Contemplating the bills for a four-year degree can leave students (and parents) quaking with fear. Most students will muddle through with the usual mix of loans, scholarships and grants, but a growing number are finding creative and offbeat new ways to help pay bills — everything from seeking investors to selling their eggs.
Certainly, the need for innovation has never been greater. College costs are skyrocketing, growing at about twice the rate of inflation, and student debt loads are also rising steadily — even as consumers pay off other forms of debt. The average cost of in-state tuition at a public school is now $7,605, according to the College Board, while private universities charge $27,293 on average. Meanwhile, the unemployment rate for college-educated workers under 25 is 9 percent — double the rate of grads over 25, according to a study by the Economic Policy Institute. No wonder a new study by the Institute for Higher Education Policy found that 41 percent of student-loan borrowers became delinquent at some point during the first five years of paying off their loans.
Among the most promising of the new strategies are programs that aim to pay for education the way angel investors finance start-up businesses. These companies raise funds from investors, then offer students money up front in exchange for a portion of their post-grad earnings. The concept isn’t new – Nobel Laureate and economist Milton Friedman proposed the idea of underwriting education loans with future income in the 1950s – but until recently, it hasn’t been executed successfully. Now, an organization called Lumni, is beginning to offer investment financing U.S. students. “When students borrow money for school, they risk not making enough money to pay their loans back,” says Noga Leviner, CEO of Lumni, U.S.A. “We’re taking on that risk for them.”
Mark Kantowitz, publisher of college funding web sites FinAid.org and FastWeb.com, predicts these educational-investment loans will become increasingly attractive not just to students, but also to universities over the next couple of decades. College discount rates (the percentage of college tuition covered by scholarships and grants) are hitting record highs, and the investment-loans give institutions a cheap way to provide students with attractive finance options. Enzi, another investment-loan company, tested a program with Stanford in 2010, funding two students during their final quarters at school. “It’s a pretty clever idea,” says Kantowitz.
It’s one of many clever strategies, including interest-free loans and peer-to-peer borrowing, not to mention good old-fashioned begging (albeit with a social media spin.) Below, are five innovative – and one slightly desperate — ways to help fund a college education. None of these schemes are intended to cover the full cost of college, but they can provide needed cash to students who come up short after grants and federal loans. We’ve rated them based on how difficult they are to get, and how much they could actually help.