<p>and loan YOUR OWN money to a needy student in your alma mater?</p>
<p>Interesting idea. I think I would do this in the future once it is shown to have a solid repayment rate. It is pretty funny that they say they haven’t had any defaults “yet” since this is so new I doubt that any of these students are in repayment mode yet.</p>
<p>And what conditions would you require a borrower to meet in order for you to finance his college education?</p>
<p>Interesting idea. For a 4% return, I would probably consider it. I’d have to look more into the qualifying on the student part and what guarantees the organization has for investors but for people with some disposable income, it might be a good option.</p>
<p>Assume no guarantees, just like any other investment people make, in stocks, bonds, real estate, education. Even bank accounts are not guaranteed – viz the erosion in the purchasing power of money due to government printing. (One can shift and redistribute all one wants for a while, but eventually all investments are backed by none other than the production capabilities of the economy, and that is never guaranteed.)</p>
<p>But suppose you do get to set the qualification screening. That is really the crux of the problem, isn’t it? Would would you require of the borrower to satisfy your risk-reward trade-off and finance his education?</p>
<p>I would put my money where my mouth is. I am on the record as saying that this excessive borrowing is ridiculous and that the only reason the lending is being done, at all, is because the debt is undischargable in bankruptcy.</p>
<p>this is a strong contributor to the education bubble, imho.</p>
<p>So, yeah, I wouldn’t lend.</p>
<p>At a minimum, I’d like my borrowers to have a strong history of both academic achievement and earning their own way. Since this is B school (or maybe law school, my grad degree), I would not want people who came straight from undergrad. Self-supporting prior to grad school matriculation for at least one year and preferably two or more, and with some of their own savings in the game, even if they need loans now while they return to school full-time.</p>
<p>Yes, it is an odd title for the thread. My mouth would never be encouraging me to lend money to students.</p>
<p>Surprised I haven’t heard about this - nobody has hit me up for money, unless the solicitation was torn up and trashed without reading. There is no way I would consider being a direct lender to an individual borrower, but the way they have set it up, where an investor would be part of a pool of lenders with presumably an underwriting team in between creating a diversified portfolio of loans to numerous borrowers… I still wouldn’t do it. 
Maybe a small amount. 4% risky return doesn’t thrill me. The thought of helping a poor MBA student along his road to a multimillion dollar investment banking career also doesn’t thrill me.</p>
<p>I would not lend. </p>
<p>However, I have given specifically to an international student from my undergrad to attend my dental school. About 20 years ago, an undergrad professor put together a group of about 20 people to pay for this young man’s dental education. (Group was anonymous, though I knew about half.) We contributed for 4 years, student kept us updated, and he returned to his native country as well-trained dentist. I would do that scenario again.</p>
<p>I wouldn’t lend. (And of course, this idea gets back to the sticky issue of who defines what “needy” is.)</p>
<p>But then again, I don’t loan money to people I know. I don’t co-sign loans. And if I did loan money to a friend or relative, with appropriate documentation, I’d also consider the money as gone, and I’ll never see it again. Then if it’s repaid, it’s a bonus. If it’s not, it doesn’t screw up the relationship.</p>
<p>I will only loan money I can afford to lose.</p>
<p>Actually, based on the crowd-sourced model described, I already do fund loans – but not for students. I am a Kiva lender - see <a href=“https://www.kiva.org%5B/url%5D”>https://www.kiva.org</a> - and have been for years. So is my daughter-- she joined in 2009 while still a student. My net investment is around $75 
– but with the reminder of this thread, I think I’ll throw another $25 into the pot. </p>
<p>Kiva is a micro-lender – your money is pooled to provide funds for farmers and small business owners in third world countries. You pick the person or group you would like to lend to. After the money is paid back you can relend it or withdraw it. You do not earn interest – Kiva is a nonprofit with a charitable purposes. Since 2007, my daughter and I have funded roughly 20 loans, all of which were fully repaid or are current with their payments.</p>
<p>Obviously we don’t really care whether we get repaid or not. This is just an interesting way that we can use our relative affluence as US citizens to lend a helping hand to others. But if I can help fund a loan to a farmer in Bolivia or a food merchant in Cambodia and get paid back… then I see no reason why the for-profit, student lending model might not be profitable. </p>
<p>This is not a direct loan situation; it is simply a direct investment in a company that is in the loan business. The CommonBond company looks risky because funds are not liquid (unlike my Kiva 'investment", the money can’t be withdrawn whenever the investor decides to call it quits). It is not so clear what the status is with SoFi.</p>
<p>Calmom - that is really cool. I may look into that.</p>
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<p>Looks like the described schemes / companies involve investing into a lending pool which lends to individual students, not lending to individual students directly, which changes the risk profile from an investor viewpoint.</p>
<p>However, it seems that most posters here do not like the idea of large amounts of student loans, so they may not want to invest in such a scheme anyway (even if it, as an investment, otherwise met their investment goals), unless the loan amount to any individual student were limited to what they consider reasonable. Many consider the subsidized Stafford loan amount to the be limit of reasonable loans for undergraduate, so they may not want to invest in a scheme offering additional loans to undergraduates; professional degrees leading to strong job prospects (e.g. MD, MBA at highly recruited schools) may be a different story.</p>
<p>The alum most likely to bite are ones that were considering a donation. If they do a loan instead, then there is a decent chance that they will get money back and do another future loan.</p>
<p>Bookmarking Kiva!</p>
<p>I just give money. All this loan management is for the birds.</p>
<p>I considered starting a thread on this WaPo article but didn’t want to get caught in the value-of-a-liberal-arts-degree argument. It suggests colleges themselves participate in student loans.</p>
<p>[Colleges</a> need a risk-reward plan for student loans - The Washington Post](<a href=“http://www.washingtonpost.com/opinions/colleges-need-a-risk-reward-plan-for-student-loans/2013/01/03/d9f18e6e-4473-11e2-8061-253bccfc7532_story.html]Colleges”>http://www.washingtonpost.com/opinions/colleges-need-a-risk-reward-plan-for-student-loans/2013/01/03/d9f18e6e-4473-11e2-8061-253bccfc7532_story.html)</p>
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<p>To get away from individual student variability the thing to do obviously, would be to bundle loans into a bond fund and sell each investor a part of the aggregated fund and assign an investment grade to each tranche. We could then have a regulatory body backstop the overall funds in exchange for things like providing a useful public policy service like extending the preferential borrowing to underrepresented groups.</p>
<p>I’d also worry about the problems of a Keiretsu effect- times get bad and employment slows. That endangers the alums income repayment stream at a time when a bad economy is undermining their own finances. They put pressure on their own organizations to hire as many of the borrowers as possible to protect their own finances. This might be counter productive to the company- not hiring the best people and hiring more than needed.</p>
<p>Why is public policy service any more valuable than scientific research?</p>