Student loans can be expensive and time-consuming, and they put borrowers at the risk of going deeper into debt if they don’t stay on top of their payments. But there is a way to potentially shave years off of your repayment: By raising money on crowdfunding sites like GoFundMe, student loans can be knocked out much more quickly.
Think about it: Crowdfunding sites have become a popular platform for financing commercial ventures. By the same token, crowdfunding student loans by sharing your story online may well be a way to help pay off your debt. Here’s everything you need to know using crowdfunding sites to pay off student loans.
- Pros of crowdfunding student loans
- Cons of crowdfunding student loans
- GoFundMe for student loans, and other helpful websites
- Set realistic crowdfunding goals
A successful crowdfunding campaign means you’ll receive money from good-hearted people who want to see you tackle your debt, succeed financially and move on with your life. Choose a crowdfunding platform with low fees to get the most out of the gifts you receive.
If you manage to carry out a donation crowdfunding model, the money is “gifted” to you with nothing expected in return — no interest, fees or ancillary costs or charges.
You may not even have to pay taxes on your crowdfunded gains, as these are usually considered personal gifts. And it might not cost the donor either: In 2021, donors don’t have to pay gift tax if the amount is at or below the $15,000 annual gift tax exclusion. And if it’s a gift, you don’t have to pay taxes on it either. That’s a pretty sweet deal.
You might elect to offer sincere gratitude in exchange for donations, however. Updating your GoFundMe student loans page, for example, with news of your academic success might make donors feel proud to have supported you — and perhaps more willing to donate a second time.
Businesses use crowdfunding to their advantage all the time. By leveraging your platform to include social media, a blog, YouTube testimonials and videos and more, you’ll drum up publicity for your campaign and garner more interest (and money) from the public.
If you’re a recent grad seeking employment, this may help your chances at becoming more visible to employers as someone with entrepreneurial business acumen, especially if your crowdfunding venture was successful.
It’s all too common that struggling with debt of any kind places people at risk of going into other types of debt. For example, some people might end up with credit card debt as they channel their money toward paying off student loans.
If you raise enough money with crowdfunding, however, you may be able to pay down some or even all of your student loan debt without having to dip into your savings, charge more money to your credit card or take out a personal loan.
Even if your GoFundMe student loans page is sparkling, not enough interested donors, or a crowdfunding goal that’s set too high, means you might not raise enough cash to make a dent in your debt.
The market is saturated with competition from recent grads clamoring for donations. A search of student loan-related campaigns shows that many fundraisers only collected small-dollar donations, far from their five-figure goals.
How could that happen, you ask? If you use the peer-to-peer method, it’s possible. One advantage of crowdfunding is the variety in alternatives: If the donation method doesn’t pan out, you can aim for peer-to-peer lending.
But proceed at your own risk. “P2P” or marketplace lending is just like getting any other loan, often with interest and fees attached to money fronted to you by an independent “backer.” If you can’t pay that money back, you’ll end up in deeper monetary trouble.
If your crowdfunding campaign doesn’t work out, you’ll likely have spent time on marketing efforts that could have been spent seeking employment, furthering your professional skills or looking for other ways to earn extra cash.
The experience could also prove disappointing and make you doubt (wrongly) that you’ll ever pay down your debt.
Crowdfunding sites are numerous, but some of these specialize in education financing:
- GoFundMe is one of the more popular crowdfunding sites, and despite some of the cons listed above, it’s raised $70 million a year for more than 100,000 education-related campaigns.
- LoanGifting is a student loan crowdfunding site and payment management system for student debt. Unlike other crowdfunding platforms, donations through LoanGifting go to your student loan account directly.
- Indiegogo also allows users to raise funds for education, and it has a flexible funding option that allows you to keep the money you’ve raised even if you don’t hit your goal.
As you’re choosing a place to start your campaign — others include GoGetFunding — watch out for sites with higher-than-average fees, slow-to-respond customer support or a lack of mobile app.
|Tips from borrowers who used GoFundMe to pay off student loans|
|● Choose the right website and dollar amount
● Start with your friends and family
● Create a positive conversation about debt help
● Share your unique story to build momentum
● Be as transparent as possible
● Don’t solely rely on crowdfunding for debt help
|For more: How These 2 Borrowers Made Thousands by Crowdfunding|
Be proactive yet realistic when setting your crowdfunding goals. Depending on your total student loan debt, your ideal donation goal may differ from someone else’s — so don’t worry about competition or comparison. You may be surprised at how much you’ll raise.
If you have student loan debt, consider crowdfunding as an option to explore, but don’t count on GoFundMe to pay off student loans completely. You should also consider consolidating or refinancing your student loan debt, or shifting to a more manageable repayment plan.
You can also explore other ways of saving money to put toward your monthly payments: Eat out less, take on roommates to split the rent, find frugal or free ways to socialize, take advantage of coupon codes and online deals or get a second part-time job or side hustle.
In the end, what ultimately matters is setting a goal — paying off your debt — and sticking with it.
Andrew Pentis and Shen Lu contributed to this report.