I just ran across an interesting method of covering your tuition bills in an article on alternative ways of paying for college. They offer a number of alternative methods for paying for your schooling, but by far the most interesting of these was a service called MyRichUncle.com.
There’s not a whole lot of information at their site — just a bunch of gibberish about their ‘revolutionary’ scoring system, yadda, yadda, yadda. But according to the BankRate article:
MyRichUncle provides money from private investors to college students who need help with education expenses.
In return, a student agrees to pay a fixed percentage of their gross future income for a fixed period.
“They pay less when they make less, ” says Raza Khan, managing director of MyRichUncle. “They pay more when they make more.”
This is an education investment not a loan, so there’s no interest to pay.
For every $1, 000 of financial help, a student agrees to pay 10 to 40 basis points of future income. A basis point is one one-hundredth of a percentage point, so someone who receives an education investment of $10, 000 might agree to pay anywhere from 1 to 4 percent of future income.
Payment periods are 10 years for graduate students and 15 years for undergraduate students. Payments begin six months after graduation.
Once the payment period ends, a student’s obligation ends even if you end up paying back less than you were given.
“We’re actually taking a chance on a student, ” Khan says. “If a student succeeds, we succeed.”
This sounds like an interesting idea, but I’m not sure how I’d feel about being an indentured servant once I got out of school. This is fundamentally different from standard student loans, as you don’t seem to have the ability to accelerate your payments to rid yourself of the obligation. I guess such a plan could have a weird sort of upside, though — if you end up in a low paying deadend job after graduation, you could come out far ahead in terms of the cost of your college education.