Is This The Future of College Financial Aid? June 16, 2009
Ian Welham on the future of college financial aid
There was an eye-opening article in Sunday’s New York Times about a new Web site called Unithrive.org, where cash-strapped college students seeking loans can get matched with alumni online who opt to “sponsor” them. The loans are interest-free.
Sound like an interesting idea? It is. Except here are the caveats: At this point, it’s for Harvard University students only. And the maximum amount that can be requested is $2,000. Hopefully, the for-Harvard-only part—as well as the loan limit—will expand down the road. But since Unithrive was started by three newly minted Harvard grads, their initial focus has been matching Harvard students with Harvard alumni.
Students post photographs and biographical information. The idea is that alums will lend to students with whom they feel a bond. The loans are payable within five years of graduation.
To date, 73 alums have offered to make loans. About $4,500 has been lent to the nine students who have uploaded profiles in the four weeks since the site has been launched.
Certainly, in the multi-billion-dollar world of college financial aid, $4,500 is not even a speck on a flea on the hide of an elephant. So is this much ado about nothing?
Why would the New York Times put this story on the front page of the Sunday Business section? Is it that so many ideas hatched in Harvard dorm rooms have gone on to meteoric success that the NYT doesn’t want to be scooped?
I think there’s much more to it than that. Let’s look at the big picture.
Unithrive was inspired by peer-to-peer microlending organizations such as ACCION International and Kiva.org, which work with small business owners and farmers in the developing world. Indeed, one of the founders of Unithrive, Tanuj Parikh, is a cousin of Kiva president Premal Shah. “It’s a huge, huge idea to democratize financial aid,” opines Mr. Shah. “It’s really cool.”
Microfinance has revolutionized lending in third world countries. (According to the article, Kiva lends about $1 million a week and enjoys a payback rate of 97.8 percent.) Could it do the same with the American college financial aid system? Apparently the young entrepreneurs from Harvard think so. Premal Shah must think so too. Because Kiva recently announced that it plans to offer loans to students for college and vocational schools.
“Some people might want to fund a yogurt maker in Senegal, but someone might want to fund an 18-year-old in South Boston who wants to go learn a skill or a trade,” states Mr. Shah.
So from a germ of an idea to two companies who look like they’re cheerfully willing to compete with each other. Oh yes, this trend definitely bears watching.
