will require you to prove that you will likely turn your education into later occupational success. You may be asked for a bio, a detailed account of how you plan to use your education, and maybe even some samples. The other disadvantages of education crowdfunding for the student include potential differences in interest rates, non-deferment of interest while you are in school, and the need to actively keep the crowd updated about your progress. The disadvantages of crowdfunding for education for the investor have to do with the potential for default, and the fact that as opposed to other forms of peer-to-peer lending interest rates must be kept low.

Advantages of crowdfunding student loans

The advantages of crowdfunding for education are obvious. The range from allowing a prospective student to get funding where no traditional funding is available, to potentially save on interest especially when public loan options have been exhausted, and less apparent perhaps the motivation that can be derived from knowing that a group of investors has confidence in you. For investors, crowdfunding student loans are a relatively safe (especially when aggregated) way to get a reasonable return from an investment that truly helps.

Applying for Crowdfunding Student Loans

If you are a prospective student looking into the possibility of crowdfunding for education you obviously need to start by looking for the best crowdfunding sites for education. Look for a site where there are actually crowdfunding for education investors, which can be challenging because education crowdfunding is relatively new to the marketplace. There are many good sites available though, and

starting with a simple search of something like “crowdfunding for college” may be helpful. Of course you want to dig deeply into the sites you do find – how many have students like yourself who tend to successfully attract this funding, and are there any independent reviews of your chosen sites out there anywhere?

Bankrate provides information on a cousin of education crowdfunding, peer to peer student lending

Applying for crowdfunding education loans is fairly straightforward but quite a bit of time is necessary.  You may find that crowdfunding student loans are a viable option for you for a variety of the advantages we discuss elsewhere.  The main reasons why people turn to crowdfunding for education usually has to do with not qualifying for traditional school loans, though increasingly students are seeing the advantages that can be had with crowdfunding student loans even if they do qualify whether because the crowd gives an even better package, or because traditional loans do not cover the entire cost.  So what is the application process like for education crowdfunding?  It usually goes something like this

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 educational pursuits, and may also involve 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 both qualitative – how motivated you are for example – and quantitative – what your grades have been – information.

Education 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 in to 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” but you can prove your point by describing all of your extracurricular pursuits that you took on voluntarily and show how interested you are in learning and growing. Make sure your pitch is well written and solid – the crowdfunding for education investor who is reading it is not just reading it 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 not only what you’ve done but 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.  It can be extremely helpful to provide any statistics you can find from your field of interest – e.g. if you are planning 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 if temporarily, and they will want to know how you handle, and more importantly proactively assess, possible barriers.

Education crowdfunding final steps

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

Crowdfunding Student Loans Application

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

Crowdfunding for education essays

Essays and other more traditional means of the prospective crowdfunding student loans lenders learning about your abilities and potential as a student, as well as your motivation for learning and willingness to put time in to make sure 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 loans interviews

Some sort of interview, ranging from a detailed questionnaire to an in-person interview that 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.  This process otherwise is very impersonal so the funders may want to take a step back and see who you are.

Education crowdfunding samples of schoolwork

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

If your crowdfunding student loans request involves funding that will go beyond one disbursement, such as a need that will extend over several years you will likely have to produce updates in the form of grades and progress reports, as well as updates about your plans for post-graduation and career.  The crowdfunding student loans investors will certainly want to keep in touch.

Where to find crowdfunding student loans investors

The best way to find crowdfunding student loans investors is to look for a person or group who seems to specialize in your area, or at least has funded your type of education recently.  Some education crowdfunding investors will fund a variety of areas as long as the student appear to have great potential, but others specialize in certain areas or occupations.

There are two specific ways to find these types of funder:

1. Existing platforms that provide opportunities for many students or prospective students to apply for education crowdfunding and attract a large amount of potential investors who sift through the applications.

2. White label crowdfunding for education where you build your own independent website and hope to drive traffic to it that will attract investors that may be interested.

Each of these methods has drawbacks and advantages, bit in either case you need to put a significant amount of effort in.

Investing in Crowdfunding for Education

Investing in crowdfunding for education is a great way to get a modest return on an investment that tends to be safe.  That said, investing in education crowdfunding does not tend to have a huge payoff given that the terms are usually comparable to more traditional

student loans.  The students who turn to the crowd for crowdfunding for education are usually those who either do not qualify for traditional educational loans, or those for whom the traditional choices will not cover the amount they need.  Given that there are often other choices for students those who are investing in education crowdfunding cannot charge too much interest.  Thus we find that the investors often fall into one of three categories:

1. Those who are investing in education crowdfunding because they want to give back and give others a chance in a field or area of study they pursued themselves or want to support.

2. Those who want to invest in education crowdfunding but want to choose an area that is very low risk, and some choices as far as investing in Crowdfunding for education provides this opportunity.

3. Those who know the person looking for the investment but want to use an in-between to set the terms and provide the follow-up

One way or another investing in education crowdfunding can be fruitful if the investor has realistic expectations and does her or his homework well.

Choosing Your Education Crowdfunding Investment

The most important decision when you are considering education crowdfunding is to choose your investment(s) wisely.  The first step toward this goal is to decide whether you are going to help fund the education of just one person, a small number, or a large amount of prospective students.  The approach you might use in investing in education crowdfunding might be different depending on this choice.  For example, if you are funding just one person you need to know a lot about him or her, and need to decide that it is no more risky to invest in one person 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:

Education 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 just feel that those who pursue ir are more likely to pay back your education crowdfunding investment.

Crowdfunding for education and types of students

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

Crowdfunding for education and criteria

You also need to decide what criteria you will use for your measures of likely occupational success before investing in education crowdfunding expenses.  How will you assess whether the person is likely to pay back your investment as far as the path they choose – the easiest example would be if you choose 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 likelihood of success of the person her or himself before investing in education crowdfunding.  Regardless of the path chosen, what makes this individual more likely of paying back your investment.  His or her history of meeting financial obligations in combination with past academic success is a good place to start.

Choosing an Crowdfunding for education 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 own 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 crowdfunding sites for education before you make an investment.

Crowdfunding Student Loans Investing Summary

Crowdfunding for education is an excellent option for the investor, given how often the top students going in do successfully finish and at least meet with moderates success later on. Investors who choose the education crowdfunding route and at least minimally spread the risk over a few students often find that this leads to a steady stream of income, though there are no guarantees of course. If you either feel that you have proven outstanding success so far, or have a plan that will impress the crowd as far as how successful you will be going forward, this may be a great option for you.

Keep in mind when looking for crowdfunding for education that you should also be looking into more traditional options as well. Make sure you know what loans you do qualify for, what the payback would be, and what potential tax advantages might be of each. Also know details such as when the lenders will begin to charge interest and what possible programs are out there to lower interest. As exciting as education crowdfunding is, there may be other options for at least your initial funding that make more sense. Crowdfunding for education may only be the best choice if you are turned down for traditional educational funding, or if the amount you qualify for is not enough.

Related topics we cover is crowdfunding for personal reasons which can provide help paying student loans for those who went the more traditional route or crowdfunding for educational purposes that are not as expensive as college or graduate school.

Crowdfunding Student Loans Conclusion

Crowdfunding student loans, more generally known as crowdfunding for students, are more readily available than ever before, and as the cost of a secondary education rises and subsidized options with low rates increasingly do not cover the full cost, they may become a viable option for many.  That said, as you can see from the above the process of getting crowdfunding for education is more involved and in many ways from more traditional loans, and as both an investor and an applicant you need to be fully prepared and fully understand the process.

We wish you the best of luck if you are a prospective student looking into education crowdfunding, or if you are an investor looking to this path to diversify your portfolio and/or do something meaningful as far as your investments. We will likely see things expand in coming years and we will stay on top of new innovations and ideas in crowdfunding student loans.