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Credit Cards and College: How Not to be a Bull in a China Shop

“You’ve Been Pre-qualified!”

“Our Best Rates Ever!”

“Important Finance Information Enclosed”

It seems like every time you open your mailbox there’s a letter from a credit card company hounding you to sign up. They promise low monthly interest rates, no annual fees, and bonus points for rewards in the form of merchandise or flights. These credit card companies are counting on your naïve, excited outlook on borrowing money. They know that college students have a lot of expenses, and that they may not see how creditability is like fine china. College students are not always delicate when it comes to spending money.

So how do you make sure you don’t become a bull in a china shop and make the best choice when it comes to getting a credit card? You can start by reading this article.

Tip #1: Stay Away From Booby-traps

The credit card company’s main goal is to convince you to sign up for their card. Some companies will offer freebies, use words like “easy credit,” or tell you that you can cancel at anytime. Avoid these traps by reading all the fine print and paying attention to the gimmicks. If it sounds too good to be true, it probably is.

Tip #2: Ask Yourself The Hard Questions

- Do I really need a credit card right now?

- What is my income? Is it steady? Can I really afford this credit card?

- What do I plan to use my credit card for?

- How much credit should I get and how much do I actually need?

Tip #3: Not All Cards Are Created Equal

Shop around, do your homework, and compare, compare, compare. You should look for the following things while researching which credit card to get:

- A card with low Annual Percentage Rate (APR). You want the interest rate you are going to pay to borrow money to be as low as possible.

- A card with a super low or no Annual Fee. Why should you get charged every year just for having a card?

- Make sure you know the cards Default Interest Rate. This is what the company will charge you if you get a penalty or making a late payment (which you will never do of course).

- Look out for Universal Default. Some companies are sneaky and will raise your interest rate even if you always pay all your other bills on time.

Some credit cards are flat out horrible. Make sure you research those as well so that you don’t accidently sign up for one. Read about it here.

Tip #4: Some Words To The Wise

-       Don’t just pay the minimum; try to pay off your balance in full.

-       Don’t go over your credit limit.

-       Don’t take out cash advances.

-       Don’t forget you can manage your card online.

The horror stories are real. You don’t want to end up like some of those people on Hoarders who are not only buried under mountains of “stuff,” but are also drowning in a sea of credit card debt. While having and using a credit card wisely is a common tool to build a good credit history, falling into a credit card trap can ruin your credit for a long time. In order to avoid this, do your research and pay attention to detail. In college, it can be difficult to think long term, however getting a house, an apartment, a car, and even higher loans all depend on your credit history. Creditably is like fine china, once cracked it is never quite well mended.

Student Debt: Some Clear Advice Among a Sea of Contradicting Messages

Here’s a scary thought… The total amount of college debt in the United States is pushing nearly a trillion dollars and is continuing to rise at a rate of 13.9 percent compounded annually. As students prepare to accept their degrees this Spring, many teachers, mentors, and families will proudly cheer for their graduate. Valedictorians and key note speakers will tell stories of a promising, exciting future filled with unlimited potential to stadiums full of hopeful 20-somethings. However, for the majority of graduates, a grim reality of possible unemployment and debt awaits them.

The messages are contradicting. Students are told to go to school, invest in their future, and work hard to earn a degree that will guarantee them a job. My mother is always quick to suggest that I take out more loans and pursue a doctorate degree. “If I were your age again,” is how she greets me. However, since the advent of the recession, students have struggled to find employment that matches the skills they’ve acquired in college. After graduating from undergrad, I worked in retail, in a call center, as a customer service rep, as a tutor, and at more internships than I can count. For over a year, my “sent box” looks like a cemetery for outgoing cover letters and resumes.

Often times, employers are reluctant to hire recent graduates because they lack consecutive years of relevant work experience. In turn, students are forced to take jobs that are often unrelated to their field of study, usually lack the benefits they need, and are lower paying, making it extremely difficult for them to both live and pay back their loans simultaneously. Instead of a great job, undergraduate and graduate students, are often left with a mountain of debt from anywhere between $25,000 to even $200,000. And you cannot discharge student debt given by the federal government by filing bankruptcy.

In addition to these mixed messages studies to do not reflect actual hiring practices. A recent study of thousands of U.S. companies showed more than half want a worker with at least a two-year degree. However, according to the newly-published special report from the Bureau of Labor Statistics, more than 11 percent of the country’s students who’ve earned a four-year degree were unemployed in 2011. That’s an unemployment rate that was higher than the national average, which floated between 8.5 percent and 9.1 percent that year.

So how does a student make it through college, graduate with a great degree, land a fabulous job, and start an awesome career without drowning in an ocean of student loans? Even if you absolutely have to take out loans, it’s possible to stay afloat.

Accept that Equality is a Fantasy

It may be hard to accept, but not all degrees are created equal. If you decide to go to college to pursue a whimsical degree that based on market trends does not equate to a promising job search, expect to have a difficult time finding a career to suit your degree. During freshmen year, when your advisor pulls you into her office and asks you to decide on a major, ask yourself: What type of job do you plan to pursue that will justify spending a large sum of money on that type of a degree? Do research on the types of careers people usually go into with the degrees you’re in and pick your degree based on whether you will have a better chance of securing a job. Even if you attend a liberal arts college, do not be too liberal with your choice of major. Don’t believe the hype or buy into the fantasy of college being an extended party on the government’s dime. Not to burst anyone’s bubbles, but the point of going to college is to learn what you need to know in a specific field in order to obtain a well-paying job.

Balance is Key

If you choose a major, like business or engineering, the likelihood of being able to pay back any loans is greater. If you decide to go to law school and have to take out a large loan, you’ll probably be able to pay that loan back after a few years because lawyers typically earn high salaries. Same is true for medical school. For my graduate degree, I knew I wanted to be as marketable as possible, yet still remain true to my discipline. I want to eventually teach at the university level so I picked a Humanities degree that concentrated in English, which would also make me more desirable to a university’s Humanities department. The college professor salary I will one day earn justifies the loans I took out. However, if you major in women’s studies or archeology or photography or even English, you may have a harder time paying back loans… especially if you took out $200,000. Make sure the loans you take out, if any, match the career you expect to obtain.

Two or Four?

A four-year college is not the only option and many students choose to attend two-year colleges or community colleges first. After those two years they can transfer to a four year university. This allows them to fulfill many core requirements and even get a jump start on their major credits for a fraction of the cost. If you maintain a certain GPA while in community college, many schools will guarantee you a spot in your junior year. In addition, online colleges and online courses, offer virtually every degree imaginable for considerably less money.

Private vs. Public?

Often times, the only difference is the cost. In-state tuition at public colleges is usually significantly less than private schools. Some of the highest ranked colleges in the nation are state schools with have amazing resources, alumni, and scholarship plans. Currently, the University of California—Berkeley holds the number one spot in the nation. University of California—Los Angeles is second, University of Virginia third, University of Michigan—Ann Arbor fourth, and University of North Carolina—Chapel Hill fifth. For a complete list of top national public universities click here.

Work Hard So You Can Play Harder

During my junior and senior year of high school I busted my butt writing essays for scholarships and contests. I wrote about whatever the application called for, whether it was the environment, space travel, literature, or cockier spaniels. All in all, I only won a hand full of scholarship money, but I was able to purchase books and pay for housing my first year. I also worked throughout college to afford my expenses. If I could do it all over again, I would have worked more and I would have saved more. The less you have to pay back in loans the more money you will have to enjoy your life.

Are You Independent or Dependent?

It’s that time of year again–the time of year that students and parents are forced to either complete their taxes early or go through loads of paperwork from the previous year to fill out the FAFSA. For those student who have completed the FAFSA in previous years it’s clear that there are lots of unclear questions. One category that lots of students have questions about is the designation of independent and dependent students.

This is an important designation because it has a very significant pull on the amount of financial aid that a student is eligible for and raises the amount of Stafford loans available immediately.

In order to meet the definition of being an independent student one must meet at least one of the following criteria:

• You are 24 years old or older (Born before Jan. 1, 1990 for the 20013-2014 FAFSA).

• You’re married on the day you apply for financial aid (even if you are separated but not divorced).

• You are or will be enrolled in a master’s or doctoral degree program (beyond a bachelor’s degree) at the beginning of the academic year your FAFSA is for.

• You’re currently serving on active duty in the U.S. Armed Forces for purposes other than training.

• You’re a veteran of the U.S. Armed Forces. (A “veteran” includes students who attended a U.S. service academy and were released under a condition other than dishonorable.)

• You have children who will receive more than half their support from you during the FAFSA academic year.

• You have legal dependents (other than your children or spouse) who live with you and who receive more than half their support from you.

• When you were age 13 or older, both your parents were deceased and you were you in foster care or a dependent or ward of the court.

• As of the day you apply for aid, you are an emancipated minor as determined by a court in your state of legal residence.

• As of the day you apply for aid, you are in legal guardianship as determined by a court in your state of legal residence.

• At any time on or after the July before you file your FAFSA, your high school or school district homeless liaison determined that you were an unaccompanied youth who was homeless.

• At any time on or after the July before you file your FAFSA, the director of an emergency shelter program funded by the U.S. Department of Housing and Urban Development determined that you were an unaccompanied youth who was homeless.

• At any time on or after the July before you file your FAFSA, the director of a runaway or homeless youth basic center or transitional living program determined that you were an unaccompanied youth who was homeless or were self-supporting and at risk of being homeless.

• Note that a parent not claiming a child on their own tax return does not make a student independent.

If a student does not meet one of the above criteria, they must file as a dependent. Dependent students have to report both their parent’s income and assets in addition to their own, while independents only report their own income and possibly their spouse’s income if applicable.

Hope that cleared up any questions for you! Good luck filling out those papers!

Investing for College Students

No course on personal finance would be complete without a section included in investing. And investing early is one of the smartest things you can do. Investing not only protects your money for the future, but it also keeps the money you already have safe and secure. Unfortunately, a lot of young people don’t invest. It isn’t that they don’t want to, it’s usually because they don’t know where to start or what options are available. This article should make all the financial jargon around investing a lot easier to understand.

Bonds: a bond is an interest-bearing debt security.  Bonds are issued by both companies and government entities for a specific amount of money that is “lent.”  Bonds always have a given term.  While interest is generally paid out on specific intervals, the bond amount or face value is repaid in total at maturity (the end of the term).  Bond duration is generally between 90 days (treasuries) and 10 years.

Stocks: when a corporation decides to go public, it allocates ownership of the company by partitioning the company into shares. A stock is then a unit of ownership. Stock values generally fluctuate with the understood value of a company. Stocks are generally traded through the stock market.

Mutual Funds: a mutual fund is an investment made by pooling funds from a number of investors for the purpose of investing in stocks, bonds, and other assets.  Funds are managed by specific money managers who invest the capital while maintaining the investment objectives and structure.  Different mutual funds have different general investments. For example, some funds are focused in specific international markets, while others are focused in specific market areas (mining, the financial industry, technology, etc.).

Risk: in most cases an investment will not have the exact same return as expected. The possibility that some of the original investment will actually be lost is the risk associated with an investment. Risk is calculated using the standard deviation of historical or average returns of investment. Different investments carry different amounts of risk.  While risk carries the concern of loss, greater risk also means greater possible returns. An individual’s risk tolerance is thus something that needs to be considered both from a financial and personal standpoint.

Diversification: to manage risk, it is generally desirable to diversify. That means you have a variety of investments that do differently in different scenarios. The idea of diversification in based off the wisdom of not placing all of one’s eggs in one basket. By investing in different country’s markets and in companies that might do well in different markets an investor gives themselves a cushion.

Tax-deferred investments: some investments allow users to accumulate tax free until the investor takes the money out at a later date.  These types of investments are generally used for retirement saving and are important for two reasons. The first is the idea of compound interest. If the money can grow unhindered by yearly taxes on interest and gains it is a benefit to the investor. The second is the fact that money is taxed at different rates depending on the income tax bracket that an individual falls into.  While one is working, they will generally be in a higher tax bracket than would be expected once retired and not working, and therefore income would be taxed at a higher rate if done immediately.

Interested in investing? Unless strictly interested in treasury bonds or placing money in a money market account, you will need to open account with a brokerage firm.  If you are interested in having a financial planner, it is important to decide if you would like to do a fee based or commission based account.  Also, consider going through your bank or through a referral.

Happy investing!

5 Ways to Pay Off Student Loans Faster

Paying off student loans (and any credit card debt accrued while in school) should be a big priority for any student who is looking to get their personal finances in order and to get rid of a big cause of stress. For students who have a basic understanding of the way that compound interest works—that is that an extra $100 dollars paid off this year means $150 less down the road—paying off loans as fast as possible is also important.  Here are our 5 suggestions to help students do so:

1)      Put things in order…

Pay off loans in order of interest rate. Because interest is your enemy when holding debt, make sure to pay off higher interest student loans (generally these are any privately-held loans) and credit card debt before tackling student loans with lower interest rates.  Focus energy into paying off the loans with the highest rates for the greatest return.

2)      Take full advantage…

Not too many students know that they may be eligible for tax deductions. If paying off student debt, you can deduct up to $2500 of interest paid each year on federal taxes. Borrowers should check their eligibility for this benefit by speaking with their tax preparer or checking the IRS website.

3)      Borrowing has its benefits…

Because lenders compete for private student loans, there are often different perks that lenders offer to borrowers. Student borrowers should always check the small print of their loans to figure out if there are incentives given to those who sign up for auto repayment, keep a good payment history, or have graduated from school.

4)      Don’t waste the grace…

If you have a “grace period,” before student loans are due, make sure to check the terms of the grace period and use the time to get organized. Most loans allow students to set amount of time between graduating or leaving school before month payments start being due called a grace period (generally 6-9 months). During this time, students should take an inventory of all loans if they haven’t already and should come up with a repayment plan.  If employed, students should also begin to save monthly so they get in the habit of saving.  Setting aside money will also allow such students to either pay down a portion of their principle once loan payment kicks in, or will give such a student an emergency fund to rely on.

5)      Become the commitment type…

To really try to pay off debt, students need to commit to paying more each month than is actually due, especially if the minimum payment is interest-only. The more principle is paid off the better.  A trick that is used for mortgages that could also be applied to student loan debt is the trick of making biweekly payments instead of monthly payments.  This is very easy to do—especially for individuals who are paid biweekly, not monthly and will make an automatic extra months payment each year, which can help a borrower to pay off loans years earlier in the long run.

A (Very) Short Course for College Students on Saving Money

While there are a few colleges out there that offer courses in personal finance, most schools do not. This leaves many students to muddle through personal finances on their own. But, don’t stress out! This blog post is especially for students who are struggling with basic finances.

The most important way to save money is to eliminate or reduce expenses. It doesn’t matter how much you can save on an item, if you can live without it or you can do with much less, it’s much better to cut the cost altogether.

 

FOR ONLINE PURCHASES

Cash back isn’t just for credit cards…

If you sign up for a program like ebates.com or shop at home, you can click through their links to a host of different online retailers and can then earn between 1% and 12% back on your purchase.

 

Promo codes are like secret passwords…

Unlock those savings. Whenever you get to the checkout page and see the promo-code box make sure to do a quick internet search for “retailer+promo code” to see if you can find anything that will work on your purchase, whether it be a percentage off or free shipping.

 

Deal sites are dangerous…

Unless you have a plan to buy something that you need. Deal sites can be great if looking for something in particular, but other than that they can be very misleading. The steep discounts on luxury items such as facials, eating out and even hotels can lure buyers into purchases that aren’t needed. Always use caution when visiting these sites.

 

EVERYDAY SAVINGS

Grab your little brown bag…

Make yourself a lunch for work and when you’re just hanging out with friends. Even if you’re eating off the dollar menu every time you go out, those dollars quickly add up. If you happen to be out and get hungry often, consider buying a box of granola bars to leave in your car to tide you over until you can get home and prepare an inexpensive lunch.

 

Brew at home…

Even if you only drink coffee a few times a week, a $10 coffee maker bought on sale and coffee beans bought at the store can translate into immediate savings.

 

Explore your city, for free…

Especially as a college student, there are lots of free and discounted activities available to you. Most universities let students into school athletic games for free and host a slew of free on-campus events. Even if you want to escape from campus for a little, consider going to a local beach, park, or hiking trail. For activities near you, search “your location + free events” and you’re likely to come up with some new ideas!

 

Use your oven for a change…

It can be easy to get into the habit of going to restaurants a few times a week just to go out with friends. However saving the expense of eating out for special occasions—birthdays, anniversaries, really big announcements—can be really important to budgeting.

 

Turn on the faucet…

Just like eating lunch and dinner out every day can add up quickly, a $2 bottle of water every time you get thirsty can take a big chunk out of your wallet. Reuse your water bottles and refill them with tap water—that’s what your immune system is for. However, if you don’t want to rely on your own body’s own defense mechanisms to protect you from toxins in public drinking water, purchase a filtered water bottle and reuse it as long as possible.

 

Learn to mend…

Pick up a needle and tread. It might seem a little grandma-ish, but being able to quickly fix a small hole or tear can salvage clothing, as well as, will help you avoid buying more clothes.

 

BE A SMART CONSUMER

Necessities, necessities, necessities

One of the most important steps to saving is learning the difference between needs and wants. To really save money it is very important to be able to tell the difference and make purchases that are necessary, not just desirable.

Make a list and check it twice…

Before you go to the store write down or make a list in your phone of the things you need to purchase. This will help you avoid tempting deals or unplanned purchases. Make a list before entering a store or running a series of errands and stick to it.

 

Quality is key…

When buying, often the least expensive option is not actually the most cost-effective. When making purchases, be sure to read reviews, consider any applicable warranties and quality of the item. If there is much more life in an item it might be worth paying more for as it will need to be replaced less in the long run.

 

Abort the brand names…

Buying store brand items for groceries and household items doesn’t make you look poor, it makes you look smart and can lead to large savings at the register. Often these items are not only made of the exact same ingredients as the brand name, but are actually made at the same place and then just branded differently. Don’t be fooled into paying more for the same item. What you’re paying for in brand names is often just marketing.

 

Another man’s trash…

Can be another man’s treasure so consider used good as well. You can save a lot on item if you make “vintage” your friend. Getting items off Craig’s List or at a resale store can be much less expensive than getting new items.

Happy budgeting!

Budgeting as a College Student: The Need, The Options, and The Steps

While budgeting might not seem like a lot of fun, neither is waking up senior year to realize that in addition to the possible student loans you’ve taken out, you’ve also piled on additional debt from overspending. Plus you’ll likely score some favorite child points with Dad if you tell him you’re budgeting!

The need:

For most, their college years are the the tight years. Unlike people who have already graduated and work full time with a good salary—college students spend a majority of their time doing work that they are paying to do and learn. Side jobs like nannying, tutoring, and even interning are rarely lucrative. This makes college an ideal time to start looking at a budget. Once you get out into the real world, being financially successful means knowing how to live within your means.

The options:

There are different options for budgeting. Lots of individuals now choose to use online budgeting sites like Mint.com and Moneytrackin.com. There is also the low tech option of budgeting worksheets and cash envelopes, and then there is an inbetween point of using excel and entering in receipts and budgets. Students should choose the method that best fits both their personality and their budget needs. Cash envelope budgeting is the most rigorous of the options, but might be needed if a budget is too hard to stick to otherwise.

The steps:

1. First, decide if you will budget by month or by semester. Figure out if tuition and books will be a good portion of your expenses. If you are living on campus and paying rent by the semester, planning based on academic blocks probably makes more sense. Otherwise a standard monthly budget probably makes the most sense.

2. In addition to the tuition and room and board that you might be financing, you should determine approximately how much you will be spending on other items. Make a list of educational extras like books, supplied and tutoring, groceries and food, clothes, etc.

3. Look at past semesters expenses to make sure that your estimated figures are realistic; if you are a new college student then consider asking friends or looking around for cost trends online. If your expenses can’t be reconciled with income or available funds, look for ways that you might be able to curb your expenditures. This step often involves separating wants and needs.

4. Track your spending and expenses and make adjustments to either the budget or spending habits as necessary.

The 4 C’s of Success: Cost-effective Community College Courses

Community college enrollment has been steadily growing in popularity in recent years. According to recent figures from the American Association of Community Colleges, enrollment is over 13 million, which represents about half of all college and university students in the US.

One of the main reasons for this growth is likely the relatively low tuition cost of attending community college. Full-time tuition, based on two 15-unit semesters is about $600 -$5,400 per year, or an average of $2,361 according to the American Association of Community Colleges.

Many students go to community college to earn their associates degree in specialized fields (some popular fields are dental hygiene, computer technology, and nursing). However, many students attend community college in order to take advantage of the low unit costs that such schools offer in addition to the savings that can be recognized by continuing to live at home.
If you are a high school senior and are financing college on your own or have a smaller family budget for school, don’t forget to consider community college as an option.

When considering community college students should try to plan further out by anticipating what 4-year college they would like to attend following completion of their lower credits. Most community colleges maintain specific articulation agreements with four-year universities that outline exactly which courses will transfer. On occasion these articulation agreements also include agreements on the universities part to admit students who meet grad and course work requirements automatically. Students should pay close attention to such details, as courses that do not transfer equate to a loss of both time and money.

If you are already a college student, consider taking summer classes at a community college, or see if your school allows students to take courses at community college during the academic school year.

An additional bonus about community college is the flexibility that they offer. Because these colleges cater to a wide range of students they often have more evening and weekend classes and also have a variety of online courses and even telecourses.

I Have a Secret for You: Bring Down College Costs with the College-Level Examination Program (CLEP)

Are you an independent learner? Have you ever taken a final thinking you didn’t need any lectures to pass it? Or do you want to avoid the time and construction of a set college class? I’ll let you in on a little known secret: you can save time, cut down on your college costs, and even graduate early by looking into taking CLEP tests for class credit instead.

If you took any AP Tests in high school, CLEP tests are very similar in style and just like AP tests, are administered by the College Board. CLEP has also been one of the most widely trusted credit-by-examination program for over 40 years, but not too many students know about it. I know I sure didn’t. Only about 200,000 students take the test each year, compared to the nearly 3 million students who take the SAT. It’s a rigorous program, but it allows students of a wide range of ages and backgrounds to demonstrate their mastery of college-level material in introductory subjects and earn college credit.

At $77 each, the tests are cheaper than taking an equivalent course in college. In addition, over 2,900 colleges and universities in the United States accept CLEP tests. If saving money in the long run is on your agenda, the CLEP is definitely worth looking into.

You can take the test at testing centers across the country and occasionally they are offered at a specific location on various campuses. Each exam lasts 90 minutes. With the exception of The English Composition essay, all of the tests are multiple choice and are scored immediately. Scores of 50 and above (out of 80) are generally considered passing, but students should check with their respective schools to determine what score they will need for credit.

While the College Board does not post pass rates to the test, the military does post their CLEP pass rates. CLEP test are especially popular among military personnel who can take the tests free of charge at duty centers around the world. These pass rates vary from year to year, but the average trends show relatively high percentage pass rates on foreign language test and intro to management and marketing. On the other hand, calculus, chemistry, and the other business courses (economics courses, financial accounting, and business law) all have relatively low passing rates.

Regardless of the test, it is important that interested students become familiar with the format and prepare for the material tested.

Right now the College Board offers the following 33 courses through CLEP exams:

History and Social Sciences:
• American Government
• History of the United States I: Early Colonization to 1877
• History of the United States II: 1865 to the Present
• Human Growth and Development
• Introduction to Educational Psychology
• Introduction to Sociology
• Principles of Macroeconomics
• Principles of Microeconomics
• Social Sciences and History
• Western Civilization I: Ancient Near East to 1648
• Western Civilization I: 1648 to the Present

Composition and Literature:

• American Literature
• Analyzing and Interpreting Literature
• College Composition
• English Literature
• Humanities

Science and Mathematics:
• Biology
• Calculus
• Chemistry
• College Algebra
• College Mathematics
• Natural Sciences
• Precalculus

Business:
• Financial Accounting
• Information Systems and Computer Applications
• Introductory Business Law
• Principles of Management
• Principles of Marketing

World Languages:
• French Language (Levels 1 and 2)
• German Language (Levels 1 and 2)
• Spanish Language Levels 1 and 2)

Sharpen up those pencils and happy testing!

Two New Alternative Financing Methods

While most students tend to go for the typical plethora of loan and grant options without doing much research, there are some new, alternative, financing methods that make use of the Internet. Two such sites are sofi.com and upstart.com.

SoFi—Alumni Funding Students at their Alma Mater

SoFi (https://www.sofi.com/), which stands for “social finance,” was started by Mike Cagney (http://www.forbes.com/sites/petercohan/2012/05/15/sofis-mike-cagney-wants-to-fix-student-loans/) with the idea that the site could make alumni the lenders of student loans instead of having banks financing the loans. In essence, the model allows alumni to group together to fund students. These students are not individually chosen by the alumni, but are rather chosen by the site and grouped.

The alumni stand to make a return of at least 5% off of the loans. When using the site, students should look to pay about 5.9% an up on loans (government loan rates start at around 6.8%). This makes the site a win-win for both investors and students.

Like other online peer-to-peer lending bases, SoFi functions as a marketplace for online loans (although in this case group-to-group might be a more appropriate term).

Students can register on SoFi’s web site; if accepted, students will receive loan funding through their school’s financial aid office.

The site also offers loan consolidation of up to 200,000 for new graduates with a fixed interest rate of 5.99%.

Upstart—Capital for a Portion of Future Income

Upstart (https://www.upstart.com/) is a totally new model of financing. The idea is based off of the future value of promising graduates. Upstart takes information from applicants including schools attended, work experience, job offers and signs of potential including accomplishments and even standardized test scores.

Upstart then uses statistical models to predict the individuals expected income during the next 10-15 years to determine a funding rate. They then allow individuals to determine a specific percentage of their future earnings that they would like to share—although they are capped at 7%. Based off of the statistical determination made, upstarts are granted a specific funding amount for each percentage of income shared.

Obviously this model doesn’t work for everyone, but only those who are really promising and committed to having a strong career to repay those who have decided to invest in the individual.

Students can use the funds raised for student loans, but are not limited to doing so.