Stories about student loans and the hardships they create for college students dominate the news and pull at the heartstrings of concerned America. If you are a student loan borrower, or a parent of a student loan borrower you understand these frustrations on a personal level.
Financing higher education has led to an inconceivable level of debt for students and their families, and has thrown our economy to the brink of a bubble we may never fully recover from. The good news, is that because this problem has gotten so much attention in recent years, solutions have begun to surface.
If you are saddled with student loan debt or know someone who is (or better yet, may be in the near future) these 5 alternatives to traditional student loans can literally change the course of your life.
SoFi has consistently been one of the hottest FinTech startups of the past few years. This is due in large part to their crusade to simplify the loan process.
SoFi offers personal loans and mortgages, but their bread and butter is the student loan space. They offer Federal and private student loan refinancing, parent loans and parent PLUS loan refinancing, as well as MBA loans. They make it easy to apply for a loan with a simple application completed 100% through their website. They offer fixed refinancing rates starting at 3.5% and a 2.14% APR for a variable rate loan.
According to their website, SoFi is able to save their student loan members an average of $18,936. Lose your job? No problem. With SoFi, if you lose your job they will temporarily pause your payments AND help you find a new job. Everybody wins! Millennials love this company because of their no hassle processes and transparent pricing structure.
Pave does not technically offer a student loan, but they do offer affordable credit to individuals based on more than just your credit score. What this means for a recent college graduate, is that you may still qualify for financing through Pave even if you get turned down by a traditional bank. The added benefit is that you can get significantly lower rates through Pave than you would using a credit card.
According to Pave “We start by reviewing the individual’s credit score and history, then incorporate additional factors like use of funds, work history, current employment, education and future earning potential. This gives us plenty of opportunities to recognize how financially responsible a person can be, and it’s how we can give the lowest possible rate.”
The power of this type of flexible financing is that many student loan borrowers cannot afford to pay their student loans because they do not have access to affordable credit for the other areas of their life. For example, if a recent college grad takes out an auto loan, they may expect to pay between 5% – 8% on that loan. They may have an 18% credit card APR, and a 21% personal loan used to purchase a new computer and a recent vacation. With a Pave loan, all of these various credit vehicles can be rolled into one, with a low interest rate beginning at 5.99%.
This savings frees up a student borrower to focus their financial resources on paying down their student loan debt. Compare Pave to other lenders using Credible – where you can compare up to eight different student loan refinancing companies.
Utilizing crowdfunding and advanced technology, WeFinance allows individuals the ability to secure student loan financing at rates and terms that they set.
You will create a profile page, and then tell your story and why you are applying for funding. Potential lenders can then browse your profile to determine whether they want to invest in all or part of your goal. Once your target funding goal is met, through one or multiple lenders, the funding campaign is closed, a simple contract is created, and the loan funds are sent to your bank account. For student loan borrowers, this is an excellent way to refinance an existing student loan or access additional student loan funding not available to you on the private student loan market.
WeFinance adds a human touch to the student loan lending experience through their crowdfunding model. You are not applying to a faceless bank or lender, but rather pouring your heart out to individual investors who want to partner with you to achieve your goals.
This is also an opportunity for you to potentially invest directly in worthy borrowers while making a small profit on the loan interest.
Best of all, WeFinance does not charge any fees when you receive or make a loan. They make money by referring borrowers to additional financing vehicles if their borrowing needs exceed the limits of the WeFinance platform. See how WeFinance compares to other lenders on the Credible platform.
13th Avenue Funding
13th Avenue Funding is a pilot program started at Allen Hancock College in Santa Maria, CA. In a nutshell, this program allows a student to borrow funds to pay for their education, and then pay those funds back based on a fixed percentage of your income, assuming they earn at least $18,000 annually.
Borrowers are only required to pay if they are employed, and the financing is all local and community based, so there is infinite flexibility.
The pilot program at Allen Hancock College was a success with 4 students successfully receiving these grants and beginning to repay their debts at a fixed 5% of their annual earnings. This program is only in the pilot phase, but they are actively looking for partners to start similar programs in communities across the nation.
If this is a program that you are interesting in funding or receiving a benefit from, you can contact 13th Avenue Funding and request information on partnering with them.
Purdue University “Back a Boiler” Program
Purdue University’s “Back a Boiler” program is one of the most innovative student financing programs I have ever seen, and it all started on a college campus.
Similar to the 13th Avenue Funding model, the Back a Boiler program offers junior and senior Purdue University students the option to receive funding from the Purdue Research Foundation in exchange for signing an income share agreement (ISA). Participants will then pay back a fixed percentage of their income for a specified number of years. Essentially, Purdue University is investing in the future success of their students.
The ISA is not a loan, but rather an advance on your future earning potential that you can tap to pay for your college. It’s not free money, but there is no interest charged, so it can be significantly less expensive than traditional student loan options.
Also, once the recipient successfully makes the required monthly payments for the specified term of the contract no additional payments are required even if they have paid less than the amount of funding they received!
Use These Student Loan Alternatives To Escape Your Debt
Innovation and change is what we need to see a positive change in the student loan lending landscape. All 5 of the options above have begun to chip away at the traditional model of student loan lending and offer attractive alternatives for students and their families.
I hope that one of these will help you on your journey to escape your student loan debt and enjoy a brighter future. The future is indeed bright for FinTech and I can only hope that as technology continues to advance and anger boils over at student debt levels, that passion is channeled into creating better solutions that benefit us all!
If you have experience with any of these program let us know in the comments!
Photo Credit: tuk69tuk / 123RF Stock Photo
DJ works in financial services at a large public university. He lives in the Southeast with his wife and young daughter.