Peer-to-Peer Sites In Search of More Sponsors

Article in the Christian Science Monitor today highlights websites where borrowers can go to try and raise money for their college educations.  The sites highlighted are:

• GreenNote
• CollegeDegreeFund.com
• GradeFund.com

As the reporter indicates in her closing "Finding sponsors is the main challenge for many of these websites. At GradeFund.com, for instance, 96 percent of those registered are students, while 4 percent are donors. But hope is not in short supply among these social entrepreneurs and the students drawn to their websites."

To highlight her point about sponsors, none of the first 50 students listed on GreenNote's site this evening had made any progress toward meeting their stated funding goals. 

I wonder if a variation of  the micro-finance model like Kiva which provides loans to the developing world could work in the student loan space.  In the Kiva model, donors make micro-loans (the suggested amount is $25) to entrepreneurs in the developing world.  There is no investment return to donors, instead, as loans are repaid lenders can recycle dollars to other entrepreneurs.  Kiva carefully screens borrowers, who provide routine updates on how they are deploying the loans.  Kiva has completed over $24 million in loans and remarkably has a default rate of only 2.3%. 

The challenges of student loans, of course, are that they are often deferred until after graduation, and often have sizable balances compared to Kiva loans, where $1,000 loans are typical and repayment is typically over a one year period. 

Comments

[collegeloanconsultant]

It might be too soon to give up on the peer to peer sites. A new model has been developed by People Capital, which might be attractive to investors looking for added reassurance.

http://www.collegeloanconsultant.com/peer-to-peer-loans.html

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