How to Crowdfund Your College Costs
NEW YORK (MainStreet) -- It's 21st century equivalent of getting a $25 savings bond from grandma for college.
A handful of start-up companies are aiming to help parents and students employ "crowdfunding" -- the hot new technique that involves using the Web to raise small donations from large numbers of people -- to save for college.
"Relatives and friends have been giving loved ones cash and checks for college since time immemorial," says Ed Thomas of FiPath.com, one such site that's gotten about $1 million in angel funding from Atlanta-based Imlay Investments. "What we're trying to do is just bring that system forward and make the transaction easier for everyone."
Sites such as FiPath help parents and kids calculate how much they'll need to save for college, then offer automated ways to hit up relatives and friends for donations using email and social media.
In FiPath's case, loved ones can donate money automatically to a child's 529 plan or other savings vehicle using PayPal, spending about $2 per transaction in PayPal fees. (FiPath doesn't charge users anything, instead making its money by selling client leads to financial advisers.)
Thomas, who holds a Stanford University MBA, is using the site to help raise the roughly $800,000 that FiPath's database estimates he'll eventually need to send his 2- and 5-year-old children to top schools.
"The average financially responsible parent will put away a few hundred dollars a month toward their kids' educations -- but the cost of college is rising so fast that that's not going to have the impact they're hoping for," he says. "But if you apply a version of crowdfunding to college savings by asking family and friends for help, suddenly you can hit those savings targets."
In Canada, crowdfunding site Scolaris helps high-school and college kids in asking family, friends, co-workers and even strangers for small donations to raise 500 to 1,000 Canadian dollars toward their next tuition bill.
Founder Mark Mauleesan, a 29-year-old who recently graduated medical school with some 60,000 Canadian dollars in student loans, launched Scolaris after seeing people use crowdfunding to raise money for seemingly unimportant things such as buying laptops.
"I thought, 'If donors are giving people money to buy a watch or finance a movie production, why wouldn't they help someone go through school?'" he says.