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Peer-to-Peer Lending

This post is a part of our Monetization of Academia informative web series, and is available online only. To read the full article “The Monetization of Academia” as it appears in this month’s issue, visit Atlanta Tribune online for sales and subscription information.

By Jhanay Davis, Editorial Intern

As recent as 2008, an alternate way to fund the rising costs of tuition. Peer-to-peer lending, sometimes referred to as social lending, is aimed toward student loans. These sites allow students to borrow money from lenders that meet certain requirements. These programs eliminate the middle man and are designed to be more personal than a federal government  loan. Although students are encouraged to consider federal loans first, peer-to-peer lending offers relatively reasonable rates anywhere from 6% to 15% or higher.

There are three prominent organizations dominating this arena. They are: People Capital, GreenNote and TuitionU.

People Capital allows students to set up a profile that details the amount of money needed and which type of loan a student would like to take out. Potential borrowers then specify a maximum interest rate that they are willing to pay. In an auction style process, lenders negotiate what interest rate below the maximum they are willing to offer. Students select the loan at which rate they are willing to pay.

All loan choices require that a student pays on the interest monthly or a minimum of $50 while still in school. A credit check is required for People Capital loans. However factors such as a student’s major, GPA, standardized test scores and college are factored into the Human Capital Score which is basically an in-depth risk assessment. Lenders vary from banks, charitable organizations, individuals with a minimum $1 million net worth, or individuals with a salary of $200,000 or greater for the two previous years.

GreenNote and TuitionU are two very similar programs. Both require users to subscribe to a membership. They use social networking sites to aid members in educational fundraising efforts. The sites allowusers to access funds through their own contacts. Users are encouraged to begin with friends, family, friends of family, friends of friends and community leaders. The largest difference that exists between the two is that GreenNote requires that members set up a PayPal account so that funds can be directly accessed. Existing PayPal accounts can be used but if users do not have one, they will be prompted to create one during GreenNote registration.


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