As tuition costs and student loan debt levels continue to rise, more students are turning to crowdfunding to cover their educational expenses. According to the crowdfunding platform GoFundMe, the number of campaigns using the word "tuition" increased a stunning 4,547 percent between 2011 and 2014.1 Learn more about how crowdfunding works, so you can help students who show great promise for college, but lack the financial means to get there, set up their own crowdfunding campaign and pay for college.
How Educational Crowdfunding Works
Crowdfunding follows a three-step procedure:
- First, you use a crowdfunding platform of your choice to create a page for posting videos, pictures and updates about your fundraising campaign
- Second, you share your page with potential donors using tools such as Facebook, Twitter, and email
- Third, your platform collects donations and distributes them to you or your school
Most platforms charge a payment processing fee, such as 30 cents per donation, plus a percentage of total funds raised, typically 5 percent if the campaign's fundraising goal is reached and 8 percent if it is not.
Advise students on how crucial it is to choose an appropriate crowdfunding platform. Individual platforms often specialize in different types of fundraising and have different policies for screening and compensating donors. CrowdCrux provides a list of top educational crowdfunding resources with a review of their specifics.2
A campaign’s success also depends on how aggressively the student promotes it. A common mistake is creating a campaign page and expecting it to automatically attract donors. Encourage students to create a video to describe their campaign and promote it using tools such as blogs, social media, and email.
Crowdfunding to Pay for Tuition and Expenses
The most popular educational application of crowdfunding is raising money for tuition and other education-related expenses. Some sites, such as GradSave3, enable parents and other donors to contribute to college savings funds. Other sites, such as Piglt, allow students to offer incentives in exchange for donations.4 For instance, a student with computer skills might offer website design services to donors. On some sites, students can offer to repay donors out of their post-graduation income. Familiarize yourself with the specifics of different sites, so you can help students explore options that fit their situations.
Paying Down Student Loan Debt with Crowdfunding
People are also using crowdfunding to help pay off their student loan debt. For example, Zerobound connects people with loan debt to organizations and sponsors who may be willing to pay up to the full balance of a loan's debt plus interest, processing and transaction fees.5
Some crowdfunding sites enable participants to secure loans from investors, a practice known as peer-to-peer lending (P2PL). FinAid outlines best practices for using peer-to-peer lending sites to finance an education6. Advise your students to consider P2PL only after they’ve explored federal and private loan options and as an alternative to more expensive options, such as credit cards.
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Resources: Photo credit. (1) College Students are Turning to Internet Doners to Pay Their Tuition (2) Top 16 Crowdfunding Sites for College and Education Costs (3) GradSave (4) Piglt (5) Zerobound (6) Peer to Peer Education Loans