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?Here are the top 6 lenders of 2020!
|Lender||Variable APR||Eligible Degrees|
|1.99% – 6.65%1||Undergrad & Graduate|
|1.99% – 7.10%2||Undergrad & Graduate|
|2.99% – 6.44%3||Undergrad & Graduate|
|2.39% – 6.01%||Undergrad |
|1.99% – 6.43%4||Undergrad & Graduate|
|3.18% – 6.07%5||Undergrad & Graduate|
|Check out the testimonials and our in-depth reviews!
1 Important Disclosures for Laurel Road.
Laurel Road Disclosures
All credit products are subject to credit approval.
Laurel Road began originating student loans in 2013 and has since helped thousands of professionals with undergraduate and postgraduate degrees consolidate and refinance more than $4 billion in federal and private school loans. Laurel Road also offers a suite of online graduate school loan products and personal loans that help simplify lending through customized technology and personalized service. In April 2019, Laurel Road was acquired by KeyBank, one of the nation’s largest bank-based financial services companies. Laurel Road is a brand of KeyBank National Association offering online lending products in all 50 U.S. states, Washington, D.C., and Puerto Rico. All loans are provided by KeyBank National Association, a nationally chartered bank. Member FDIC. For more information, visit www.laurelroad.com.
As used throughout these Terms & Conditions, the term “Lender” refers to KeyBank National Association and its affiliates, agents, guaranty insurers, investors, assigns, and successors in interest.
Assumptions: Repayment examples above assume a loan amount of $10,000 with repayment beginning immediately following disbursement. Repayment examples do not include the 0.25% AutoPay Discount.
Annual Percentage Rate (“APR”): This term represents the actual cost of financing to the borrower over the life of the loan expressed as a yearly rate.
Interest Rate: A simple annual rate that is applied to an unpaid balance.
Variable Rates: The current index for variable rate loans is derived from the one-month London Interbank Offered Rate (“LIBOR”) and changes in the LIBOR index may cause your monthly payment to increase. Borrowers who take out a term of 5, 7, or 10 years will have a maximum interest rate of 9%, those who take out a 15 or 20-year variable loan will have a maximum interest rate of 10%.
KEYBANK NATIONAL ASSOCIATION RESERVES THE RIGHT TO MODIFY OR DISCONTINUE PRODUCTS AND BENEFITS AT ANY TIME WITHOUT NOTICE.
This information is current as of June 23, 2020. Information and rates are subject to change without notice.
2 Important Disclosures for Splash Financial.
Splash Financial Disclosures
Splash Financial loans are available through arrangements with lending partners. Your loan application will be submitted to the lending partner and be evaluated at their sole discretion. For loans where a credit union is the lender, or a purchaser of the loan, in order to refinance your loans, you will need to become a credit union member.
The Splash Student Loan Refinance Program is not offered or endorsed by any college or university. Neither Splash Financial nor the lending partner are affiliated with or endorse any college or university listed on this website.
You should review the benefits of your federal student loan; it may offer specific benefits that a private refinance/consolidation loan may not offer. If you work in the public sector, are in the military or taking advantage of a federal department of relief program, such as income based repayment or public service forgiveness, you may not want to refinance, as these benefits do not transfer to private refinance/consolidation loans.
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 May 1, 2020.
Fixed APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Fixed Rate options range from 2.88% (without autopay) to 7.27% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Rates are subject to change without notice. Fixed rate options without an autopay discount consist of a range from 2.88% per year to 6.21% per year for a 5-year term, 3.40% per year to 6.25% per year for a 7-year term, 3.45% to 5.08% for a 8-year term, 3.89% per year to 6.65% per year for a 10-year term, 4.18% per year to 5.11% per year for a 12-year term, 4.20% per year to 7.05% per year for a 15-year term, or 4.51% per year to 7.27% per year for a 20-year term, with no origination fees. The fixed interest rate will apply until the loan is paid in full (whether before or after default, and whether before or after the scheduled maturity date of the loan).
Variable APR: Annual Percentage Rate [APR] is the cost of credit calculating the interest rate, loan amount, repayment term and the timing of payments. Variable rate options range from 1.99% (with autopay) to 7.10% (without autopay) and will vary based on application terms, level of degree and presence of a co-signer. Our lowest rate option is shown with a 0.25% autopay discount. Our highest rate option does not include an autopay discount. The variable rates are based on the Variable rate index, is based on the one-month London Interbank Offered Rate (“LIBOR”) published in The Wall Street Journal on the twenty-fifth day, or the next business day, of the preceding calendar month. As of April 27, 2020, the one-month LIBOR rate is 0.43763%. The interest rate on a variable rate loan is comprised of an index and margin added together. The margin is a fixed amount (disclosed at the time of your loan application) added each month to the index to determine the next month’s variable rate. Variable rate options without an autopay discount consist of a range from 2.01% per year to 6.30% per year for a 5-year term, 4.00% per year to 6.35% per year for a 7-year term, 2.09% per year to 3.92% per year for a 8-year term, 4.25% per year to 6.40% per year for a 10-year term, 2.67% per year to 4.56% per year for a 12-year term, 3.44% per year to 6.65% per year for a 15-year term, 4.75% per year to 6.93% per year for a 20-year term, or 5.14% per year to 7.10% for a 25-year term, with no origination fees. APR is subject to increase after consummation. Variable interest rates will fluctuate over the term of the borrower’s loan with changes in the LIBOR rate, and will vary based on applicable terms, level of degree earned and presence of a co-signer. The maximum variable rate may be between 9.00% and 16.00%, depending on loan term. The floor rate may be between 0.54% and 4.21%, depending on loan term. 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.
3 Important Disclosures for SoFi.
4 Important Disclosures for Earnest.
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 3.19% APR (with Auto Pay) to 6.43% APR (with Auto Pay). Variable rate loan rates range from 1.99% APR (with Auto Pay) to 6.43% 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 June 15, 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 6/15/2020. 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.
5 Important Disclosures for CommonBond.
Offered terms are subject to change. Loans are offered by CommonBond Lending, LLC (NMLS # 1175900). 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 0.19% effective June 10, 2020.