As college tuition prices continue to rise along with student loan debt, many students are looking for new ways to fund their education beyond the traditional methods, with many turning to crowd funding.
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“Crowd funding presents an appealing alternative of securing the funding ahead of time and eliminates the possible consequences of thousands in student loans – especially since those loans carry an interest rate and a penalty for defaulting,” says Steven Smith, CEO of Finicity, maker of money management program Mvelopes. “Graduating debt free and starting your adult life without the burden of debt is what I believe is driving so many students to the crowd-funding model.”
Crowd funding allows individuals to appeal for funds for any reason—whether it’s for medical bills, making a movie or buying a business—to people to work together in a collaborative effort to pool their resources.
The College Board reports that a “moderate" college budget for an in-state public college for the 2012–2013 academic year averaged $22,261 while a private college averaged $43,289, and as families struggle to cover the costs, raising money through online crowd funding can help fill financial gaps, says David Sperling, co-founder of YouveGotFunds.com.
“It gives students an alternate way to get money when they can’t get the loans, they can’t get the federal help, the parents don’t have the money--they turn to crowd funding where they have a chance to make money and they don’t have those student loans to pay back later,” he says.
Donors can contribute toward a student’s education though a variety of platforms including organizations focused on investment vehicles (529 plans and other college savings plans), sites where the student is responsible for their own donation outreach, and pages run by parents intended for family and friends to fund their young children’s future college goals in lieu of gifts.
“There are so many different toys and useless things out there to choose from that sometimes going with the basics like [contributing] funds towards college just works really well--it’s just making these tools available to parents and young children,” says Mauricio Idarraga, founder of Instagrad.
For students interested in pursuing crowd funding to bolster their financial resources, here's what experts say students should look for in a crowd funding platform and how they can effectively promote their educational cause.
How to Choose a Site
Before committing to a site, students need to read the fine print about any associated fees or percentages the company extracts from the funds as a service charge, usually around 5%-10%, warns Sperling.
“Some of them you don’t get the money unless you reach your goal, some of them if you don’t reach your goal, you pay a higher fee,” he says.
Researching website policies, terms and conditions can help students make a more informed choice of where to start the process, says Smith.
“Some require you to spend more time setting up your profile and go through crowd funding lessons before you can actually set up your cause, so do your homework before blindly jumping in to the first site that pops up in your search,” he says.
Create a Personalized Page
Students should create personal pages that provide information on why and how they will use raised funds to bolster their appeal.
Connecting with donors by detailing education plans can increase students’ chances of reaching their college funding goals, says Orlando Espinosa, co-founder of ScholarshipProz.
“When people read it, they have to identify with something the student is writing about; whether they’re coming up from a single-parent home or whether they are the first in their family to go to college, you have to have something that’s candid,” he says. “It’s no longer going to be [enough to say] ‘I need money to pay for my education’ and that’s it because everybody needs money to go to college.”
Besides sharing extracurricular activities and volunteer projects, students can also create a more interactive page by posting pictures and videos, suggests Ellen Sperling, co-founder of YouveGotFunds.com.
“A video is really important because it’s their chance to really sell themselves--it doesn’t have to be professionally made, it can be done on their cell phone, but just really a chance to talk about themselves and tell their story.”
Set Realistic Goals
Although it may be tempting to shoot for the moon and list an ambitious donation goal, an unrealistic figure could result in donors not taking the student and their cause seriously, warns Sperling.
“You’re looking for people to help you financially, and if you’re not realistic, you’re going to lose people in the intro because they’re obviously going to look at it and say this isn’t achievable,” she says.
Creating a budget breakdown of individual college expenses can help contributors visualize how their money is actually benefiting the student, points out David Sperling.
“By breaking it down they can see where the money is going to, not just I need $20,000 or $15,000 but here’s how I’m going to spend it--here’s how it’s going to be put to the best use, so they really get an idea that I’m helping them, I put money towards their books, I can really help them do that.”
Be Active with Outreach
It’s vital that students proactively promote their page to friends, family and members of their community through email updates, social media outreach and word of mouth, recommends Espinosa.
“People are willing to share stories about other people and that’s the great thing about social media,” he says. “It actually empowers the student so that they can understand that they’re not in it alone, that they can tie their voice to other people’s voices and share their specific story [with others] who can help.”
Students should continue the excitement and buzz around their college campaign by continuously giving updates on their progress, even after they reach their goal, says Ellen Sperling.
“The people who have invested in them really like to hear from them,” she says. “It’s like someone who has received a scholarship fund, they want to see how they’re doing--I think that’s really important that they stay in touch and pass on that information.”