NEW YORK (MainStreet) —If you graduated at any point in the last fifteen years or so, it’s a pretty good bet that you took out some fairly hefty student loans to pay for that degree. After all, there are over 37 million student loan borrowers in the U.S. and their average individual debt load hovers around $24 000. But what if it wasn’t Sallie Mae holding the note for your education and demanding monthly payments, but a well-off private citizen who wanted to invest in your career potential and expected to be repaid from your future earnings? It may sound crazy, but two startups are seeking to put a Renaissance-era spin on educational funding by reviving the patronage model.
Pave, founded Sal Lahoud and Oren Bass, launched in December 2012. The site allows pre-screened young prospects - new grads or those soon to graduate - to post campaigns seeking funds for their education or career ventures. Backers can donate to these campaigns and are repaid with a percentage of the prospect’s income over the next ten years.Also see:The Rise of the 529: How to Afford College
“The idea came to me when a friend asked to borrow some money to pursue his passion," Lahoud said. "I wanted to help, but I didn’t want to find myself in the awkward position of having to ask for repayment should things not work out with his projects." Lahoud wondered if, instead, this could be something more like a revenue share.
"I would provide the funding needed, and if he did well, I suggested we share in that success," Lahoud said. "Conversely, during times of hardship, he would not be responsible for sharing earnings. Thinking historically, didn't patronage used to work in the arts and sciences in a similar fashion?”
Upstart, founded by a group of former Google employees, has a similar mission and financial backing from such heavy hitters as Mark Cuban. Founder Paul Gu says that a desire to prevent promising grads from making career decisions on the basis of money alone was what motivated his team to launch their platform.