Getting a decent college loan these days isn’t easy. The recession has triggered a tighter credit market and many lenders are deciding to opt out of the college lending market altogether.
According to Sallie Mae (Stock Quote: SLM), 70 lenders cut off student loans in 2008
So what options do college students have left to get the loans they need? One interesting option is to dig up loans through an online network of families, friends, and even local businesses.
That’s the idea behind CollegeDegreeFund.com. The web site enables college students to sign up on its web site and basically advertise for loans from a wide variety of sources.
CollegDegreeFund.com acts as a facilitator, connecting students with lenders who can donate anywhere from $10 and up to the student, and get a 6.8% interest rate on their loan.
Call it a micro-loan program geared toward the social networking set.
At the site, students create a profile, allowing them to reach out to potential lenders who may want to help “sponsor” the student’s college education. Student borrowers are encouraged to sell themselves by adding any scholastic achievements, athletic accomplishments, interesting hobbies, or social or community work to help their cause. Visitors to the site can check out profiles and ask questions, before they agree to a loan. Once they do agree, all the lender has to do is click a “sponsor” key and use a credit card to deposit the money.
CollegeDegreeFund.com will verify that the money is being used to fund a college education, and not used to buy a motorcycle or fund a backpacking trip through Europe. CollegeDegreeFund.com makes its money on a small service fee attached to the loan amount.
The web site has a creative business angle, too. In most cases, businesses sponsor a loan to a prospective college student in exchange for free advertising on the site. Businesses also rely on the student’s use of social networking to spread the sponsor’s advertising message across cyberspace. The student can’t get access to any money from a business unless he or she reads the company’s advertisement and provides direct feedback on its effectiveness.
Once the money is deposited into the loan account, it cannot be withdrawn by the borrower until they can prove it will in fact be used to pay for a college education. Borrowers must establish a Paypal account to receive and withdrawal funds.
It’s an interesting concept and time will tell if the site or concept gains traction. But tough times call for creative ideas, and this one seems to fit the bill.
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