Thursday, January 13, 2011
Paying for College : yet another way.
In the past I've covered Vittana, Kiva's higher education loans, life investments, and peer to peer loans. Moving onto the next installment ... social investment funds that invest in the education of college students.
Lumni is a company that invests in the education of college students in Chile, Colombia, Mexico and the USA. Lumni doesn't cover a student's full tuition - only the balance left over after students have received assistance from grants, federal loans, and scholarships. For the USA program, the max you can apply for is $5,000/year.
For the USA program, Students must be citizens/have a SSN, must live in California or South Florida, and must be enrolled in a four-year college. More info about the application process here. If you want to apply then send an email to email@example.com or firstname.lastname@example.org. Check out some of the students who received funds from Lumni here.
In exchange for the funds from Lumni, each student commits to pay a fixed percentage of income for 120 months after graduation. The exact percentage of future income they are committed to pay varies based on a number of factors including a student's school, time until college graduation, grades, and major. The student’s obligation is complete at the end of that period regardless of the sum paid to date.
Plus, grads don't begin making payments until they have their first job, so the grace period extends as needed. They can pursue any number of careers after college since they pay nothing when unemployed and are exempt from payments when earning small stipends through programs such as Peace Corps or AmeriCorps. But grads DO have to pay for 120 working months; months during which you were unemployed just don't count towards that total. If you are unemployed for 24 months then Lumni then asks you to pay based on household income, not personal income.
The company also offers a career coaching program.
In order to minimize risk, Lumni lends to the children of existing microfinance clients, targeting students in their final year at vocational schools.
Lumni isn't the only one out there.
XacBank, a Mongolian microfinance lender, tends to lend to second-year students, who at least have some record of attendance.
Qifang operates in China, raising money online for Chinese students from Chinese lenders.
Enzi has just put students from India and Iran through Stanford University; they are paying investors up to 6% of their income for five years. Their founder noted that the big challenge is to come up with enforceable contracts.