PAY IT FORWARD ... Social Money Peer Lending has 3 use cases right now ..
Recently another peer lending money startup "Lending Club" IPOed for Billions! For now we propose to take them on with a simple CAPITAL ONE BUSINESS ACCOUNT to enable this!
Univ Alumni help deserving students who find it hard to get bank loans (if they live in a slum no bank is going to lend to them!) For now focus is on international students where $4000 can get a student through college, as compared to $100,000 - $250,000 in USA.
Grad student at Stanford, Berkeley or Ohio State, that already has a job at IBM or Google or Facebook, but if he gets $10,000 he can skip on being a TA or RA and save a semester (~$30k). Of course he should be able to repay the debt in a few months!
goDebtFree Social Money Peer Lending - is to avoid the fear of financial - for the 25% in USA who are living in penury and have poor credit but are working 2 jobs, etc. The methods are Avalance (pay off high interest debt e.g. 24% credit card debt first), or Snowball (payoff small amounts that are frustrating or creditors nagging a lot ... but are doable .. e.g. paying off a $500 furniture loan allows you to prevent your credit from being snagged).
What I think is unique about this idea, is that there is a strong SOCIAL and EMOTIONAL components .. i.e. a (24% - 4% fees) would be a saving of 20% on say $5000 debt, i.e. save $1000. So one would say - it still would take 5 years to pay it off? However by using the Capital One API, we are able to show the transactions - is the guy paying $70/mo for Cable TV, $3 daily Starbux lattes, or $70 for an iPhone contract? If the guy takes the emotional WILLPOWER .. these alone add up to $3000+ savings/year. With a bit of other social help (and nagging) ... the goal would be to pay off the $5000 in ONE YEAR ONLY! Woot go debt free!
IN DETAIL .. SOME NOTES FOR USE CASE #1
(1a) What are your thoughts on positive potential and drawbacks of a scheme for 8 IITD alumni (loan $500 each) + 1 onsite faculty supervisor + 0-3 onsite student seniors (as possible) loan money to a student who is academically good but is having difficulty getting loans. There would be an "unsecured" loan document to student and cosigning parents at say 9% interest rates - all payments deferred till student gets a job (high chances with IITD). - I assumed merit candidate so ~Re 30,000/yr fees, and same for hostel for 10 months - is this very out of date? - The idea is Re 60k*4yr ~ $4k/8 alumni lender=$500 or Re 30k ea - Do you think graduation rates would be > 95%? - Do you think the eventual repayment rates would be > 80%? - Note there is no stipulation whatsoever that the candidate stay in India, does engineering, etc.
(1b) What would be implementation problems, risks of this scheme? - Would IITD admin try to take over? - How would students be identified? Say 10% of 300 ~30/yr - Assuming we have 80*$500/8 - enough for 10 students - Should it be offered for 4 years or for less 1,2,3 years? - Should incoming JEE rank be used for 1st year selection? - Any ongoing GPA restriction imposed?
(1c) What other support could alumni, faculty and PAY-IT-FORWARD seniors to ensure students success (and repayment)? - English training help/advice esp summer before coming - Personal advice, mentoring - Internship (paid) help - If hostel fees higher than local (eg Sheikh Sarai) shared one should they do a "Day Scholar" shared room approach?