Low Interest, Crowdfunded Student Loans Gaining Popularity

Crowdfunding platforms like Prodigy Finance, CommonBond and SoFi are becoming an increasingly attractive option for MBA aspirants and others to get finance with minimum hassles for their educational and other needs.

Prodigy Finance is reported to have provided more than $140 million to enable more than 4000 students from 112 countries join Business schools for MBA as well as Masters degrees. It also has an enviable rate of almost 100% repayment.

Most of the crowd sourcing finance platforms also have the advantage of overcoming barriers to financing international students. Prodigy’s border-less peer-to-peer lending provides just such an opportunity for students from other countries.

Prodigy Finance is reported to have provided more than $140 million to enable more than 4000 students from 112 countries join Business schools for MBA as well as Masters degrees. It also has an enviable rate of almost 100% repayment.

Prodigy Finance was founded in 2007 by three INSEAD MBA graduates who had experienced firsthand the difficulties of financing an international MBA.

It claims to provide ‘border-less’ postgraduate student loans to international students to attend a top school. These loans are collectively funded by a community of alumni, institutional investors and qualified private investors.

The student borrowers gain access to higher education that they might not otherwise be able to finance, and the investing community earn a financial and social return through their investment in future leaders and higher education.

“Many international postgraduate students find it difficult to fund their degrees as banks are reluctant to lend across borders. We bridge this financing gap by lending to postgraduate students from up to 150 countries who are travelling abroad for their studies,” it say.

Among the advantages of crowdsourcing platforms like Prodigy Finance, CommonBond and SoFi are that the interest rate is much more favourable than private loans, especially in the US.

The application process is also easier and a seamless process enables transferring the funds directly from Prodigy to the applicants school of choice.

Simran Singh, a graduate of Wharton School of the University of Pennsylvania had opted for a loan from Prodigy after finding that Indian financial institutions were charging very high rates, school-backed loans were equally expensive and his being ineligible for US federal loans.

He is happy at not being constrained by the restrictions his loans from elsewhere would have entailed that would have even affected career decisions.

CommonBond refinances student loans at 2.14% APR (annual percentage rate of charge) as also refinancing parent plan loans at the same rate. MBA borrowings are at 6.23% APR.

Among other crowdfunding platforms for students in the US is GoFundMe that charges 7.9% + $0.30 per donation. Upstart allows offering a percentage of the applicant’s future income in exchange for immediate funds.

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Indiegogo, an international crowdfunding website also allows charity and donation-based campaigns. The fee varies from 4% to 9% depending on a choice of all or nothing or fixed crowdfunding campaign. It has a 3% payment processing fee and $25 wire fee for non-US campaigns.

Scholar Match, a non-profit org partners with college access organizations and schools around the Bay Area to find talented, ambitious students dedicated to pursuing higher education and in need of financial resources. Students are nominated by partner organizations and apply to join ScholarMatch.

CrowdfundEDU could be used to raise money for education-related projects or tuition assistance. Like PigIt, a platform for community-based fundraising, charges a 5% fee if the goal is met that otherwise goes up to 8%. (Image Courtesy : JISC )