Pros and Cons of Using Crowdfunding to Pay Off Your Student Loans

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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 pay off your debt.

Some borrowers may feel they’ve got nothing to lose. According to the Consumer Financial Protection Bureau, about 26% struggled to pay off their loans, as of 2017. And in 2019, more than 5.1 million borrowers have landed in student loan default. As with anything financial, there are some pros and cons you should consider first.

Pros of crowdfunding student loans

1. Access to money

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.

2. Nothing is expected in return

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 2019, 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.

3. It may build your marketing/outreach presence

Businesses use crowdfunding to their advantage all the time. By leveraging your platform to include social media, a blog, YouTube testimonials/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.

4. It may ease up other financial burdens

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 to pay 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.

Cons of crowdfunding student loans

1. You might not raise enough money

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.

2. Alternatives could send you into further debt

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 marketplace/peer-to-peer lending.

But proceed at your own risk. P2P 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.

3. Time is money spent

If your crowdfunding campaign doesn’t work out, you’ll likely have spent time (and money) 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.

Student loan-specific crowdfunding sites

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 payments management system for student debt. Unlike other crowdfunding platforms, donations through LoanGifting go to your student loan account directly.
  • Future College Fund is where parents can start fundraising campaigns for their children’s college education. Funds raised can be transferred directly to a college savings account.
  • 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.

Set goals and be realistic

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 it by any means. Also consider consolidating or refinancing your student loan debt, or shifting to a more manageable repayment plan.

You can also explore other ways of freeing up cash to put toward your monthly payments: Eat out less, take on roommates to split the rent, find frugal/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 matters is setting a goal — paying off your debt — and sticking with it.

Shen Lu contributed to this report.

Interested in refinancing student loans?

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1.99% – 5.64%2Undergrad
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1.99% – 6.84%3Undergrad
& Graduate

Visit CommonBond

1.91% – 5.25%4Undergrad
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2.25% – 6.53%5Undergrad
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2.17% – 4.47%6Undergrad
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1 Important Disclosures for Splash Financial.

Splash Financial Disclosures

Terms and Conditions apply. Splash reserves the right to modify or discontinue products and benefits at any time without notice. Rates and terms are also subject to change at any time without notice. Offers are subject to credit approval. To qualify, a borrower must be a U.S. citizen or permanent resident in an eligible state and meet applicable underwriting requirements. Not all borrowers receive the lowest rate. Lowest rates are reserved for the highest qualified borrowers. If approved, your actual rate will be within a range of rates and will depend on a variety of factors, including term of loan, a responsible financial history, income and other factors. Refinancing or consolidating private and federal student loans may not be the right decision for everyone. Federal loans carry special benefits not available for loans made through Splash Financial, for example, public service loan forgiveness and economic hardship programs, fee waivers and rebates on the principal, which may not be accessible to you after you refinance. The rates displayed may include a 0.25% autopay discount.

The information you provide to us is an inquiry to determine whether we or our lenders can make a loan offer that meets your needs. If we or any of our lending partners has an available loan offer for you, you will be invited to submit a loan application to the lender for its review. We do not guarantee that you will receive any loan offers or that your loan application will be approved. Offers are subject to credit approval and are available only to U.S. citizens or permanent residents who meet applicable underwriting requirements. Not all borrowers will receive the lowest rates, which are available to the most qualified borrowers. Participating lenders, rates and terms are subject to change at any time without notice.

To check the rates and terms you qualify for, Splash Financial conducts a soft credit pull that will not affect your credit score. However, if you choose a product and continue your application, the lender will request your full credit report from one or more consumer reporting agencies, which is considered a hard credit pull and may affect your credit.

Splash Financial and our lending partners reserve the right to modify or discontinue products and benefits at any time without notice. To qualify, a borrower must be a U.S. citizen and meet our lending partner’s underwriting requirements. Lowest rates are reserved for the highest qualified borrowers. This information is current as of Feburary 1, 2021.


2 Important Disclosures for Earnest.

Earnest Disclosures

To qualify, you must be a U.S. citizen or possess a 10-year (non-conditional) Permanent Resident Card, reside in a state Earnest lends in, and satisfy our minimum eligibility criteria. You may find more information on loan eligibility here: https://www.earnest.com/eligibility. Not all applicants will be approved for a loan, and not all applicants will qualify for the lowest rate. Approval and interest rate depend on the review of a complete application.

Earnest fixed rate loan rates range from 2.98% APR (with Auto Pay) to 5.49% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 5.34% APR (with Auto Pay). For variable rate loans, although the interest rate will vary after you are approved, the interest rate will never exceed 8.95% for loan terms 10 years or less. For loan terms of 10 years to 15 years, the interest rate will never exceed 9.95%. For loan terms over 15 years, the interest rate will never exceed 11.95% (the maximum rates for these loans). Earnest variable interest rate loans are based on a publicly available index, the one month London Interbank Offered Rate (LIBOR). Your rate will be calculated each month by adding a margin between 1.82% and 5.50% to the one month LIBOR. The rate will not increase more than once per month. Earnest rate ranges are current as of October 26, 2020, and are subject to change based on market conditions and borrower eligibility.

Auto Pay discount: If you make monthly principal and interest payments by an automatic, monthly deduction from a savings or checking account, your rate will be reduced by one quarter of one percent (0.25%) for so long as you continue to make automatic, electronic monthly payments. This benefit is suspended during periods of deferment and forbearance.

The information provided on this page is updated as of 10/26/2020. Earnest reserves the right to change, pause, or terminate product offerings at any time without notice. Earnest loans are originated by Earnest Operations LLC. California Finance Lender License 6054788. NMLS # 1204917. Earnest Operations LLC is located at 302 2nd Street, Suite 401N, San Francisco, CA 94107. Terms and Conditions apply. Visit https://www.earnest.com/terms-of-service, email us at [email protected], or call 888-601-2801 for more information on our student loan refinance product.

© 2020 Earnest LLC. All rights reserved. Earnest LLC and its subsidiaries, including Earnest Operations LLC, are not sponsored by or agencies of the United States of America.


3 Important Disclosures for CommonBond.

CommonBond Disclosures

Offered terms are subject to change and state law restriction. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900), NMLS Consumer Access. If you are approved for a loan, the interest rate offered will depend on your credit profile, your application, the loan term selected and will be within the ranges of rates shown. ‍All Annual Percentage Rates (APRs) displayed assume borrowers enroll in auto pay and account for the 0.25% reduction in interest rate. All variable rates are based on a 1-month LIBOR assumption of 0.15% effective Jan 1, 2021 and may increase after consummation.


4 Important Disclosures for LendKey.

LendKey Disclosures

Refinancing via LendKey.com is only available for applicants with qualified private education loans from an eligible institution. Loans that were used for exam preparation classes, including, but not limited to, loans for LSAT, MCAT, GMAT, and GRE preparation, are not eligible for refinancing with a lender via LendKey.com. If you currently have any of these exam preparation loans, you should not include them in an application to refinance your student loans on this website. Applicants must be either U.S. citizens or Permanent Residents in an eligible state to qualify for a loan. Certain membership requirements (including the opening of a share account and any applicable association fees in connection with membership) may apply in the event that an applicant wishes to accept a loan offer from a credit union lender. Lenders participating on LendKey.com reserve the right to modify or discontinue the products, terms, and benefits offered on this website at any time without notice. LendKey Technologies, Inc. is not affiliated with, nor does it  endorse,  any educational institution.

Subject to floor rate and may require the automatic payments be made from a checking or savings account with the lender. The rate reduction will be removed and the rate will be increased by 0.25% upon any cancellation or failed collection attempt of the automatic payment and will be suspended during any period of deferment or forbearance. As a result, during the forbearance or suspension period, and/or if the automatic payment is canceled, any increase will take the form of higher payments. The lowest advertised variable APR is only available for loan terms of  5 years and is reserved for applicants with FICO scores of at least 810.

As of 02/17/2021 student loan refinancing rates range from 1.91% APR – 5.25% Variable APR with AutoPay and 2.95% APR – 7.63% Fixed APR with AutoPay.


5 Important Disclosures for SoFi.

SoFi Disclosures

  1. Student loan Refinance: 1. Fixed rates from 2.99% APR to 6.99% APR (with AutoPay). Variable rates from 2.25% APR to 6.53% APR (with AutoPay). Interest rates on variable rate loans are capped at either 8.95% or 9.95% depending on term of loan. See APR examples and terms. Lowest variable rate of 2.25% APR assumes current 1 month LIBOR rate of 0.12% plus 2.38% margin minus 0.25% ACH discount. Not all borrowers receive the lowest rate. If approved for a loan, the fixed or variable interest rate offered will depend on your creditworthiness, and the term of the loan and other factors, and will be within the ranges of rates listed above. For the SoFi variable rate loan, the 1-month LIBOR index will adjust monthly and the loan payment will be re-amortized and may change monthly. APRs for variable rate loans may increase after origination if the LIBOR index increases. See eligibility details. The SoFi 0.25% AutoPay interest rate reduction requires you to agree to make monthly principal and interest payments by an automatic monthly deduction from a savings or checking account. The benefit will discontinue and be lost for periods in which you do not pay by automatic deduction from a savings or checking account. The discount will not reduce the monthly payment; instead, the interest savings are applied to the principal loan balance, which may help pay the loan down faster. Enrolling in autopay is not required to receive a loan from SoFi. *To check the rates and terms you qualify for, SoFi conducts a soft credit inquiry. Unlike hard credit inquiries, soft credit inquiries (or soft credit pulls) do not impact your credit score.Terms and Conditions Apply. SOFI RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.

6 Important Disclosures for PenFed.

PenFed Disclosures

Annual Percentage Rate (APR) is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rates range from 2.99%-5.15% APR and Variable Rates range from 2.17%-4.47% APR. Both Fixed and Variable Rates will vary based on application terms, level of degree and presence of a co-signer. These rates are subject to additional terms and conditions and rates are subject to change at any time without notice. For Variable Rate student loans, the rate will never exceed 9.00% for 5 year and 8 year loans and 10.00% for 12 and 15 years loans (the maximum allowable for this loan). Minimum variable rate will be 2.00%. These rates are subject to additional terms and conditions, and rates are subject to change at any time without notice. Such changes will only apply to applications taken after the effective date of change.