For many families, the astronomical cost of college tuition coupled with a lack of savings, has created a massive debt load for students after graduation.
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According to a 2011 Pew Research Center report, a four-year private college education tripled in price between 1980 and 2010 and student loan debt for a bachelor's degree now averages more than $23,000 per student borrower.
With college costs expected to steadily rise, the task of paying for college is going to become even more burdensome.
“The key event that happens in a person’s life is when parents have children and that’s when the defining moment takes place: what are we going to do for our child’s education?” says Tim Harrington, CEO of FiPath.
To help cover tuition costs, families and students are increasingly turning to crowd-funding, where individuals join in a collaborative effort to pool their resources for a cause.
“Our mission is to help families start saving because if they don’t start saving money now, it’s really going to be difficult to pay for college in 18 years from now,” says Marcos Cordero, CEO of GradSave. “A big part of how we think about it is the old adage that it takes a village to raise a child and we have a similar sort of form.”
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Here are different forms of crowd-funding for college and how students can benefit from online donations.
Investing in a Future
Sites like FiPath and GradSave use investment vehicles to encourage donations will be used as intended.
GradSave directs donors to contribute directly into a user’s 529 plan, an education savings plan operated by either a state or higher education institution designed to help families save for college.
“We call it a ‘scholastic promise’ so the contributor knows that the funds are going to be used for higher education expenses,” says Cordero. “In a 529 plan, there are ways to pull out the funds and not use it for college but they incur penalties.”
Although FiPath allows parents to direct the funds into a savings account without paying fees for early withdrawal, Harrington explains that “collective peer pressure” prevents anyone from dipping into the account.
“If you create a goal for all of your friends and family for your child to go to college, you can see how you’re progressing towards that goal,” he says. “If all of a sudden that goal is dropping down, everyone is going to be asking ‘what’s going on here?’”
Friends and family members can receive customized emails requesting donations in lieu of gifts and presents, which can account for a third to half of the total cost of school by the time the child graduates high school, says Harrington.
“If you have 20 friends and family members who give gifts three times a year at $100 per gift and if you start when the child is two years old, you’ll have almost $100,000 saved for a college education,” he says. “Most private schools 15 years out are going to be upwards of $300,000 for the four years and in-state schools will be more like $200,000, so it’s such a practical way of getting to the end goal.”
Giving Students a Voice
Some students are running their crowd-funding pages beyond covering tuition costs, which provides a sense of responsibility and provides good budgeting and saving skills.
“We’re seeing more and more people turn to the internet for tuition and all kinds of causes,” says Naomi Ketcher, marketing director for YouCaring.com. “[Students] are finding that there are people that actually want to help them, and friends, family and people outside of their immediate circle will actually give money to these types of causes to see people benefit and get educated.”
YouCaring.com lets users set up free fundraising pages for a variety of causes and students can share their pages with donors around the world through social media sites like Facebook, Twitter and Pinterest.
“Friends and family can then come online and donate in a couple of minutes and the money is paid directly to the fundraiser into their secure account,” Ketcher says. “It’s simple and quick, the money is paid straight away and your story is online, so anybody around the world can access it and donate.”
The recently-launched site ScholarshipProz provides students with a platform to make their needs known and turn their education into a family, friend and community event, says vice president of marketing, Orlando Espinosa.
“We call ours ‘cause-funding’ because there’s a specific cause--we want to make sure our students have an opportunity to let their voices be heard,” he says.
Espinosa explains the purpose of ScholarshipProz is to help students cover gaps in their abilities to pay their college expenses rather than relying on funds for a full-ride.
Students are in charge of their own fundraising efforts through social media campaigns and approaching local businesses and members of the community.
“We don’t want them to just create an account, we want them to be interactive and be their own spokesperson,” he says. “What we’re seeing right now with social media is that there are so many students out there who are creative in their promotion of everything and anything---the more creative you are and the more that you push your cause, the more information is going to be out there for people to make the decision on whether to help you.”
Families and students interested in crowd-funding to pay for school should research any site fees and consult a tax professional about owing taxes on any donations received.