GreenNote launched in June to do just that. You've probably heard of micro-lending sites such as Kiva, which pairs small loans ($25 and up) from individuals with entrepreneurs in developing countries. GreenNote applies that approach to college students, allowing them to reach out to friends and family who may want to lend $100 and up at rates comparable to federal Stafford loans.
Because it is modeled after the federal loan program, GreenNote launched with a fixed 6.8 percent loan rate. Loans do not have to start being paid back until six months after graduation, and they can be deferred up to 5 years and repaid over 10 years. Credit ratings don't matter, nor are there other loan requirements. But, obviously, the schools must verify that the student is indeed a student. Students set up profiles on GreenNote, then invite friends and family to consider making loans. Soon, they will be able to open profiles to alumni organizations and other community groups, too.
"This takes the stigma away from the loan being a handout," says GreenNote CEO Akash Agarwal. It also allows students to reach out to many, many people rather than just a few family members.
Schools are teaming with GreenNote to allow the loans to go directly to colleges and universities. GreenNote tracks what each student owes each lender, collects the loans, distributes the payments to the schools and then will distribute the repayments when the students start paying back the loans. For its part in the transactions, GreenNote takes 2 percent of each student's loan principal and 1 percent from the lenders' interest.
It's a unique web 2.0 approach to a widespread college funding problem. And it's one that I think will make sense to college kids and young adults who have grown up with social networking. But I'm wondering how this request would hit Aunt Anne in Albuquerque if it showed up in her inbox one day. I think it will take a bit of a cultural shift to make this a hit with relatives and family friends of all ages, but I could be wrong. As Argarwal says: "Americans are very giving. Education is the best investment, and education is an even better investment when you know someone."
What do you think?
